SOARING inflation in the construction sector threatens to create a major “insurance gap” amongst UK policyholders, London headquartered insurer Chaucer has warned.
Sharp increases in the costs of building materials could leave homes and businesses underinsured, as policies fail to cover the cost of repairing and rebuilding damaged properties, research carried out by the Lloyd’s of London broker shows.
According to UK government figures, the cost of cement has increased 15 per cent between June 2021 and June 2022.
The cost of imported wood has also jumped 24 per cent, while the cost of structural steel has surged 46 per cent over the same period of time.
The higher costs of building materials come as soaring global energy prices and global supply chain disruption have driven sharp increases in the price of manufacturing and transporting construction supplies.
Sanctions imposed on Russia following its decision to send troops into Ukraine have also driven up the price of raw materials in limiting supplies of Russia’s major exports, including iron, wood, copper, and aluminium, to Europe and the United States.
The situation means existing insurance policies may increasingly fail to cover the actual costs of fulfilling claims, leaving properties underinsured in the case of either natural or man-made events.
Chance Gilliland, Head of Global Property Delegated Authorities at Chaucer says: “Rapid inflation in building costs risks creating an insurance gap.”
Policyholders with properties most vulnerable to natural catastrophes, such as storms or floods, are most at risk of being underinsured.
“Those based around coastal regions, which are more exposed to extreme weather are at greatest risk,” Giliand said.
“Policyholders need to review their coverage to ensure that they will not be left underinsured should their homes and business premises suffers damage.”
Rising costs in the automobile sector, due to supply chain issues, have also driven up car insurance premiums