Considering the recent rough couple of years for the construction market, how can your business prepare for what 2022 might hold?
Overall commercial insurance premiums increased 8.7% in 2020-21, and they’re forecasted to rise this year too. Reasons underpinning this include: inflation, influx of claims from natural disasters, changes in governments’ taxes and duties, and disruptions or change in how a business operates.
Driving the hardening construction insurance market in Australia are issues with structural defect and non-conforming cladding, challenges incorporating renewable energy, fewer insurers operating in this space and those that remain being more selective about who they cover.
The protracted and enduring supply chain disruption has hit the construction industry hard, with initially unforeseeable shortages of building materials, such as structural timbers, insulation, bricks, fittings and plumbing items, continuing. These disruptions resulted in higher prices, such as an 11.7% increase for structural timber in the 12 months to June 2021. As well, construction costs also rose due to a global scarcity of shipping containers, bushfires destroying 10% of plantation timber, and the shortage of skilled trades workers.
Expect all those shortages to continue into 2022, or further. In the face of uncertainty about future government lockdowns and border closures, the construction industry is still dealing with the fallout from last year’s disruption. Businesses are playing catchup with project schedules, materials sourcing, productivity, delays, and dealing with extra costs, such as legal and finance costs, public health orders or vaccination policies, and the state and territories own rules and restrictions.
Chances are the construction sector won’t return to a pre-COVID ‘normal’ this year. Knowing that uncertainty, and the factors that could impact your business, can help you understand some of the risks and how to manage them. If you would like to know more about how we can help you fine tune your risk strategies in these still uncertain times, please CLICK HERE to read more or feel free to contact us.