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Key drivers of insurance claims inflation in 2023

Everyday there continue to be fresh headlines about various price increases, from energy to food costs. Our businesses are not immune to these price increases, and unfortunately, this impacts all areas of business, insurance included. You may even have seen the cost of your insurance premiums rise. We spoke to business insurer, Covéa Insurance, to find out what is driving these costs up.

Steve Godbold, External Claims Operations Manager at Covéa Insurance advises that since the pandemic in 2020, several factors have influenced the cost of claims which has had a knock-on impact on insurance premiums. The cost of living has sharply risen with the impact of both Covid-19 and Brexit.

Tradespeople will be aware of the disruption to their own supply chain due to shortages and delays in materials and the availability of labour, all of which are also having an impact on the cost of insurance claims.

This has a subsequent knock-on impact on the rise in premiums, with claims inflation costs around 11%. Covéa Insurance advise that merchants continue to notify of material increases – at the end of last year there were cost rises of 14% for cement, 9% for blocks and 28% for bricks.

What is “Claims inflation”?

“Claims inflation” refers to an increase in the average cost of claims due to a rise in the price and lack of availability of goods, services, products and labour which are used to repair, replace or reinstate your property after an insured loss.

What are the key drivers of Claims inflation in 2023?

In recent years, we have seen a number of global and national factors which have impacted the speedy access to materials, products, services and labour. Since the start of the pandemic these factors have accelerated and when combined have a significant impact:


  • Challenges and queues at borders, limit UK’s access to materials, goods and services, and creating delays at import stage.
  • European labour has reduced in the UK, creating shortages of skilled labour in a number of industries, including construction and transportation i.e. lorry drivers.
  • Tighter border controls, increased regulation around labour and imports, and the relatively reduced appetite to trade with the UK have created reduced access, increased costs, and delays.


  • The UK has faced several pressures due to Covid-19, including lockdowns, reduced economic production, furlough, reduction in the money supply and reduced economic activity.
  • Internationally, other countries suffered similarly, reducing economic output, manufacturing, and therefore availability of goods and materials.
  • Consumption including shopping online and home repairs were artificially increased during these periods putting a strain on available resources.

Supply Chain

Supply chains were already starting to face increased delays and costs due to Brexit, which were further exacerbated by Covid-19 related supply chain disruptions, which caused sharp rises in energy and fuel prices.

This resulted in challenges to international trade, increased cost of fuel, pressures to find more environmental methods for transport and demand for materials and labour.

You will know from many of your own businesses, how the price of raw materials can increase and change on a weekly basis, meaning your own costs have gone up.

The situation in Ukraine, including economic sanctions on Russia, puts inflationary pressures on energy for both the UK and the rest of the world, pushing up the costs of production and transportation of machinery and materials in use in the UK.

Longer queues and lead times increase the time spent repairing claims and increase the cost of these too.

Labour Markets

  • Several industries have been impacted by a labour shortage with an increase in the average age and retirement of skilled, experienced labour.
  • The exit of foreign labour has had a further impact.
  • Reduced supply of labour with increasing demand has put inflationary pressures on wages in a number of industries.

Climate Change

  • More volatile and extreme weather patterns have resulted in severe storms and flooding in the UK, including flooding caused by Storm Eunice earlier in 2022
  • Built-up cities, and building development on flood plains leave water trapped in areas with insufficient drainage, resulting in significant damage from flooding.
  • Insufficient historical investment in flood and river defences and drainage result in existing measures being overwhelmed, particularly in the current, volatile environment.

Environmental Awareness

  • As we have become more environmentally aware, we have seen a shift to the usage of materials which are often lighter and more susceptible to significant fire and flood damage, increasing the costs and scale of repair.
  • A number of technologies used and relied upon to protect buildings are also more expensive, and sometimes less technologically advanced, limiting the impact they can have on reducing damage.

How to help reduce the impact of claims inflation

All the above factors have had a significant impact on claims inflation over the last two years and it’s no surprise that insurance premiums have increased as a result.

We expect these costs to eventually normalise, however, customers can help to reduce the impact by:

  • Letting your insurer know about a potential claim as soon as feasible. This allows your insurer to help contain costs where possible.
  • Providing detailed information and access to the appropriate people within a timely manner to allow your insurer to act quickly and minimise any delays in your claim.

What are Covéa Insurance doing to help our customers?

1. Planning ahead

At Covéa Insurance, we’re working together with contractors and our customers to help identify key materials early on in the building reinstatement process, by ensuring orders are placed as quickly as possible to source wherever feasible in advance.

We’re also endeavouring to arrange delivery times ahead of time to mitigate the potential risk of delays.

2. Working flexibly

We’re exploring wider methods of accessing materials, such as by air freight if shipping options are delayed. We’ll also investigate alternative forms of materials where appropriate, or use different suppliers to source equipment in the shortest timeframes.

Additionally, we’re mitigating potential delays in repair times by offering overtime working as well as a premium for the speedy replacement of stock and machinery.

3. Commitment to service

We work closely with our expert team of licensed loss adjusters who are renowned for their customer-focused attitude. Our loss adjustors share our strong service ethos to deliver a positive end-to-end customer experience.

4. Regular updates

We know how important it is to keep our customers regularly updated and manage expectations throughout the claims journey. It is a particularly challenging time at the moment, and we are working with our supply chain to ensure customers continue to receive a quality service experience.

We’re maintaining regular updates with customers via their preferred contact methods, explaining any reason for delay and the actions we are taking to try and reduce waiting times as much as possible.

5. Repair and restore

We’ll look to repair items wherever feasible, and so long as the customer is happy to do so, partnering with contractors who promote repairs and support a greener way of working.

Covéa’s Steve Godbold adds:

Here at Covéa, we continually assess our pricing to ensure we are charging the correct amount for each risk presented, and assess each risk on individual circumstances. We regularly to monitor claims inflation and work closely with our suppliers to ensure we are getting the best value for money when handling claims and then passing these savings on to our customers.

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