Costs are rising meaning that insurers will have to pay out more if you make a claim. What does this mean for you and your business and what you can do about it?
Costs are rising
You only need to look at the news and there will be a story about price rises somewhere and the stats from the office for national statistics doesn’t make pleasant reading:
· The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 6.2% in the 12 months to March 2022, up from 5.5% in February.
· On a monthly basis, CPIH rose by 0.9% in March 2022, compared with a rise of 0.2% in March 2021.
· The upward contributions to the change in the CPIH 12-month inflation rate between February and March 2022 came from many categories, with the largest from motor fuels, with no large offsetting downward contributions.
The BBC back this up with there article – Soaring petrol costs drive UK inflation to 30-year high which highlights that inflation has risen to 7% in March with further inflation
expected in April.
What’s causing the costs to rise?
We are in a perfect storm to create the rises in costs for everyone, but here we look at a few examples of what is pushing prices up.
Supply chain issues
Initially supply chain issues began with the pandemic, but now it is due to a combination of things, the economic rebound from the pandemic, a shortage of workers, an over-stretched transport system and new post-Brexit import and export rules.
An example of an industry heavily affected by supply chain issues is the construction industry. Companies are struggling to get the raw materials which coupled to a staff shortage means that building projects and new construction is being delayed. This in turn means that there are fewer properties being made, which has led to higher property prices and increased cost for property claims.
Brexit
The conclusion from Vox EU paints a negative look at Brexit and the effect it has had on the Sterling exchange rate and our ability to import produce into the country. While we accept that there might be an agenda here what is clear is that Brexit is affecting the supply chain as mentioned above and we have seen some logistical issues that have led to slower supply chains. So without wanting to debate the long-term benefits or negatives of Brexit, data would show that in the short-term at least Brexit is having a cost on prices.
Fuel prices
The BBC tells us that – ‘Soaring petrol costs drive UK inflation to 30-year high’. There was a 12.6p average increase in petrol from February to March which is affecting everyone. But as well as hitting our own pockets this increase the costs for businesses. Transport companies have to pay more for petrol and their for their costs go up which in turn means that the items we buy in the shop will go up. The rise in petrol prices has also led to a surge in interest for electric cars. In fact, when we were at the Cobra Conference one of the leading insurers told us that anyone that works for them and needs an electric car will only offered an electric car go forward. But electric cars are expensive and therefor, the cost for insuring them will also lead to a rise in the cost of claims.
We have only touched on why costs are going up but the truth of the matter is that we appear to be in a situation where everything together is leading to rising costs.
How do rising costs affect your claims and your renewals?
Your insurance takes into considerations many different factors, such as, your location, your industry and your previous claims history. With the rising costs any claim that you make is likely to cost a lot more to resolve in 2022 than it would have done in previous years. This means that your claims history is going to show a higher pay out and this in term will increase your renewal price for the following year.
What to do to reduce the cost of your claims
With costs going up it is important to limit the size of your claim. We have some tips that can help with this.
Report your claim immediately
If you delay making your claim it can cause the amount you have to claim to go even higher. For example, your insurer or broker might be able to give you advice on how to reduce damage or what to do in the first instances. It will also allow your insurer to start investigations, if required, sooner. This will again keep costs down. Aviva have a useful video that shows how a motor claim can rise over time if you don’t report the incident. The principles used in this motor fleet example can be applied to most types of claims.
In the first instance act if you aren’t insured
When an incident happens to your business you need to think about what you would do if you weren’t insured. For example, if you have a flood, the first things you would do is to get someone out to stop the flooding, you will hire dehumidifiers to try and dry the walls. Your insurer will look favorably on you if you have done what you can to try and reduce the costs that are going to be occurred.
If you want to discuss this topic further or speak to a member of our team about any other insurance related matter then please give us a call on 0208 850 5531.
