The latest data on claims inflation challenges in Australia has highlighted mounting cost pressures in property insurance, driven by repair complexity, labour shortages and elevated construction expenses. The bigger warning for brokers could be that the pressure is no longer mainly about short-term disruption. According to Crawford & Co’s latest Claims Inflation Update, the market is now being shaped by a more entrenched mix of elevated repair costs, constrained specialist capacity and longer claim timeframes - conditions that can quietly widen underinsurance risk and leave clients exposed when losses hit.
Jonathan Hubbard (pictured), president of Crawford Australia, said the industry should not assume claims inflation will fade quickly.
“The shift we’re seeing is important,” he said. “When claims inflation is driven by a sticky cost base and tight repair capacity, it tends to persist rather than unwind quickly.”
The “sticky cost base” is these underlying repair costs that remain elevated and are unlikely to ease quickly, even as supply chain pressures stabilise.
That shift moves the conversation brokers need to have with clients. Sums insured that looked adequate a year ago may no longer reflect current replacement and repair costs, particularly as pricing continues to edge up and the cost of time becomes a bigger part of the claim. At the same time, delays in repairs are putting more focus on covers linked to disruption, including alternative accommodation, loss of rent and, in some commercial cases, business interruption.
For brokers, that points to a more stubborn operating environment in which repair pricing, settlement timing and claim duration all need closer scrutiny. It also suggests that underinsurance risk may build gradually rather than arrive as a sudden shock, particularly if clients have not updated declared values in line with current rebuilding conditions.
Crawford’s view is that materials are no longer the whole story. While supply chains have stabilised from their pandemic-era peaks, the pressure has shifted into other parts of the repair process: scarce specialist trades, longer lead times, preliminaries, compliance requirements and rework risk. Those factors all feed into what Hubbard described as the “time cost” of getting work done.
That is especially significant after catastrophe events, when demand spikes quickly and pricing starts to reflect schedule risk, mobilisation pressures and layered contracting. In those conditions, the final cost of a claim can be driven as much by delay and coordination as by the price of core building inputs.
“In that environment, the key issue is the adequacy of sums insured and declared values,” said Hubbard.
That resonates with brokers working through renewals in a market where clients may still be anchored to older valuations. If repair and replacement costs continue to climb, sums insured can become outdated faster than expected, increasing the risk of a shortfall at claim time.
Hubbard also pointed to fresh external pressures since his firm’s March report was published. The Middle East conflict has pushed up fuel and petrochemical inputs, creating potential flow-through effects for freight and plastics-based building products. Higher interest rates are also adding strain through financing costs and greater risk buffers in tender pricing, reinforcing the sense that claims inflation is now being driven by a wider and more persistent cost base.
Just as important as sums insured is the impact of claim duration on client expectations. Hubbard said one of the most common pressure points in the market is underestimating not only rebuilding costs but also the financial effect of longer repair periods.
“Capacity constraints can mean longer repair timeframes, more uncertainty around settlement timing and greater exposure to consequential losses,” he said.
Duration blowouts are most likely to emerge in claims involving complex repairs, tight sequencing or constrained specialist capacity. Hubbard said this often shows up in flood and major water ingress losses, where drying and remediation have to be completed before reinstatement, as well as in residential repairs after catastrophe events when local trades and equipment come under immediate pressure.
The result is that clients may face longer waits, greater quote variability and more difficult choices around settlement options. Hubbard said insurer-managed repairs can help with coordination and quality control, while cash settlements may suit some policyholders but can transfer project management and cost escalation risk back to the insured.
For brokers, this persistent claim cost pressure and longer repair timelines entail a growing need to ensure clients understand both the adequacy of their cover and the practical realities of the repair market before a loss occurs.
