May 11, 2023
The cost of your labor, materials, and supplies are not the only expenses going up due to inflation. So is the cost of your insurance.
Managing expenses has been a challenge for all businesses across all industries and the construction industry is no different. We see inflation impacting two main forces driving the cost of insurance:
Increased Revenue and Payroll Expenses
Due to the increased cost of doing business, contractors are having to charge more today for the same work they performed two or three years ago.
This inflates the revenue number on the income statement and the figure given to the insurance company.
Additionally, contractors are having to pay more today for the same skilled labor they paid for two or three years ago.
This inflates the payroll expense on the income statement and the figure given to the insurance company.
This combination alone could increase your premium even if the rate the insurance charged you for doing the work stayed the same over the last three years.
Increased claims cost of insurance companies
We can all agree that a structure built today can cost 25% or more to build than it did 3 years ago prior to the pandemic.
As we mentioned before, the costs of materials and supplies are up considerably.
Increased demand and supply shortages have caused prices to skyrocket. Insurance companies are feeling the effects.
The cost to repair or replace a structure or vehicle is up causing insurance companies to pay more and claim costs to rise substantially.
Your claims cost directly reflects the premium you pay.
If you want to learn more about these challenges and how to combat them, please contact us today. We have tips, resources, and solutions that can help keep your claims cost down while managing your insurance expenses.