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Reviewed by Matthew Ashton
Rising inflation impacts more than the cost of groceries and petrol; it also affects the cost of claims, which have a knock-on effect on your premiums.
What’s causing building claims inflation?
Claims inflation is the cost of a current claim compared to the cost of the same claim a year ago, and it’s on the rise – particularly building claims inflation.
In the wake of Russia’s invasion of Ukraine, rising energy costs are in turn driving up building claims inflation, according to our partners at Ecclesiastical. Additionally, a lack of skilled labour and wage increases are leading to delays in construction, repair and alteration, which also impacts claims costs. Some regions in the UK also continue to struggle with post-pandemic labour shortages.
Surprisingly, Brexit isn’t thought to be too big a factor in claims costs, as supply chains have since recovered. What’s more, many goods imported into the UK from the EU are tariff-free, provided that they meet the rules of origin requirements laid out in the Trade and Cooperation Agreement.
The knock-on effect of claims inflation
When the economy struggles and claims inflation rises, fraudulent claims also increase, as people are more likely to make insurance claims – both genuine and fraudulent.
Claims inflation also means that insurers have increased costs they need to cover. For example, it costs a lot more to rebuild a house today than it did just five years ago, because the cost of labour, energy and materials have all gone up.
Insurers increase their policy prices as a way to cover the increase in inflation, which is why you may notice a rise in your premiums.
What is High Value Home Insurance?
High-value home insurance is a type of property insurance that provides coverage for homes worth more than the average policy limit. It is designed to protect homeowners against losses that could potentially exceed the limits of a standard homeowners policy.
Cover can include for your buildings, outbuildings, general contents, fine art and paintings, jewellery and luxury watches, liabilities, travel, family protection legal expenses, home emergency, cyber and other subsidiary covers. Although, it’s important to check your policy to discern your exact cover.
How to reduce your premiums
No one wants their premiums to rise, but sometimes it’s unavoidable. The next best thing you can do is make up for the rise in costs in other ways, like making sure your policy is as specific to your needs as possible.
A generic insurance policy may include features that you personally may not need or use, so take the time to look through the policy prior to purchase so you’re not paying unnecessarily.
That said, just because a policy feature isn’t useful to you now, that doesn’t mean it won’t be in the future, so factor this in, too.
Another way you can keep premium costs as low as possible is by making sure not to over-insure. Instead, take care to accurately calculate the value of your possessions and the rebuild value of your home, so you don’t end up paying more than you need to.
In the longer term, keeping your home secure and reducing your likelihood of claiming can help you to build towards a no-claims bonus. The important thing to take away is that when premium costs rise, it’s tempting to go for the cheapest policy you can find – but this shouldn’t be the driver of your decision. The policy that will benefit you most in the long run is one that’s tailored to your individual needs and has accurately valued your possessions.
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https://www.confused.com/meet-our-experts/content/combatting-claims-inflation
https://www.money.co.uk/home-insurance/8-ways-to-cut-your-home-insurance-costs