Inflation's impact on claims costs – are your clients prepared?

Inflation’s impact on claims costs – are your clients prepared? | Insurance Business Canada

Construction & Engineering

Inflation’s impact on claims costs – are your clients prepared?

Here are some vital pointers for brokers

Construction & Engineering

By
Brynn Tucker

The Bank of Canada reported a consumer price index (CPI) of 158.1 in July up from 157.2 in June. The overall inflation rate as of July was 3.3%. This, combined with the lingering supply chain crisis, means that costs are much higher than two years ago, and many items are less readily available, including automobile parts, specialized equipment and building materials. As a result, claims departments are experiencing a lengthier claim resolution time.

Residential building construction costs increased 1.9% in the second quarter, following 1.8% growth in the previous quarter. Meanwhile, non-residential building construction costs rose 1.5% in the second quarter, following a 1.7% increase in the previous quarter.

The tight labour market in Canada heightens the time and funding required to indemnify clients who have suffered a covered loss. This infographic from the Labour shortage trends in Canada shows that recruiting skilled individuals has become a lot more difficult, especially for the construction sector.

The automotive sector has also experienced shortages and higher automobile pricing. According to AutoTrader, the “impact of the pandemic, most notably, [the] production issues fuelling new vehicle inventory shortages, continues to drive demand to used vehicles, resulting in a sustained price crunch”.

In addition, FleetOwner reported in March 2022 that “semiconductors have become the national poster child for commercial vehicle equipment shortages,” and that “procuring equipment to move a record amount of freight” has led the commercial vehicle industry to be “met with persistent supply chain challenges that ramped up in 2021” and continue to be ongoing.

As Heather Matthews, chief client officer at Crawford & Company, told Insurance Business, “Inflation and supply chain delays are having an immense impact on claims adjusters across Canada. Not only are these trends increasing the cost and lifecycle of claims, but they’re also wearing claimants’ patience thin.”

It is important for brokers to speak candidly with their clients about how a loss may impact their business and the potential cost of a larger-than-usual claim. Here are a few pointers to keep in mind:

Contact your underwriting and risk control teams for support in a changing risk landscape. CNA’s Strategic Business Resilience Report provides strategies on how to endure and thrive through adverse business conditions.
Speak with clients regularly about their day-to-day business operations to ensure that their coverage is adequate for all business needs.
Identify risks associated with the client’s business activities and suggest alternative supply chains and material sourcing.
In the event of a claim, alert the client that the claims adjuster will be asking them questions about their loss as well as their business practices. The client should be prepared to provide additional documentation as required.
Work with our claims team, which can provide support to brokers and clients with guidance throughout the claims process.

Businesses cannot avoid the impact of inflation and the persisting supply chain issues; however, they can work proactively with the resources at their disposal to reduce potential disruptions and mitigate potential losses. Alternative solutions create safeguards which can help businesses continue to carry on as usual.

Brynn Tucker is the assistant vice-president of claims at CNA Canada’s Eastern Region. She leads a team of claims professionals in the Toronto office.

Prior to joining CNA in July of 2022, Brynn worked in the property and casualty industry for over 20 years. Brynn began her career at RSA, holding many claims and underwriting roles over a period of nine years. She then joined Claimspro, a Marsh claims intake team as a bilingual claims triage specialist, where she was promoted to a claims administrative supervisor, creating and implementing the first quality assurance audit program. In 2016, she joined Tokio Marine & Nichido Fire Insurance Company Canada branch as lead oversight for all Canadian claims operations.

Brynn holds a BA (Hons.) from the University of Guelph, a CIP and FCIP from the Insurance Institute of Canada. She has continued to volunteer for the Insurance Institute of Canada since 2008 as a career connections ambassador to promote the insurance industry as a world of possibilities and as a CIP instructor since 2017. She is a member of the Insurance Supper Club and of CICMA.