Pandemic disruption to insurance values are SWIFT and ONGOING!
Increased focus by the insurance industry on increased cost due to pandemic disruptors.
“On average, renovation/remediation costs have increased by 50%, making it crucial to evaluate home values and building limits on a much more detailed level.”
– Cindy Locke, Maxwell Claims
WHY HAVE CLAIMS COSTS INCREASED SINCE THE PANDEMIC ONSET?
Supply Shortage and Material Expense Increase
- Increased renovations
- Increases cost of raw materials
- Closing of mills cause by Stay-at-Home orders and infections.
Labor Shortage and Increased Renovation Periods
- Increased renovations
- Stricter laws and regulations
- High demand and not enough supply for qualified workers
- People are less willing to have strangers in their homes due to Covid-19
GroupOne’s Claims Experience
In a recent claim, water leaked from an adjacent unit causing damage to the insured’s unit.
The insured advised the broker that they would have to submit a loss of income claim, along with the water damage claim, due to a loss of rental income.
Restoration to the unit was delayed and not completed in a timely manner due to scarcity of contractors coupled with wait times for relevant materials, all causing a ripple effect which resulted in a loss of rental income.
These combined factors extended what would typically be a weeks’ worth of restoration to 3-6 months.
In this situation, not only has the money that would normally be paid out for a loss increased, but a claim for loss of rental income would normally have been irrelevant had there been no delays in labor and materials.
WHAT SHOULD BROKERS DO FOR THEIR CLIENTS?
It is critical that as a trusted Insurance Broker you undertake an annual evaluation of building, contents and business interruption limits with your clients to ensure:
- Your clients have adequate insurance limits for their property which contemplates regular inflation factors as well as increased cost factors caused by the pandemic disruption.
- Your clients have current information regarding current markets conditions, standards and disruptors that should be considered in arriving at an adequate limit of insurance.
- You have fulfilled your fiduciary responsibility in advising your clients of all factors which could impact ease in loss settlement and protected your own E&O!
How to Determine Proper Insurance Limits:
- Meet with your clients at a minimum of once per year with updated information and communications. Listen to the advice of your clients around the value of their property.
- Make use of industry tools and calculators available to assist in value determination.
- Suggest a professional insurance appraisal for higher value properties or if there is a large discrepancy in value limits.
- Recruit the advise of a contractor who will have a great awareness of cost and time limitations.
- Remember – market value and insurance value can vary considerably in the current environment!