Authored by Sara Weathers

One of the unexpected side effects of the COVID-19 pandemic has been the prices of materials and labor skyrocketing. Because of this, increases in property insurance claim costs are taking place as well.

In an interview with Jim Sams of ClaimsJournal.com, Greg Pyne, who is the vice president of pricing solutions at Versik’s Xactware, prices for some materials like plywood increased by over 250 percent and by over 100 percent for other lumber materials since July of 2020.

In the past two months, lumber prices have begun to level out. However, with COVID-19 infection rates surging again, the future pricing market remains unclear and buying in bulk at a lower price means risking having unused materials at the end of the project.

Labor shortages are also driving up costs. “We tend to see 3 or 4 percent in a normal year,” Pyne said. “This year we are seeing more than double that.”

The uptick in pricing for both materials and labors has made it increasingly harder for insurers to provide accurate property claim costs. There are a few ways that they can stay aware of costs throughout the project. One recommendation from John Shaw of Marsh Risk & Insurance Services is that insurers hire a cost management consultant. These consultants can stay in constant contact with the contractors that are seeing the fluctuation in prices on a daily basis.

Contractors should be informing insurers of any cost changes as they happen so that insurers have the most up to date cost of any given project. Insurers can also keep track of prices themselves, but it can be harder for them to predict changes, especially in an ever-changing market.

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