Currently the claims environment remains complex, with under insurance emerging as a significant concern.
Importantly, between 2022 and 2024, commercial building costs in Australia experienced significant growth due to inflationary pressures, supply chain challenges, and rising labour costs.
Here’s a breakdown:
2022: Commercial building costs rose sharply, with increases ranging from 10% to 12% in many regions. This was driven by pandemic-related supply chain disruptions and high demand for construction materials.
2023: The rate of cost increases moderated somewhat, averaging 5% to 6% as market pressures began to ease but remained elevated due to ongoing labour shortages and inflation.
2024: Costs rose by approximately 5.5% nationally, with some variability depending on the region and project type. Factors included enterprise agreement-driven wage increases and lingering supply chain issues.
Three-Year Average Increase
The cumulative average annual increase over the three years (2022-2024) is approximately 7% to 8% per year. This reflects the compounded effect of significant early increases in 2022, tapering growth in 2023, and stabilization in 2024. Over three years, total costs likely increased by around 20% to 25%, depending on the project type and location.
References: Build Australia and CoreLogic Australia.
Industrial Special Risks (ISR) policies on commercial risks in Australia commonly include underinsurance clauses, also referred to as “average clauses” or co-insurance clauses. These clauses are designed to ensure that the organisation maintains adequate sums insured for their insured property.
The ReSure platform can assist the annual renewal process greatly by giving a clear view of sums insured across multiple sites and multiple risks showing a very clear trend over multiple insurance periods. This feature gains considerable power when individual risks are linked to Surveyors reports (highly recommended) to ensure risks are neither under insured nor over insured thereby maximising premium efficiency and peace of mind!
