Claims costs for businesses have been steadily rising in recent years due to various factors including supply chain disruptions, advanced vehicle technology, fraud, and climate change. Understanding what is driving these increasing costs can help businesses prepare and budget accordingly.
Supply Chain Disruption Driving Up Repair Costs
The global shortage of microchips has significantly impacted new car production, leading more customers to buy used vehicles. This demand has driven up used car prices. Additionally, lack of parts and materials has extended repair times and increased rental car costs. Shortages of rental cars themselves are also pushing up rental rates. For property claims, construction materials and labor shortages have led to higher repair and replacement costs.
Advanced Vehicle Technology Means Higher Repair Bills
Electric vehicle sales are booming despite supply issues. However, these technologically advanced cars contain sophisticated components that are expensive to repair or replace. More cars end up being declared total losses. Specialised technicians are needed to service these new technologies, further increasing labor costs. Theft of catalytic converters for their valuable metals remains problematic as well.
Fraud on the Rise Due to Economic Pressures
Fraud often rises when economic times get tough. The cost of living crisis seems to be driving more fraudulent claims. Insurers like Aviva are investing heavily in fraud detection and prevention. While effective countermeasures are in place, businesses must stay vigilant against fraud in the current climate.
Climate Change Leading to More Extreme Weather Events
From record heat to intense storms, climate change is causing more extreme weather globally and in the UK. Hot and dry conditions increase fire and subsidence risks. February 2022 saw three major storms hit the UK in one week. December brought prolonged freezing temperatures and snowfall. As the UK works towards its Net Zero goals, new green technologies could also push claims costs up due to advanced materials and skills required.
The combination of supply chain problems, vehicle technology shifts, fraud, and climate change makes it critical for businesses to prepare for rising claims costs. Staying informed on these cost drivers can help in budgeting and protecting your business.