How Rising Construction Costs Are Affecting Insurance Claims in Australia

Over the past three years, prices for materials such as ceramics, concrete, finishes, metal, and roofing have climbed by 20% to 30%. Notably, concrete costs have surged by 30% since late 2021, making it the most inflationary material during this period. These escalating costs are reshaping the claims environment, leading to higher valuations and extended repair timelines.

Labour shortages further compound the issue, with the construction sector reporting a national gap of 90,000 skilled tradespeople. Wage growth is expected to reach 6% in 2025, and projections indicate that more than half a million new workers will be needed over the next five years to support national infrastructure and housing targets. This shortage leads to project delays, increased costs, and heightened claims inflation.

Additionally, the rise in contractor insolvencies adds another layer of complexity. Over 3,200 construction firms entered administration in 2024, marking a significant increase from the previous year. Factors such as fixed-price contracts, cash flow challenges, and ongoing inflationary pressures contribute to this trend, resulting in project delays and incomplete work, which in turn drive up insurance claims and complicate the recovery process.

Global supply chain disruptions also play a role, with rerouted shipping lanes, higher tariffs, and increased insurance premiums for maritime transport pushing up the cost of repairs and rebuilding. Some insurance policies now exclude coverage for conflict-related incidents, increasing the exposure of businesses to supply chain risks.

In this challenging environment, insurers, claimants, and stakeholders across the built environment must navigate a more complex and risk-sensitive landscape. The cost of claims is rising, timelines are stretching, and the need for robust validation and risk management has never been greater.