Crawford & Company's latest Claims Inflation Update highlights that construction expenses are rising at a rate faster than general consumer prices. The Building Cost Index (BCI) is increasing at nearly 5% annually, with cities like Brisbane and Perth experiencing the most pronounced effects. Factors contributing to this trend include strong demand, logistical challenges, and a persistent shortage of skilled labour.
Wage growth in the construction sector is projected to reach 6% in 2025, with forecasts indicating that over 500,000 new workers will be needed over the next five years to meet national infrastructure and housing targets. The combination of a shrinking workforce pipeline and slow policy changes on migration is leading to project delays, higher costs, and increased claims inflation.
Additionally, the report notes a rise in contractor insolvencies, with over 3,200 construction firms entering administration in 2024. This marks a significant increase from the previous year and is attributed to fixed-price contracts, cash flow challenges, and ongoing inflationary pressures. These factors are contributing to project delays and incomplete work, which in turn drive up insurance claims and complicate the recovery process.
For tradies, these developments underscore the importance of robust risk management strategies. Ensuring comprehensive insurance coverage, staying informed about market trends, and adopting proactive business practices are essential to navigate the current challenges effectively.
In conclusion, the Australian insurance industry is facing a period of heightened complexity due to rising claims costs and labour shortages. By understanding these dynamics and implementing strategic measures, tradies can mitigate risks and sustain their operations in this evolving environment.
