There is a much talked about shortage of raw materials in the construction industry right now.
The perfect storm of Logistical Issues with what could be up to an estimated 100,000 less lorry drivers from Eastern Europe in the UK post Brexit and the increased demand for home renovations and expansions from those who have found a surplus of disposable income as a result of being able to save whilst living in lockdown and avoiding booking expensive foreign holidays. This has led to a significant shortage in raw materials at Builders Merchants and as we all know when the supply drops and the demand increases then prices go up.
The average prices of raw materials has been estimated to have increased by over 20% since June 2020. If A Builders Merchant business renews its commercial insurance without reviewing the current level of stock cover, it may find itself becoming a victim to the application of “the average clause” where a claim is reduced by the proportion of underinsurance should a loss occur. The stock that the business holds needs to be insured for the replacement value (reinstatement) so for example if the business previously had their stock insured for £100,000 in 2020 the replacement value would now be closer to £120,000. Should a loss occur such as a theft or a fire, the payout for the claim would also be reduced to 4/5th (80%) of the total value of the loss, so if the value of the claim was £20,000 then the business would only receive a payment of £16,000 before the removal of any policy excess.
Another point to consider is that as materials get more expensive and harder to source we also tend to find that the potential for theft of stock claims also increases, especially for stock stored in the open which builders merchants tend to hold quite a large amount, most commercial insurance package policies will also have a reduced inner limit for stock covered in the open which is significantly less than the overall total sum insured, be careful to check that your policy does not penalise you in this way.
How AIC can help you:
We will conduct a full review of your cover requirements and tailor your insurance policies to meet your changing needs, making sure you are adequately protected for all your requirements including your building, contents and stock and business interruption. We will get a better understanding of your risk management features and not only advise on how these can be improved but also relay this on to our insurer partners in order to achieve the best possible discounts to the premiums quoted.