What Crawford is seeing in the Business Interruption claims space ...

The impact on business interruption claims in Australia (thanks to all the issues described above) has been severe, with some projects blowing out to more than twice original scheduled time lines.

Builders and suppliers have often cited logistics interruptions through the supply chain from off-shore suppliers, following Covid effects. There has also been some profit maximisation from suppliers diverting materials to alternative markets. For example, shortages of timber have seen periods where vital building material has been diverted to the USA, where premium prices can be secured.

While the availability of steel, roofing materials and timber are the most talked about materials in this context, construction projects rely on thousands of components. The non-availability of even less significant components can have radical delay impacts. Every delay in the construction timeframe extends the period of interruption, and therefore increases the overall cost of the claim.

Here at Crawford, we have seen a rise in insureds and advisers seeking to transfer elements of increased building costs to business interruption covers, when material damage cover is inadequate, generating considerable discord when these are rejected.

For tendered projects, the increased uncertainty has been factored into pricing, but for managed cost-plus projects there is greater uncertainty over the material damage cost and the likely timelines.
​ With many building businesses failing thanks to cost over-runs, there is a genuine concern for insurers to ensure projects are completed. When builders fail, it is very hard to restart projects, with delays running into months or years if the project can be completed at all. Few builders are happy to take on an unfinished project, as there may be unexpected liabilities and regulatory compliance problems.

In turn, these supply difficulties put roadblocks on completion of tasks which may not normally be time critical. It has therefore become critical for loss adjusters, concerned to manage business interruption risk, to regularly review project plans and challenge builders to report on the project of each item. Understanding and being able to query project plans to identify program slippage, not initially on the critical path, are key skills in the loss adjusters repertoire.

There have been significant problems sourcing unskilled labour with dramatic cost pressures. The shortage of unskilled labour has meant that skilled trades have not been able to delegate routine tasks, which has led to further project completion delays. The outward migration of unskilled labour (often backpackers) has certainly started to reverse, but there are still shortages across the building industry.

An increasing burden for builders is the difficulty of fitting insurance projects under the Building Regulatory Framework. The Australian Building Codes are focused on new-build projects, which do not anticipate partial rebuilds after a fire for example. A builder recently described the difficulties this creates; ie almost working the project backward. There are limited builders with the skills to work this way and hence the development of specialist insurance builders. Where builders unfamiliar with these issues seek to do insurance work, there are often delays.

Mitigating the risks of claims inflation

Driving efficiencies throughout the claims cycle

At Crawford, we are working with clients across the board to help mitigate the effects of claims inflation and are supporting proactive steps to better manage claims costs. 

A key part of this are our efforts to manage the deployment of adjusters, contractors and supporting services centrally, enabled by technology, to ensure policyholders receive the optimal response in the event of a loss, and that every stage of the claim process is streamlined, with costs minimised.

Deploying the right adjusters, inspectors and contractors at the right times can make a huge difference to customer experience, claim spend and the overall duration of the claim life cycle.

For example, automation is becoming an increasingly important component of our claim segmentation and triage process. AI accelerates the decision-making process and connects adjusters, policyholders and all players involved in a claim, enabling a network-wide response to be coordinated within minutes of an incident developing.

In the current inflationary environment, managing the assignment of contractors centrally through a managed repair network model is becoming an increasingly important means of ensuring resources are deployed quickly and efficiently. Rather than relying on the availabilities and timelines of individual contractors, managed repair networks enable the insurer, or claims management company, to orchestrate claim responses from a pool of professionals that can flex and scale much more effectively to meet demand.

Putting a higher proportion of claims through a network is proven to be more cost efficient, particularly for mid-complexity claims, as well as driving significant expense savings. Using a trusted managed repair network (such as Crawford Contractor Connection) where all contractors are carefully vetted and can be put in direct contact with the policyholder quickly and efficiently can also help significantly reduce call-out costs.

Via a well-run managed repair network, work that might have taken weeks to complete can now sometimes be done in a few days. Errors, revisions and return visits are reduced, while the accuracy of estimates and timeline management is improved.

Managing cost through Crawford Contractor Connection

Contractor Connection is designed to fully optimise resources and managing performance in the claim process. Leveraging technology that captures contractor capacity and real-time performance data, Contractor Connection ensures the right contractors are deployed at the right times, consistent service is ensured, and costs are managed stringently at every stage.

“Contractor Connection has an embedded cost scrutiny service. We call this our Building Validation Service which is used by both our loss adjusters and clients to review the proposed Scope of Works from contractors and ensure only items that need to be repaired or replaced are accepted.
​
​We then work with contractors to ensure that their pricing is right. Our experience shows that 60% of savings actually relate to the Scope of Works, or over servicing, and the remainder are actual price point issues" - ” Tim Butler, Head of Contractor Connection, Australia.

​Contractor Connection affords users the benefits of accessing Crawford’s approved vendor panel. Allocations to our panel builders, restorers and suppliers are made based on the Service Rank of the vendor. A key component of this is the Vendors Average Cost performance over the past three months.

Overall, this provides cost reductions in that there is typically a 15% difference between the lowest to the highest ranked vendors. Another item in the ranking system is our Quality Score where, on every claim that our validators review, they score the Scope of Works and Quotation they have been asked to review. This provides additional weight to costing and drives better outcomes across all peril types.