Impact of inflation on Insurance

How Has Inflation Impacted Your Insurance?

Ensure Your Business Has the Correct Levels of Cover to Weather the Storm


You will have no doubt felt the impact of recent hikes in inflation and the current cost of living crisis be it in your business or personal life. But did you know that the rise in inflation will also have an impact on your business insurance coverage?

With inflation rising to its highest point in 40 years, the cost of materials and services has increased. Pressures on the supply chain and shortages across the board also contribute to price increases and the availability of resources.

When times are tough and money is tight, it can be tempting to cut back on insurance and view some covers as a ‘nice to have’. However, it is important to be aware that this approach could be catastrophic for your business. So, what should you be doing now?

At CCRS, our experienced team is ideally placed to provide you with advice and guidance on the risks your business may face

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What is Inflation?

Inflation is the term to describe rising prices with the rate of inflation being how quickly prices go up. The current rate of inflation in the UK is 9% (as of 17th June 2022, Bank of England) and could likely rise to 10% this year. This is the highest rate of inflation the UK has seen in 40 years. For context, the target for inflation set by the Government is 2%.

While a low and stable inflation rate can help to encourage growth within the economy, high and unstable rates can become harmful. Businesses and consumers can struggle with the costs of living and can find it difficult to plan how to spend, save, and invest their money. In extreme circumstances, it can lead to the collapse of the economy.

The current rise in prices and inflation has only been intensified by several factors such as the COVID-19 pandemic, Brexit, and the conflict in Ukraine. All have had a large impact on the effectiveness of supply chains across the world.


What Does This Mean for Insurance?

When it comes to your insurance policies, the rise in inflation and rising costs of materials and services will have a dramatic effect. You will need to consider how these rises and supply chain challenges will affect your business should you need to raise a claim. For example, are your sums insured still adequate? Are you at risk of underinsurance? Is your business interruption indemnity period sufficient to get you back up and running? Now is the time to review!


How to Protect your Business from the effects of Inflation

One thing you can do to protect your business from the impact of inflation is to review your policies. Particularly those that include financial protection for assets such as buildings and machinery.


Things to Consider:


inflation can lead to underinsurance


Even prior to the Covid-19 pandemic, underinsurance was a huge issue within the insurance industry. Now there is concern that inflation will lead to an underinsurance crisis where businesses and individuals are at risk of having insurance coverage that doesn’t match the value of their assets.

Read our article to understand more about underinsurance



Reinstatement Valuation and Sums Insuredinflation can effect your sums insured

As inflation drives prices up it is vital that business owners such as yourself, maintain adequate coverage. Act today to ensure you have the correct level of sum insured for your business. Your Account Director can assist you with the valuation process and help you to assess your policy limits.

For insurance purposes, a reinstatement cost valuation by a qualified valuer is required. This calculates the cost to rebuild the property should it be destroyed. This is different from a market valuation which represents what the property may sell for at a given time.

Ensuring your business has the correct levels of cover will give you confidence and peace of mind knowing you are in a good position to weather the storm.


inflation may require you to review your indemnity period

Length of your Indemnity Period

Supply chains across the world are struggling to deliver with huge backlogs. It is vital that you consider whether the length of your indemnity period is sufficient in the event you should make a Business Interruption claim. Where in the past, 12 months may have been sufficient time to get your operations back up and running, you should consider extending this period to 24 months.

For example, what is the current wait time to replace any machinery your business relies on? How long would a construction project to replace any buildings now take while waiting on materials and labour?


Changes in Your Operations

While not necessarily linked to inflation, following the pandemic your business may have changed the way it operates. For example, have you moved more services online? You can use this opportunity to review how your business has changed (if at all) and work with your Account Director to ensure you have no gaps in cover. For example, if you have moved online, do you have the necessary Cyber cover in place?



Use a Broker Experienced in Risk Management

It is important to use an insurance broker who is experienced in risk management and can advise you on how to protect your business from underinsurance. CCRS Broker’s team of experts understand all too well the financial exposures associated with underinsurance, and we work with all our clients to identify any possible issues. You can have peace of mind that you have the correct level of cover in place.

Our unique risk assessment process can quickly uncover any issues you may be unaware of.


Contact CCRS today and one of our Account Directors will be in touch

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