According to Gallagher, a prominent insurance brokerage, construction costs have surged by over 30% since the onset of the COVID-19 pandemic. This increase is driven by persistent supply chain issues, elevated material prices, and a shortage of skilled labour. Materials like copper, aluminium, and HVAC components remain costly due to global supply constraints and energy price volatility.
In response to these challenges, tradies are encouraged to adopt comprehensive risk management tactics. Strategies include securing long-term supplier agreements to lock in prices, utilizing open book contracts that allow for cost-sharing of materials, and exploring alternatives to high-cost materials. Additionally, streamlining site operations and enhancing procurement planning can help alleviate financial pressures.
From an insurance perspective, tradies should consider key policy types such as contract works, professional indemnity, and construction all risks (CAR) coverage. These policies can provide protection against risks related to theft, weather events, design flaws, and material cost volatility. Regularly reviewing policy language to confirm coverage for project delays or inflation-linked material costs is also advisable.
In summary, the rising costs in the construction sector necessitate a proactive approach from tradies. By implementing effective risk management strategies and ensuring appropriate insurance coverage, tradies can safeguard their businesses against the financial challenges posed by the current economic climate.
