Inflation

Inflation is increasing the cost of materials, exacerbating an already troubling issue in inland marine insurance according to Soja.

“One of our biggest challenges is just making sure we’re getting the right price for an exposure because of the increased cost of paying a claim,” the executive told Insurance Business. “Adequate insurance to value, whether it be for fixed location business, such as builder’s risk, or mobile equipment, such as contractors and equipment, has been problematic for a very long time.”

In addition to the increased cost of materials to replace or repair damaged property or equipment, wage inflation is also raising claim payments. Finding qualified workers in certain segments is becoming more difficult, and therefore the cost for those workers continues to rise. The global supply chain also continues to be a challenge, causing further delays in sourcing materials and labor than before.

“If the inland marine underwriter was providing a form of time element insurance, the exact same loss today would cost more in business interruption loss claims than it would have a year ago,” Soja pointed out.

The trucking sector will see the biggest impact of inflation. According to Soja, over 90% of US trucking firms operate fleets with six or fewer trucks. Small fleets hit by bigger costs might struggle with their insurance.

“Historically, trucking is a relatively low margin business. The smaller the trucker, the less reserves they have to weather tough times,” he explained. “The obvious solution is to no longer be in business, or for an independent driver joining a larger firm. But if they do stay the course, the financial struggles could impact underwriting and claims both for inland and cargo underwriters, because you could see lower investment in vehicle maintenance, or other cost-cutting measures that could impact quality risk. We’re