Inflation has been a persistent issue in the United States, though it has moderated since its peak during the COVID-19 pandemic, while supply chain disruptions for equipment and other goods continue to add to insurance claim costs—and the financial impacts of tariffs and trade policies remain uncertain.
How will these global economic trends affect businesses and their insurance carriers? What advice can you give your clients to help them meet these challenges?
These are questions a few much-needed facts may begin to answer.
Rising Prices Pushing Claims Higher
Inflation has eased, but it is far from gone. The Federal Reserve has highlighted how disruptions in global trade are exacerbating inflationary pressures, particularly when they affect intermediate goods—components used in the production of other goods.
Higher costs are not limited to consumer goods but also extend to the industrial and commercial sectors. Since many equipment repairs rely on replacement parts, the inflationary impact is direct and substantial.
Insurers and their business customers are feeling the strain. HSB’s average cost of a commercial equipment breakdown claim increased by 29% over a two-year period from 2023 through 2024.
Price hikes for equipment and spare parts will continue to be a significant concern for insurers and their clients as businesses become ever more dependent on technology.
Supply Chain Delays Add to Losses
Supply chain disruptions, although improving since their peak during the COVID-19 restrictions, continue to add to insurance claim costs for breakdowns and business interruption.
The scarcity of parts and the need for expedited shipping impact equipment maintenance, repairs, and replacement, causing delays, downtime, and bigger losses.
HSB has been studying the impact of supply chains on equipment since 2023. At that time, we evaluated the delivery times of several types of equipment in comparison to their pre-pandemic levels. While some lead times have improved since, others have grown even longer, for a different reason.