The Middle East conflict has added volatility to claims costs, particularly around jobs such as plumbing and draining water, and is raising the risk of underinsurance, according to Crawford & Co Australia.

“What we’re seeing is not broad-based inflation across everything but a more concentrated set of pressures flowing through fuel, freight and petrochemical-linked inputs that appear in everyday property claims,” head of contractor connection Tim Butler said.

Issues around the cost and timing of supplies are influencing repair budgets, procurement decisions and claims timelines, particularly when quotes are time-sensitive, and contract models are adjusting to the less predictable environment, he adds.

Crawford’s Claims Inflation Update notes plastics used in plumbing and drainage are a pressure point because they are petrochemical-linked and appear in repair scopes involving leaks and water damage.

Timber is also under pressure in some areas due to higher freight and haulage costs.

Crawford says there is a move away from fixed-price arrangements towards cost-plus models. Tender validity periods in some cases are shortening to as little as 15 days.

Outside metropolitan areas, longer transport distances and thinner subcontractor capacity could amplify cost pressures, particularly if volatility persists.

“Underinsurance risk may become more visible,” the update warns. “Replacement costs may move faster than policy updates, potentially widening the gap between insured values and rebuild costs at claim time.”

The report says policies from 2024 or early 2025 that have not been reviewed since the conflict began risk being inadequate at claim time, with averaging clauses that are triggered by underinsurance applying to partial and total losses.

The claims inflation update combines publicly available market indicators with industry insights.

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