Pandemic-Related Shortages Affect Insurance Claims
Two-by-fours for $8 each. Lumber prices up 162.66% since last July. Chip shortages that could cost the auto industry $110 billion. These troubling trends are expected to continue for some time. Building materials experts predict that supply may not catch up to demand until late 2021 or early 2022. Forrester’s Glenn O'Donnell reports, "We expect the chip shortage to last… into 2023." We asked Arbella experts, Claim Manager Elaine Dupuis-Lane and Auto Damage Manager Mike Mullarkey, to shed some light on the situation.
What’s causing these shortages and delays?
Elaine: COVID-19 closed manufacturing plants and borders and halted projects. The demand for materials and contractors skyrocketed. We experienced a boom in the housing market, which drove homeowners to renovate rather than purchase. An increase in catastrophic events throughout the US only compounded the supply situation. It was a perfect storm – short supply and high demand.
Mike: We’re seeing a similar situation in auto. Although claims decreased last year while people were at home, shortages became a major problem by the fall and supply chain disruption continues to be an issue. While rental companies struggle to keep their fleets stocked, people need their rentals longer.
The industry has had to get creative about where car parts are sourced from, too. Most body shops try to source parts locally, but lately, that’s been more of a luxury and less of a standard practice. We saw a case recently where a car needed a specific part for a repair, and there was only one such part left in the country. They had to ship that part all the way from Texas.
How is the situation affecting claims?
E: Securing a contractor for small- to average-sized home repairs has been a challenge. Contractors are focused on larger projects. A project that would typically take 12 months may now take 15 to 18 months. Cost of living expenses go up while homes are under construction – driving claim costs higher.
M: From the auto perspective, if a damaged vehicle is drivable and the accident didn’t cause safety issues, we recommend calling the shop before dropping the vehicle off and renting a car. These issues aren’t affecting every claim. It’s well worth it to ask the repair shop to pre-order parts first and get an estimate on how long the repair will take.
Note: If you’ve submitted a claim or need to do so, our claim experts are here for you. They will work with you and your agent to make sure your claims are processed smoothly.
Is there anything people can do to get ahead of the issue?
E: Homeowners looking for home updates or repairs should ask multiple contractors for bids. Social media is a great place for local contractor recommendations.
M: Arbella is here to work with you and your agent on any questions or concerns you may have. That’s what we’re here for and we’re happy to help.