Reconstruction Cost Estimations are Rising

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The standard annual adjustment pegged to inflation may not be enough to keep proper coverage these days. Some carriers have indicated inflation factors of 20% nationwide. A multitude of factors are contributing to the rise in costs, not least among them the pandemic-related shutdowns which created shortages.

The 360Value Quarterly Reconstruction Cost Analysis reads:

“Total reconstruction costs, including materials and retail labor,
rose 13.5% from April 2021 to April 2022, nearly doubling
the pace of increase from January 2021 to January 2022,
when costs rose 7.2%.”


Among some of the drivers of this increase in replacement cost estimates are catastrophe losses, supply chain issues and shortages, inflation, and labor shortages. An Insurance Journal article on November 21, 2022 stated the following:

“For the homeowners insurance line, the national 2022 net combined ratio spiked to 115.4% in 2021, the highest since 2011, thanks to natural catastrophe losses and replacement cost pressures. It is forecasted to improve in 2023 and 2024 while continuing to operate at a loss. Loss pressure and expected catastrophes indicate greater rate increases are needed to restore homeowners insurers to an underwriting profit.”