Energy-linked price movements stemming from the Middle East conflict is pushing new uncertainty into Australian claims, with loss adjusting firm Crawford Australia flagging that the effects are now detectable across repair costs, contractor pricing models, and claim durations.
The company released an update to its Claims Inflation Update series on June 9, 2026, incorporating market intelligence current as of April 2026. The report builds on a prior edition from late March and notes that definitive guidance from peak industry bodies – including Master Builders Australia (MBA), the Housing Industry Association (HIA), and the Australian Institute of Quantity Surveyors (AIQS) – remains pending. The analysis is based on the best available intelligence in the interim.
The mechanism connecting geopolitical events to claims outcomes runs through fuel. The Reserve Bank of Australia (RBA) raised the cash rate target to 4.10% in March, citing sharply higher fuel prices tied to the Middle East conflict as a sustained inflation risk. For claims specifically, fuel costs are embedded across mobilization, site transport, plant, and materials delivery, which means movements in energy pricing can translate into shifts in repair budgets with relatively little lag.
The downstream effect on contractor behaviour is already visible. According to Altus Group, major builders are moving away from fixed-price and lump-sum arrangements, with some tender validity periods now as short as 15 days. The report also points to a wider industry pivot toward cost-plus contracting, a structural change that places the burden of price movements on the principal rather than the builder, and that adds a layer of unpredictability to how claims are scoped and managed. Crawford Australia described the dynamic as a potential domino effect, in which fuel and freight shocks feed into high-use repair inputs, which in turn alter contractor behaviour, tender validity, and program timeframes – contributing to increased claim severity and underinsurance risk.
Two building materials categories have drawn particular attention in the current environment. Plastics used in plumbing and drainage – which are petrochemical-derived and appear routinely in escape-of-liquid and water damage claims – have seen price increases of up to 36% in some categories, according to SmartCompany. Timber has also come under pressure, with industry reporting indicating price rises of up to 15% in recent weeks. Unlike PVC, timber has no direct link to petroleum, but its supply chain is heavily dependent on diesel for harvesting, haulage, and site delivery. The forestry and timber sector has separately indicated that diesel costs and freight exposure flow directly into the delivered cost of wood products on building sites, with the effect amplified for regional and long-haul movements. Master Builders Australia CEO Denita Wawn, speaking to SBS News in April 2026, said: “Builders are reporting surcharges for fuel, concrete, and skip bins, with increases of between 20% to 30% to plastic piping products.” MBA estimated construction cost growth of between 1% and 5% for 2026 to date, with further increases anticipated as supplier notifications continue to flow through.
Trade subcontractors across Australian construction are heavily exposed to diesel through plant and equipment, site operations, and deliveries. Crawford Australia noted that subcontractors are only beginning to quantify the full extent of their additional costs, and the process of passing those costs on to clients and builders is still in its early stages. The practical effect for claims is already taking shape, however. As subcontractor pricing adjusts, the visible outcome is wider variation in quote ranges, more frequent discussions around scope changes, and longer lead times before work can begin – all of which affect both cost-to-complete and time-to-complete outcomes.
Crawford Australia highlighted that regional markets carry a different and more acute risk profile in the current environment. The combination of longer freight distances, reduced subcontractor availability, and fewer options for material substitution means that cost pressures compound more quickly outside major metropolitan corridors. Forest & Wood Products Australia flagged that regional operators face pronounced exposure to rising diesel costs, given freight distances and a cost structure that escalates rapidly with distance from urban supply networks. Crawford Australia noted that if the current volatility persists, the gap between regional reinstatement costs and existing sums insured can widen more quickly than annual renewal cycles allow, extending repair timelines and increasing underinsurance risk.
The report draws a parallel between current tendering conditions and those that characterized the COVID-19 period, particularly around imported products and components on the critical path of reinstatement. Master Builders Queensland noted that global events can affect local pricing and availability – a risk that applies across a wide range of fixtures and fittings, including glazing systems, tapware, sanitaryware, electrical components, appliances, and specialist hardware, many of which are sourced through international supply chains exposed to higher energy and freight costs. Altus Group separately identified imported fixtures and long-lead items, including transformers, as being under active supply chain pressure. The implication for claims management is that reinstatement estimates carry a higher time-sensitivity than in stable market conditions, and that procurement and sequencing risk warrants greater allowance in cost projections.
The shift away from fixed-price contracting has specific consequences for how cost shocks translate into claims outcomes. Under cost-plus arrangements, the financial exposure to input price movements sits with the principal rather than the builder. Provisional cost (PC) and provisional sum (PS) items – which are priced at the time of contract and reconciled at actual cost – carry elevated exposure when inputs move sharply, widening the gap between initial allowances and delivered costs and increasing the likelihood of variations and disputes.
Extensions of time (EOT) introduce a further dimension. While they protect against delay penalties, extended program durations can themselves become cost drivers, generating higher preliminary costs and additional opportunities for scope variation. Master Builders Australia, through an April 2026 member webinar, reinforced that cost bases established during crises do not return to prior levels. The COVID-19 period showed that normalisation, when it occurs, settles at a higher floor. MBA advised members to communicate early and transparently with clients, present reasonable material alternatives where supply is constrained, and – for projects not yet commenced – to delay fixing prices until conditions stabilize.
Crawford Australia identified underinsurance as a compounding risk as rebuild costs move higher. The Insurance Council of Australia (ICA) has previously pointed to inflation, labour costs, and materials pricing as factors influencing the premium environment. Policies written in 2024 or early 2025 that have not been reviewed since the conflict escalated risk being inadequate when a claim is lodged. The averaging clause – which reduces payouts on claims where the sum insured falls below 80% to 90% of actual replacement value – applies to both partial and total losses. A water damage claim involving PVC pipe replacement priced at 27% to 37% above prior rates is not only a materials cost issue; where the sum insured has not kept pace with cost movements, the averaging clause reduces the recovery across the claim as a whole.
Crawford Australia noted that replacement cost encompasses more than the current build rate, including demolition, professional fees, compliance costs, and time-related escalation. In periods of cost volatility, the gap between the sum insured and actual replacement cost can accumulate between renewal cycles, increasing the risk of shortfalls at claim time depending on policy conditions. The firm advised insurers and their clients to review sums insured against realistic current rebuild costs, understand the cost implications of their contract model, treat all quotes as time-sensitive, and retain supplier notices and revised quotes to support transparent cost validation throughout the claims process.
