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Effect of Building Construction Materials on Property Insurance Claim Severity

Abstract

Building construction materials refer to the materials used in the structural and non-structural components of insured properties, including concrete, steel, timber, roofing materials, and other building elements. The characteristics of these materials can influence the extent of damage that occurs when insured properties are exposed to fire, storms, accidents, or other insured perils. Differences in construction materials may therefore affect the severity and financial cost of property insurance claims. This study will examine the effect of building construction materials on property insurance claim severity. It will assess how variations in construction materials influence the financial magnitude of claims arising from insured property losses. The study will also examine differences in claim severity among properties constructed with different material types and determine their implications for property insurance risk assessment. The study will focus on building construction materials, property insurance claim severity, building structure, construction type, property damage, claim costs, fire losses, insured property, loss severity, and actuarial risk assessment. Historical property insurance claims will be analysed alongside information on the construction materials used in insured buildings. Actuarial and statistical techniques will be applied to determine the relationship between construction materials and the severity of property insurance claims. A quantitative research approach will be adopted for the study. Historical property insurance claims, policy, property characteristics, and construction-related data will be analysed using descriptive statistics, claim severity analysis, loss distributions, correlation analysis, regression analysis, and sensitivity analysis. Claim severity estimates associated with different construction materials will be compared to determine the extent to which material differences influence property insurance losses. The study is expected to reveal that building construction materials may have a significant effect on property insurance claim severity. Properties constructed with materials having different levels of durability, fire resistance, or susceptibility to damage may produce variations in claim amounts when losses occur. The magnitude of the effect may depend on the type and quality of construction materials, building characteristics, nature of the insured peril, and extent of property exposure. The study will be useful to actuaries, insurance companies, property underwriters, risk managers, building owners, construction professionals, regulators, and researchers. It may provide useful information for improving property risk classification, estimating claim severity, supporting underwriting decisions, and developing appropriate insurance pricing assumptions. The findings may also assist insurers in incorporating building construction characteristics into actuarial assessment of property risks. The study concludes that building construction materials are important considerations in property insurance claim severity because differences in material characteristics can influence the extent and cost of property damage. It is therefore recommended that insurers and actuaries maintain reliable information on building construction materials and incorporate relevant construction characteristics into property risk assessment, claim severity modelling, and insurance pricing practices.

Keywords: Building construction materials, property insurance claim severity, building structure, construction type, property damage, claim costs, fire losses, insured property, loss severity, actuarial risk assessment, construction materials, property risk, insurance claims, claim severity modelling, actuarial analysis.