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inside man
45 Posts |
 Posted - 02/11/2003 : 11:16:11
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Here is a link to a nice website that will allow you to enter specific information on your residental dwelling and calculate a detailed replacement cost report.
When you get the final report it is best to cut and paste the info into Word in order to get a nice looking work product.
The database is based on Craftsman's National Building Cost Manual.
The best part of this is it's FREE !!!
www.building-cost.net |
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CCarr
Canada
1200 Posts |
Posted - 02/11/2003 : 13:21:38
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Hi 'Inside', I went and 'played' in the web site you mentioned, yes it is a nice site, but I believe the building evaluation process they used is flawed in some areas; regarding the determination of ITV.
ITV is a very important aspect of the claims process, and critical to the bigger picture of insurance overall.
From a claims perspective, the calculation of ITV (aka RC) is a required portion of the exercise in homeowners policies when considering the Loss Settlement clause, and essential in any commercial policy where co-insurance is a component of coverage.
In the bigger picture, ITV/RC is a common and current conern of considerable proportion to carriers. Carriers fight, stew and worry constantly whether their book of business is insured to value, and hence do the premiums collected 'today' have the same dollar value as the claims dollars paid out 'this year'. The importance of this can not be over stated as a survival element to carriers.
It is worthy of an example. A homeowner insures his home for $150K and pays the premium based on that amount for the coverage type chosen (i.e. the perils provided); lets say that was $300. Most carriers think their books are undervalued by at least 10%, a good handful will say 20%. That doesn't necessarily mean, $30 or $60 more premium in the example given, but likely means $15 to $30 more. However, all claims are paid out at 'todays' dollar value, and that does add a second level of erosion to profit or sustainability. It is one issue to try and write a profitable book (99.9% loss ratio), but when you discount from that any percentage of undervalue of the book, that 99.9% goes south to at least 104.9%. Anyway, just wanted to illustrate to you the significance of ITV from both worlds.
I'll give my critique of the RC computation system as found on the site you mention, in summary form.
Step 1 - Corners - okay & required
#2 - total living area - don't agree. They are asking for TLA of for example a 2 sty home, that could include a large 1 sty section.
#3 - Quality class -
'foundation' - is not part of a HO RC computation
'exterior walls' - concerned w/ masonry (brick'block) choices. There is a big difference in brick veneer vs 'solid brick' (2 layers) or the real old triple brick (with the opposing 6th course).
'floor & roof plan' - I have difficulty understanding the relation of the f&r plan to quality class of exterior walls
'windows' - not as vague, may be adequate
'roofing' - not as vague, may be adequate
'interior finish' - not as vague, may be adequate
'floor finishing' - doubtful, seems inadequate at top end
'bathrooms' - doubtful, seems inadequate at top end
'kitchen' - doubtful, seems inadequate at top end
'plumbing' - doubtful, seems inadequate at top end
#4 - attic - finished attic should be considered in 'type' of dwelling, more at the front end of this equation. Often it distinguishes between a "2 sty home w/ finished attic", or a "2 1/2 sty home"; based on the finished area of that 'upper level'
'balcony' - inadequate to incorporate value
'basement' - inadequate for anything above basic
'garage' - the top choice is inadequate to consider a number of varieties of the 'built in garage', that have a wide ranging cost
'porch' - inadequate when considering 'open' or 'closed' porches
#5 - where built - don't agree with the contrast between the 2 offered choices. This is an important consideration, this area should have more 'depth' to it
#6 - HVAC - no consideration past template type choices. What about heat pumps etc? Plus, "through the window coolers" are a piece of contents, that will be taken by the owner to their next home.
#7 - fireplaces - choices are marginally adequate, but what about installed free standing woodstoves and their significant wide ranging value and flue options?
#8 - State - okay
#9 - Zip - okay
#10 - cost of this home - You would have to subtract excavation and foundation costs noted, as they do not belong in a HO RC computation
Also, no where did the equation ask for the age (when built) of the dwelling, which is an important consideration in RC computation regarding 'styles' used and hence the consideration that follows of LKQ. There is no consideration for 'speciality rooms', where significant costs can be focused. The system only seems usable for detached single family dwellings, there are no provisions for semi detached or townhouses etc; i.e common walls.
I have a number of other concerns, but overall I'll stick to my Boeckh Evaluation Handbook / Guide, and / or that type of software found in an estimating program. Part of this bias is likely rooted in the fact that I have used Boeckh for my ITV/RC computations for many years and have a comfort level with both its usage and the result it creates. |
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inside man
45 Posts |
Posted - 02/11/2003 : 13:37:18
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Gosh Clayton you crushed my enthusiasm for this site.
The carriers that I have worked for in the past will accept a one or two line ITV calculation such as:
Heated area 2000sf X $50 = 100,000
Garage area 400sf X $25 = 10,000
Total ITV 110,000
I thought the site provided a little more detail and was an improvement over the above method.
You brought up some good points but I wonder why you would not include the foundation in your RC calculations? Isn't that a part of the house that we insure? ie: concrete slab and below or above grade basement walls
I wonder how close the two evaluations would be if you ran one on the website and one on Boeckh?
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CCarr
Canada
1200 Posts |
Posted - 02/11/2003 : 14:07:29
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Hey 'inside', yes and agreed, there are carriers that will accept the type of ITV calculation you note. But, that would be at one end of the scale, others want more, others have their own forms, others want a Boeckh type build up.
In part, the degree of detail wanted or accepted inside the claims applicability of this issue, is dependent on the level of management (outside of claims) concern to the ITV situation in the bigger picture I mentioned; and how that concern may or may not have filtered down to claims management and then to us peons.
Regarding the 'foundation and excavation', have a look at a Loss Settlement wording, I'll refer to the one in an HO 3 0491.
LS part 3 - "to determine the amount of insurance required to equal 80% of the full replacement cost of the building immediately before the loss, do not include the value of:"
"(3a) excavations, foundations, ...."
I'm not saying that the site program you mentioned is useless, it more than meets the requirements to develop the type of example you gave. However, a small Boeckh Handbook, would allow you to get to that point a lot quicker than the computation process in the web site mentioned.
I think in hindsight, I was also looking at this from 'colored glasses', in view of my work in homewoners evaluation outside of claims. |
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inside man
45 Posts |
Posted - 02/11/2003 : 14:17:44
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Agreed. Nice point about the specifics of the policy as it pertains to RC. I didn't realize that language was in there as it pertains to foundations. Guess I learned something new today. Thanks!
I agree with the importance of the ITV issue however can't you just hear the belly aching and complaining coming from the masses when this comes up around the dinner table: "Why do we have to figure this stuff out? We are claims adjusters not underwriters. It's not my job to do this!"
This is probably symptomatic of the bigger problem which is working on low fee schedules which translates into the carriers wanting more for less... |
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CCarr
Canada
1200 Posts |
Posted - 02/11/2003 : 14:48:55
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Well 'inside', I don't see you at that 'dinner table', but for those that are sitting there bellyaching about the 'why' of having to compute RC for the purposes of a claim; they are either not 'adjusters' or they fail to see the need to complete all steps on a loss where that is a requirement in a Loss Settlement of an HO wording or Co-insurance in a commercial wording.
It is the job of an adjuster, and it is an equally important function as any of the other essential steps taken in the pursuit to provide indemnity.
If that same person concludes that they are not paid enough to do all the required steps; then they should find something else to do.
It is just that short and blunt of an issue, in my opinion. If a person does not want to do all the required steps, go do something else; don't dirty the water in the pond I swim in.
Not likely a popular view, but it is way past the time that we start putting a stop to 'cut corners'. |
Edited by - CCarr on 02/11/2003 15:21:27 |
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CCarr
Canada
1200 Posts |
Posted - 02/11/2003 : 16:27:24
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'Inside', you got my mind going on this important issue of ITV/RC you raised. I was searching around for more substantiation, and came up with a recent blurp from a SVP at Chubb, which may shed more light on the concerns. I'll quote from the 'repair cost' area of the comments.
".... The issue of water damage claims is that they are much more expensive on a cost per square foot basis to repair than fire damage. Water damage repairs usually involve ripping out and replacing sections of the home, instead of rebuilding from the ground up. Thus, water damage represents an 'insurance to value' issue.
Chubb, through the use of our own appraisers, probably achieves the best insurance to value in the property insurance industry, and yet we still can not determine the price to take apart a home piece by piece and put it back together .... We have paid $500K on a water damage claim in one room of a $700K house. We recently had a claim to a hardwood floor in a kitchen. We had appraised, accurately, the replacement cost of the floor to be about $12 a square foot or $4000 in total. However, we had to pay an additional $20,000 to lift the marble island to put the new floor underneath it ....
I believe that rates will continue to rise through 2003 .... Insurers will undoubtedly continue to refine their contract offerings ....
Overall, I expect to see increased industry attention being paid to insurance to value. We may also see increased annual inflation factors on policies to account for the red hot construction market and the shortage of skilled labor in the construction trades. Even with our excellent insurance to value, we will be trying to improve this ratio on contents and vacation properties." |
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Wes
USA
62 Posts |
Posted - 02/13/2003 : 17:41:34
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| I wish I had some input on this topic but I dont all I can say is I found this thread to be interesting, very well discussed and crammed full of important information. This kind of discussion makes every dollar I spend on CADO tuition worth every penny. oh wait I forgot, CADO doesnt cost a dime. I hope everyone realizes what a opportunity CADO is to anyone in the adjusting profession. |
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katadj
USA
315 Posts |
Posted - 02/15/2003 : 14:03:03
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Well, I tried this thing for the heck of it, and IMHO, it has no relevance to my area. Inputting all of the info that they had, their completed costs came up to LESS than 1/3 of what Chubb Insurance has estimated as the RC cost and the amount that they have the dwelling insured for.
I'll stick to the old ways, even though it costs a lot more.......
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Edited by - katadj on 02/15/2003 14:03:58 |
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ITV Calculations
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