Russ, Mark, others last week we attended both the PLRB (Property Loss Research Bureau) conference in Orlando http://www.plrb.org and the ABC conference it Nashville http://www.abc.org/wmspage.cfm?parm1=2006. We know a hand full of large carriers use Xactimate or their edited version of the Xactimate pricing database but most US based carriers leave pricing up to the adjusters even in a storm situation.
At the ABC conference we did not talk to any contractor that used Xactimate. Timberline was most often used by the large contractors but they all seemed to invest major money into editing the reference prices provided by Timberline. Some of the subs used estimating software geared to electrical, etc trades but the most used estimating software is still Excel. R.S. Means is one pricing book that it seems some contractors used for a reference of materials/pricing according to what we were total by contractors coming by our booth. One huge contractor had 40 doing nothing but estimates on Timberline but they used the Timberline system to manage their business but not for material and labor pricing of bids because the prices were set from their own in-house research and experience.
While Xactimate claims to have about 50% of their business with adjusters and 50% with contractors it seems like the GC’s who use Xactimate must be directly or indirectly working mainly for carriers doing insurance jobs if the building industry does not even know about Xactimate. If Xactimate is not known in the new construction industry and Timberline is the true 800 pound gorilla in the construction industry and their prices are not trusted by those that have to bid for profit then where is the validity of the Xactimate pricing especially if different supplied versions to the claims industry have different prices? Well that is not a new question.
It seems kind of like the chicken/egg thing as to which came first. Per some of the carriers we talk with the contractors quote their logic behind their pricing is that is the price Xactimate pays them. Well Xactimate does not pay anyone anything but instead of paying they are in the process of charging everyone just like the rest of the estimating software vendors. Perhaps someday the carriers will ask contractors to support the pricing used in their bids from real world sources just like contractors in the real world are forced to do. Now that Xactware is no longer a wholly owned company but is a subset of ISO perhaps the legal implications of price setting by requiring a specific pricing database will get more attention in a legal sense but than again one would have to find a victim before there can be a crime.
It is the major carriers that have set up this system and are the ones who continue to support it where a canned software pricing database becomes by default the real world cost of insurance repairs. When you think about it canned default insurance repair cost databases may be required by the actuaries of the large carries to create the selling price of policies. If so it does not make any real financial differences if the repair costs are right or wrong as long as the payout is in line with the figures used by the actuaries when pricing the product initially. Historically loss experiences can be computed but material and labor cost is the wild card. Control the payout pricing for materials and labor then maybe you have a Las Vegas setup world wide without having to get any gambling laws passed.
This is so simple to see in this light and all of the sudden it is clear why large carriers demand one brand of software. It has nothing to do with technology or the need for all estimates to look the same. In fact the print out of all brands of estimating software can be made to be identical legally and without any real cost in time or money. The property claim XML Open Standard has been so slow evolving not because of technical reasons but because of the need to control pricing by supporting one major pricing database vendor. The open standard took off in the auto estimating world as I understand it when all the software vendors started using the same price database. Thread after thread it is clear Xactimate is not the most loved software by adjusters but I expect it is the most loved by several of the large carriers due to its pricing database. The same goes for many contractors because they are assured profitability since they had rather fight than switch.
If the major carriers are happy and the insurance repair contractors are happy who is left to be unhappy that has a voice in the world of property insurance? Can the puzzle really be this simple?
We know the least common denominator is profitability. With ISO in the US now in control of both the policy language and the policy payout amounts when claims occur should the rest of the players in the world of property claims handling technology and pricing databases just throw in the towel and go home?