And there in lies the problem, the consumer will almost always try to get us to lower the replacement cost figures we use to lower the premium we charge. This is especially true with todays home market in California, people don’t seem to understand that replacement costs differ from selling prices. I don’t need more CE requirements to teach me how to follow what my company wants!
Maybe training building contractors to follow the pricing the insurance companies set would work? Or maybe, we can have a federal entity set up with a public option to build homes so everyone can get the best deal?
The majority of calls I get and the biggest complaint I get in relation to a Fire policy is that the client feels that they are over insured and that we are just trying to rake them over the coals on premium.
Their biggest misconception is the difference between replacement cost and market value. 3 years ago the calls were the client telling us that we were not covering enough because they paid $600,000 for the house and we are insuring it for $400,000. Now they call complaining that we are insuring that same house for $400,000 and the value is only $300,000. Obviously, we explain to the client the differences but in this economy we are finding that many home owners’ only want the cheapest premium possible. I’ve had plenty of business cancelled because the client feels the RC is way out of line and insists on insuring for market value or the value of their loan only. Of course by sticking to the RC I may lose policies as a result but I am also eliminating a potential E&O claim down the road. We all know that when the next wild fire hits and that same home owner is looking at a smoking hole in the ground where their home once was, it will instantly become the fault of my agency and the big, evil insurance company when there is not enough money for them to rebuild. It plays well for the six o’clock news and of course rarely will the media dig into the facts to
The DOI needs to spend some time and effort in trying to educate the public on their responsibility as a home owner and not try to legislate common sense or place the burden solely on the agent/broker.
Yeah, I am so tired of hearing my office people have to have the SAME conversation with what seems to be every one of our Homeowners clients. Anyone have word track or something they use to cut these calls short without pissing off the insured? We explain the difference between repl cost and market value but too many of these calls drag on and on and on to 20 minutes to a half hour. When you get half a dozen of these calls a day, it really eats up staff time.
The real issue with adequate replacement cost data last surfaced in the 2003 San Diego/SoCal fires and was subsequently addressed. Carriers also addressed Loss of Use timeframe issues as well. The result of the 2007 SoCal fires had a very low percentage of homes underinsured, so my question to the DOI is to show me a problem that has promulgated this new proposed regulation. Having said that, the time it takes to quote a Homeowners policy is out of hand, as each specific carrier’s Replacement Cost Estimator must be completed to ensure accurate quoting. Each flavor of a Marshall Swift or ISO HomeValue Estimator can produce wildly different estimates. I speculate that carriers using seemingly high valuations are essentially getting a rate increase without having to go through the DOI process for a rate adjustment.
This is like defining the word nice, everybody has a different answer. For everybody that thinks their home is underinsured, we have one that thinks their home is overinsured. The high end markets (Chubb, Chartis, FF) tend to overvalue and the mid markets tend to undervalue.
Seems to me that a major issue here – if not the main one – is that agents SHOULD NOT be in the business of valuing property at all, whether correctly or incorrectly. Every E&O class I’ve ever taken agrees with me, that we oughtn’t put our licenses on the line for something that subjective.
So Tired: Best way to do it is to tell them directly and immediately that the most accurate way to determine value of a home is to get a contractor’s estimate. Insurance agents should never, under any circumstance, right or wrong, give ANY advice on replacement cost of a home. We aren’t contractors, nor do we know squat about rebuilding a home and the cost that goes into it (other than it’s more than 100 bucks). These policy holders need to take some form of responsibility and if they want that low premium, well, they may have to venture into the yellow pages THEMSELVES and get the number to a contractor who will then assist them in determining a replacement cost that would suffice in the event of a total loss. I know it’s not exactly short, summed up should sound something like, “It’s not my job to predict what it’s going to take to rebuild your house, it’s my job to tell you what’s going to happen if you don’t insure it adequately.”
The MSB and other estimates are tools, at best. As someone else pointed out, in eras where home prices are high, there is less debate with the policyholder, but when they are low, it’s like pulling teeth to get even estimated ITV.
And California wants agents and companies to factor in the increased contstruction costs during a disaster. That is what Extended RC might do, but sometimes the price gouging is so massive even that doesn’t handle it.
I can’t imagine the policyholder is going to go for a “We should insure you for more than your house is worth, since there might be price gouging when you have a loss.”
If the real non-disaster cost to rebuild is less, the policyholder would complain, the D of I would make the company readjust the Cov A. Can’t win.
On the contrary, there have been many instances where insurance companies have used their estimating tools to determine RC and have had numerous complaints about the cov. A being too high. Given a contractors estimate, underwriters have lowered the RC requirements and accepted the contractor’s proposal. Sure, the RC tools insurance companies use are the preferred, and often only method of determining cov. A until customer complaints amount and come to a head where it’s either A. Lower coverage, or B. Lose client.
And there in lies the problem, the consumer will almost always try to get us to lower the replacement cost figures we use to lower the premium we charge. This is especially true with todays home market in California, people don’t seem to understand that replacement costs differ from selling prices. I don’t need more CE requirements to teach me how to follow what my company wants!
Maybe training building contractors to follow the pricing the insurance companies set would work? Or maybe, we can have a federal entity set up with a public option to build homes so everyone can get the best deal?
The majority of calls I get and the biggest complaint I get in relation to a Fire policy is that the client feels that they are over insured and that we are just trying to rake them over the coals on premium.
Their biggest misconception is the difference between replacement cost and market value. 3 years ago the calls were the client telling us that we were not covering enough because they paid $600,000 for the house and we are insuring it for $400,000. Now they call complaining that we are insuring that same house for $400,000 and the value is only $300,000. Obviously, we explain to the client the differences but in this economy we are finding that many home owners’ only want the cheapest premium possible. I’ve had plenty of business cancelled because the client feels the RC is way out of line and insists on insuring for market value or the value of their loan only. Of course by sticking to the RC I may lose policies as a result but I am also eliminating a potential E&O claim down the road. We all know that when the next wild fire hits and that same home owner is looking at a smoking hole in the ground where their home once was, it will instantly become the fault of my agency and the big, evil insurance company when there is not enough money for them to rebuild. It plays well for the six o’clock news and of course rarely will the media dig into the facts to
The DOI needs to spend some time and effort in trying to educate the public on their responsibility as a home owner and not try to legislate common sense or place the burden solely on the agent/broker.
I agree! Lets require the homeowner to take the CE courses, that way maybe they will understand why we do what we do.
Yeah, I am so tired of hearing my office people have to have the SAME conversation with what seems to be every one of our Homeowners clients. Anyone have word track or something they use to cut these calls short without pissing off the insured? We explain the difference between repl cost and market value but too many of these calls drag on and on and on to 20 minutes to a half hour. When you get half a dozen of these calls a day, it really eats up staff time.
Ask them about life insurance, they usually hang up pretty quick.
The real issue with adequate replacement cost data last surfaced in the 2003 San Diego/SoCal fires and was subsequently addressed. Carriers also addressed Loss of Use timeframe issues as well. The result of the 2007 SoCal fires had a very low percentage of homes underinsured, so my question to the DOI is to show me a problem that has promulgated this new proposed regulation. Having said that, the time it takes to quote a Homeowners policy is out of hand, as each specific carrier’s Replacement Cost Estimator must be completed to ensure accurate quoting. Each flavor of a Marshall Swift or ISO HomeValue Estimator can produce wildly different estimates. I speculate that carriers using seemingly high valuations are essentially getting a rate increase without having to go through the DOI process for a rate adjustment.
This is like defining the word nice, everybody has a different answer. For everybody that thinks their home is underinsured, we have one that thinks their home is overinsured. The high end markets (Chubb, Chartis, FF) tend to overvalue and the mid markets tend to undervalue.
Seems to me that a major issue here – if not the main one – is that agents SHOULD NOT be in the business of valuing property at all, whether correctly or incorrectly. Every E&O class I’ve ever taken agrees with me, that we oughtn’t put our licenses on the line for something that subjective.
So Tired: Best way to do it is to tell them directly and immediately that the most accurate way to determine value of a home is to get a contractor’s estimate. Insurance agents should never, under any circumstance, right or wrong, give ANY advice on replacement cost of a home. We aren’t contractors, nor do we know squat about rebuilding a home and the cost that goes into it (other than it’s more than 100 bucks). These policy holders need to take some form of responsibility and if they want that low premium, well, they may have to venture into the yellow pages THEMSELVES and get the number to a contractor who will then assist them in determining a replacement cost that would suffice in the event of a total loss. I know it’s not exactly short, summed up should sound something like, “It’s not my job to predict what it’s going to take to rebuild your house, it’s my job to tell you what’s going to happen if you don’t insure it adequately.”
The MSB and other estimates are tools, at best. As someone else pointed out, in eras where home prices are high, there is less debate with the policyholder, but when they are low, it’s like pulling teeth to get even estimated ITV.
And California wants agents and companies to factor in the increased contstruction costs during a disaster. That is what Extended RC might do, but sometimes the price gouging is so massive even that doesn’t handle it.
I can’t imagine the policyholder is going to go for a “We should insure you for more than your house is worth, since there might be price gouging when you have a loss.”
If the real non-disaster cost to rebuild is less, the policyholder would complain, the D of I would make the company readjust the Cov A. Can’t win.
Boba, with all due respect, the company won’t change their tune when the contractor’s estimate is lower, you know that.
On the contrary, there have been many instances where insurance companies have used their estimating tools to determine RC and have had numerous complaints about the cov. A being too high. Given a contractors estimate, underwriters have lowered the RC requirements and accepted the contractor’s proposal. Sure, the RC tools insurance companies use are the preferred, and often only method of determining cov. A until customer complaints amount and come to a head where it’s either A. Lower coverage, or B. Lose client.