Opposite of - Insured to replacment cost

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etimer
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Opposite of - Insured to replacment cost

Post by etimer »

I am in the process of re-quoting one of my clients. I used the same completed MSB that I have been using when I first got the account in 2007. The insured reviewed it and did make a change. There is now more hardwood flooring than carpeting.
  • In 2007 builders-net on-line building cost was $330,321.00.
    n 2007 the MSB value was $357,000.
The MSB is now coming back with a $261,000 value. Zillows estimate if the house were to be sold is $273,000.

This is the opposite of my replacement cost and under insured post from last week.

Now what? I feel that something is amiss and I had my quote person go through her MSB input twice and it is the same as on my sheet.

So in 7 years the cost to rebuild has dropped? I don't think so because inflation has been busy at work. I am not the type to let something that I consider to be wrong, just sit like a sleeping dog. Last thing anyone wants is that under insured situation.
HarrisburgAgent
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Re: Opposite of - Insured to replacment cost

Post by HarrisburgAgent »

What I would personally do is use another carrier's estimator (hopefully you have another option that isn't MSB) to do a comparison, and that way you can look at 2 sets of numbers. If they are both lower, I would discuss with underwriting to see if they will drop the coverage A down with the new documentation, and if so, discuss the lower B,C,D coverage amounts with the insured and let the policyholder decide what they want to do.

Carriers can tweak the settings on MSB if they have it incorporated into their online rating systems, to make the final figures higher on average if they desire. Within the last year, Safeco announced that they had made adjustements to their settings within MSB so that their estimates were coming in more accurately. For a while, they were clearly too high, but there isn't much you can do about it.

All we can do as agents is be consistent in inputting the correct information into these systems. In a large agency, you could probably have 10 agents work on the same new business home quote, and see a difference of $50k depending on how thorough, or lack thereof, the questioning process is on home specifics. I see a lot of laziness and dependence on the "assumed" percentages of flooring, walls, etc... that prefills when you select a year of construction, and little differences can really add up.
nixonjf
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Re: Opposite of - Insured to replacment cost

Post by nixonjf »

ITV estimate drop is likely from change in inputs, but there could have been changes in underlying cost data/models over the years: updates to pick-up new ZIP codes, etc.
For a drop the size you've indicated, some cross-checking with other models would be prudent.

Alternatives to MSB's RCT (aka accucoverage) include e2Value and 360-Value.
Don't confuse Marshall & Swift's "Swiftestimator" with MSB's RCT. It's the same company but different division/model/purpose: RCT is what you want for residential insurance (BVS for commercial).

Other free on-line estimators that I've found (including building-cost.net) are for new construction, not reconstruction.
Similarly, the "cost approach" section of a market value appraisal would also be new construction and not reconstruction basis. Market value (Zillow or otherwise) is unrelated.

For any model, it's important to review all the inputs, some of the system generated assumptions can materially impact the estimate. Some models can pull data from tax assessor databases, the data pulled warrants review.
Some report formats may not show all the inputs, check to make sure you have the most detailed report format available.
pageltd
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Re: Opposite of - Insured to replacment cost

Post by pageltd »

etimer wrote:I am in the process of re-quoting one of my clients. I used the same completed MSB that I have been using when I first got the account in 2007. The insured reviewed it and did make a change. There is now more hardwood flooring than carpeting.
  • In 2007 builders-net on-line building cost was $330,321.00.
    n 2007 the MSB value was $357,000.
The MSB is now coming back with a $261,000 value. Zillows estimate if the house were to be sold is $273,000.

This is the opposite of my replacement cost and under insured post from last week.

Now what? I feel that something is amiss and I had my quote person go through her MSB input twice and it is the same as on my sheet.

So in 7 years the cost to rebuild has dropped? I don't think so because inflation has been busy at work. I am not the type to let something that I consider to be wrong, just sit like a sleeping dog. Last thing anyone wants is that under insured situation.
I agree that you should run a few different costimators to validate results. The other thing you might want to do is run it by your underwriter for a quick review. I am seeing building costs and replacement cost estimators decrease, in general. Gas prices are way down, which might explain part of the swing.
George Page
www.pageins.com
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