Insurers Continue to Improve Their Home Valuations, Says MSB

August 12, 2013

  • August 12, 2013 at 2:31 pm
    Dale Willis says:
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    What a bunch of self serving crap. Insurance companies routinely over insure properties for the express purpose of collecting additional premium to pay partial losses. If they insure a property for $ 200,000 and it costs $ 150,000 to replace the insurance company will pay $ 150,000 and not return the additional premium charged to the insured to over insure their property. While I would agree insurance to value is extremely important the companies and MSB routinely overvalue homes by as much as 50% or more and the numbers they come up with are arbitrarily arrived at and extremely inflated in many cases. If every state would institute a law that required insurers to pay claims based on the insured value that would put an immediate end to this practice of over insuring properties. As long as insurance settlements are allowed to continue on a repair or replace basis and have noting to do with the insured value this problem will continue to get worse.

    • August 13, 2013 at 8:46 am
      Underwriting Manager says:
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      Dale, While I agree the article seems a bit self serving, there is no question the industry has done a terrible job of insurance to value through the years. We previously thought $50/sq ft was great. And maybe it was based on labor and material costs then. But the economic recession has driven many contractors out of business, thus leaving a smaller supply of labor. Increased oil prices continue to drive up materials costs – shingles specifically but many other products based on transportation required too. Combine these two factors and we now routinely see replacement cost at or above $100/sq ft. This is not an MSB estimate – this is actual replacement cost. I underwrite property in Georgia which is a valued policy state. As you say, this is a good provision that levels the playing field for company and customer. Even with this, though, we have never found ourselves overinsured. Demand surge from tornado damage has actually created underinsured situations even in recent years. The summary is not as one-sided and clear-cut as you state in your opinion.

      • August 13, 2013 at 10:26 am
        Companyman says:
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        I agree with the Underwriting Manager. Even $100 a sq ft is low in the midwest. I have personally called and talked with the larger builders in our area and an average home is running $115-118 per sq. It is a constant discussion about market value versus replacement cost coverage. Agents, of which I was one, need to do a better job of explaining the coverage sold when a person buys a home in a rural town for $50k, but needs to insure for $120k for guaranteed replacement cost coverage. Not blame the company for overinsuring. The issue with mortgage companies is even worst. When the home market was going gangbusters we, as a company, were constantly pushed by the agent and mtg company to overinsure since the loan amount was higher than the replacement… No way all the blame can be laid at the feet of MSB and the companies trying to provide adequate coverage.

  • August 14, 2013 at 5:46 pm
    JOEC says:
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    We are an agency and do not use an amount per square foot. We inspect the home and figure the replacement cost. Using the internet information on homes does not give a true replacement cost figure. You have to know the individual features of the home to decide what the replacement cost is.



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