While I applaud the intent of the regulations, I don’t know if it will be of any good. Alot of homeowner’s I encounter are strictly price shoppers and don’t care about the coverages as much as the price. I ran into one of them just yesterday. A house in Orange County, built in 2005 and is 2800 sq ft, 4 bed 4 bath 3 car garage. I ran the rep cost estimate and came in around 550k so I quoted on that. He responded that he had received a quote from a captive agent, I won’t name, but we all know who, and he got a quote that was about $800 less than mine and they used a rep cost of $225k. I told him he could never rebuild for that and he said his home was only worth $200k now and that is all he wants to insure it for. I told him to go with the captive agents quote then as I would not sell him a policy at that level. What this regulation does now is put the liability on the carrier if they allow the homeowner to underinsure. I say if a homeowner wants to be cheap and just shop totally on price and not coverage, it should fall on them if they are underinsured.
This is going to be the same guy who is going to complain and sue you and the carrier when he has a loss and the carrier penalizes him for being underinsured…you are well rid of him, Compman….
Thank your lucky stars…..
The way a reputable company handles this “consumer” is this: Run the replacement/reconstruction cost analysis using an RCT or comparable tool. Show the consumer in black and white what it will cost to REBUILD as opposed to sell. Very few consumers understand the disconnect between “what my house is worth” and what it cost to rebuild. If the consumer doesn’t want to insure for 100% reconstruction then he signs for 90%, 80% or below, goes to a lower rate class and pays the premium. The disclaimer on the application is “I understand I’m underinsured but since I’m a dumb ass I want it that way” At claim time the consumer has selective memory but the company has a signed disclaimer. I have a letter signed for my files as well to PREVENT and E&O claim. Call it a day.
I think I will use “dumb ass” in my disclaimer!. I like your approach but I still believe it is easier to just let these types of clients go as they are the “20% that cause 80% of the work”
I’m not sure about California, but replacement cost is extremely variable…especially in diaster prone areas. I seem to remember pre hurricane screen enclosures costing $8,000 while post hurricane screen enclosres were $25,000 on up.
In addition, bad times bring low prices. Let’s just say I know I can replace my home with a builder for $200,000 today, when there’s more work for the builder that same home could cost $250,000 which would put me right on the line of getting the coinsurance clause called out by the adjuster.
Instead of coninsurance and strict replacement cost estimates, why not have policies cover replacement cost up to the coverage amount?
I agree, Mr. Solvent. The cost of replacement is determined by the marketplace. When most construction/homebuilders have no work, it will cost a let less to rebuild. And who is to say the homeowner MUST rebuild when there are plenty of vacant homes to be had at much lower price? My home is worth $200K in my area and the insurance company is asking me to insure for $475K. I can take $300K, but $475K is outrageous. The loosers are the homeowners with this regulation.
While I applaud the intent of the regulations, I don’t know if it will be of any good. Alot of homeowner’s I encounter are strictly price shoppers and don’t care about the coverages as much as the price. I ran into one of them just yesterday. A house in Orange County, built in 2005 and is 2800 sq ft, 4 bed 4 bath 3 car garage. I ran the rep cost estimate and came in around 550k so I quoted on that. He responded that he had received a quote from a captive agent, I won’t name, but we all know who, and he got a quote that was about $800 less than mine and they used a rep cost of $225k. I told him he could never rebuild for that and he said his home was only worth $200k now and that is all he wants to insure it for. I told him to go with the captive agents quote then as I would not sell him a policy at that level. What this regulation does now is put the liability on the carrier if they allow the homeowner to underinsure. I say if a homeowner wants to be cheap and just shop totally on price and not coverage, it should fall on them if they are underinsured.
This is going to be the same guy who is going to complain and sue you and the carrier when he has a loss and the carrier penalizes him for being underinsured…you are well rid of him, Compman….
Thank your lucky stars…..
The way a reputable company handles this “consumer” is this: Run the replacement/reconstruction cost analysis using an RCT or comparable tool. Show the consumer in black and white what it will cost to REBUILD as opposed to sell. Very few consumers understand the disconnect between “what my house is worth” and what it cost to rebuild. If the consumer doesn’t want to insure for 100% reconstruction then he signs for 90%, 80% or below, goes to a lower rate class and pays the premium. The disclaimer on the application is “I understand I’m underinsured but since I’m a dumb ass I want it that way” At claim time the consumer has selective memory but the company has a signed disclaimer. I have a letter signed for my files as well to PREVENT and E&O claim. Call it a day.
Hey No Tolerance,
I think I will use “dumb ass” in my disclaimer!. I like your approach but I still believe it is easier to just let these types of clients go as they are the “20% that cause 80% of the work”
I’m not sure about California, but replacement cost is extremely variable…especially in diaster prone areas. I seem to remember pre hurricane screen enclosures costing $8,000 while post hurricane screen enclosres were $25,000 on up.
In addition, bad times bring low prices. Let’s just say I know I can replace my home with a builder for $200,000 today, when there’s more work for the builder that same home could cost $250,000 which would put me right on the line of getting the coinsurance clause called out by the adjuster.
Instead of coninsurance and strict replacement cost estimates, why not have policies cover replacement cost up to the coverage amount?
I agree, Mr. Solvent. The cost of replacement is determined by the marketplace. When most construction/homebuilders have no work, it will cost a let less to rebuild. And who is to say the homeowner MUST rebuild when there are plenty of vacant homes to be had at much lower price? My home is worth $200K in my area and the insurance company is asking me to insure for $475K. I can take $300K, but $475K is outrageous. The loosers are the homeowners with this regulation.