Just as apples are not oranges, there are often significant differences in appraisal services designed for large property programs and/or insurers. Frequently (and mistakenly!) viewed more as a homogeneous commodity than a customized service, insurance appraisals can take on many forms with varying complexity, level of detail, and cadence. Understanding and anticipating these issues before diving in is critical to the eventual outcomes.
Let’s peek at a few common variables:
Property to include:
- Buildings/Structures: Utilizing automated processes, most appraisal teams will include a full physical inspection of each subject property. One of the more essential pieces of data they need to record is an accurate measurement of the (gross) square foot area, including perimeter. Relying on external data supplied by others typically leads to erroneous calculations (and inaccurate valuation conclusions).
Other essential data insurers are looking for these days include documentation of recent, material additions and renovations; roof characteristics and age; and accurate geocoding of each structure to allow for subsequent risk modeling. Reviewing all your desired underwriting data requirements upfront will ensure the final reports will satisfy all stakeholder concerns.
- Contents/BPP: Years ago, the old-school method of appraising a building’s contents involved a detailed inventory process, itemizing, and valuing each specific asset meeting a designated dollar threshold. Still around today, this methodology has been supplemented by options such as a less detailed “tally” approach, and—for specific occupancies—a “modeling” method. Each has its own limitations and value and should be reviewed thoroughly before engaging a firm.
- Property in the Open (“PITO”): Generally defined as outdoor equipment and/or improvements to land which are not physically connected to a structure, PITO is a category which is frequently overlooked. Depending on the nature of the entire exposure, this property classification can often represent a very material portion of the overall risk—especially in coastal areas. Items such as fencing, lighting, playgrounds, and athletic facilities with synthetic surfaces are just a few examples.
Reflecting back on the last 20-30 years in this industry, it is easy to say the old ways are gone for good. Waiting 10-15 years between appraisals of your property is simply not good business.
Today, most of HCA’s clients follow industry best-practice guidelines of having property reappraised every three to seven years. Additionally, it is important to update the exposures annually to reflect changes in construction cost. This annual “trending” eliminates surprises between cycles and keeps property insured to value.
If it’s been a while since your last complete property appraisal, invest a few minutes upfront in exploring your options with experienced professionals. We’d love to hear your story—and then tell you ours! Learn more and reach out to us here.