Review Current Loss Trends to Ensure Accurate Valuation

October 11, 2022

Insurance Appraisals
Review Current Loss Trends to Ensure Accurate Valuation

Maintaining accurate property valuations requires diligence and continual focus on many moving pieces. Here’s one activity program managers and underwriters can easily overlook—doing a deep dive into your historic loss trends.

Outside of getting frequent appraisals—which we recommend every 3-5 years to ensure that you are minimizing your risk—a great way to ensure ongoing statement of value (SOV) accuracy is to review and identify trends that may be contributing to more frequent losses, especially where those losses are not insured to value.

What does it look like?

In general, we see many clients with large property portfolios who don’t think to look back and review their historic loss trends—they might have a claims department that presents them with an annual number, then take that at face value without drilling down into the details of the losses and why they occurred.

Reviewing loss trends includes looking for patterns. These can occur in several ways:

The last pattern—specific types of occupancies—is one place where we encourage our clients to drill down to see if they can identify where and why more frequent or more severe losses are occurring.

How does this lead to over/underinsured properties?

Many property insurers like to “stay in their lane,” where they are most comfortable. They may be insuring similar types of properties within a portfolio and are comfortable with the risk.  Without frequent reviews of their loss runs, they may open themselves up to unwanted risks.

It’s not uncommon to see the biggest variance in insurance value in utilities. These are often the most complex and not as easy to value. Historically, insurers have relied on the insured and/or agent to provide values for these exposures, without a more detailed review.  

Today’s environment requires a more sophisticated approach. Assuming the risks associated with an unverified property can be a costly gamble.  Independent, third-party appraisals can reestablish confidence in the overall renewal process – both for the insurer AND the insured.

Partnering with a trusted appraisal firm with the requisite experience to work side-by-side with you will help ensure you’re not overlooking unwanted risks.