The above photo of timber visually shows the significantly increased price of basic building materials costs that drive many disputes over property insurance when policyholders with various losses from forest fires, hurricanes and frozen pipes try to get their claims resolved. The insurance industry relies on outdated and incorrect Xactimate pricing.
A recently published Fox News article, Home Buyers Canceling Contracts When Costs Float noted:
Lumber costs have increased more than 170% over the past year, bringing in about $ 24,000 the cost of a new home. Concrete, metal products, appliances and other expenses are also increasing due to disruptions in the supply chain caused by COVID-19 shutdowns.
Although disputes between policyholders and policyholders try to rely on incorrect Xactimate pricing, a major problem is the issue itself is not only one with claims but also with insurance. I wonder how many insurance agents send out messages to their customers that the increase in construction prices can give them an insurance or undervaluation problem in case of loss? Very few are my efforts.
Policyholders who do not face a claim are seldom raising construction prices. Owners of built properties are generally not tasked with ensuring that they are properly insured to value until the time of renewal. But if they have a loss, you can bet that some zealous claims user can run a valuation of compensation costs to insurance limits to see if an insurance penalty applies. This fluctuation in construction pricing is only one reason why "agreed values" or insurance-exempt insurances are so superior to those with an insurance fee. Policyholders generally have no idea what it costs to rebuild their property. They are not trained how to do it. They always lack the knowledge and technical skill to do this correctly.
Come with me at 2 pm this afternoon as we explore this topic with increased construction pricing and the impact it may have on adjustment and insurance. Here is the link.