Got a very interesting question this week. The essence of this is that the agent has a customer with a homeowner's policy. The company plans to renew the coverage with the house on Actual Cash Value (ACV), instead of replacement cost (RC). The company has asked for a specific repair that the customer not only sees as necessary. The agent wanted to know what to do about it.
Now you have already begun to formulate opinions and you do not even have all the details yet. It's cool. I do too. But let me give you some thoughts on this subject from an author's perspective by answering some questions that may already be in your mind.
Actual cash value is a method of valuing property that tries to estimate what the property is worth at the loss. At best I see real estate valuation methods as estimates. There are many variables that can be used to calculate the replacement cost value of a property and even more when you appreciate the ACV.
ACV is calculated by first calculating the replacement cost of the property. Depending on the property, there are several ways to do so. For buildings there is a building appraisal program. You can use the same software to estimate the replacement cost of personal property. You can also have receipts that indicate the cost of the items new or go to a store and find out what the items actually cost today.
ACV is the replacement cost with deduction for depreciation. Now that we have an estimate of the replacement cost, we need to find out how to write it off. A simple method for calculating depreciation is to find (or estimate) the property's effective useful life, subtract how much time the item has been in use (how long since it was purchased) and then share the remaining useful life of effective life. Multiply that number by the replacement cost. All is well? new life x  remaining useful life / useful life = [1
Back to the question: Why did the insurer decide that the risk would be written on ACV? What we know so far is that the insurer has identified some repairs that they consider necessary and there is at least one of those whom the insured has determined is unnecessary and does not want to.
tells me that it is likely that the company has written this risk for at least 3-4 years and there is some history. It seems likely that there is a small claim activity. From what we know, there are some problems with repairs that need to be made.
An author should not have a problem with a small repair. In fact, I have seen insurers accept risks conditionally with the necessary repairs to the pledge that the insured planned to work on them during the insurance year. This can be things like an obvious wood root at a window or door or some sofits that need repair or replacement.
The problem is that there seem to be several of these repairs, and we know if a repair that the insured does not want to do. This type of pushback is a problem for the insurers. It tells them that the insured also cannot afford to make the repairs (not a statement of the insured's nature), that the insured does not want to make the repairs (a potential statement about the insured's character) or that the insured waits for something to happen so that the insurance policy will repair the current damage (a definite statement on the insured's nature).
Once again, my guarantor tells you to read the implant that the existing injury and attitude of the insured worked together to create increased risk in the insurer. That, and the current relationship with the insured, is why they decided to renew with an ACV score. In fact, the underwriter wanted this to be a new company so they could refuse it and do it with it.
Why the repair requirements?
This goes back to the last question. Why does the insured have to make these repairs? Why can't they just wait for something to happen so that the insurance policy pays for it?
That's not what the insurance is for. A homeowner's policy is not intended to regularly receive maintenance of the home. It is meant when something unexpected happens, like a hurricane, a fire or Godzilla behaves.
Regarding the repairs, existing damage to a building increases the likelihood of loss for the home from various reasons. No, the maintenance of a home cannot change the likelihood of hurricane, flood or Godzilla. On the other hand, the existing damage creates some additional thoughts for the insurer.
My signature implant reads to me that the publisher is wondering what harm they cannot see. Existing visible damage is an indicator of the occurrence of injuries that cannot be seen. I once tried to renovate a bathroom and when I got all the tiles out of the shower I discovered water and mold damage on the wooden frame. There was extra work and extra money.
Any damage that you can see from the outside of the house, whether it is a cracked window or a missing sofa, means that it is possible that something outside the house can enter the house. A little bit missing soffit is an invitation to squirrels, mice, rats and bats. A small crack in a window is an invitation to water to enter the residence. Water
Why the repair requirements? This is because the damage we can see makes us worried that there is more that we cannot see, and the likelihood is that future damage will come.
What is the author really about here?
Let me check with my signatory to read implants again and see what can really happen in the signer's mind. The primary goal of the underwriter is to write profitable business. My guess is that the insurer either knows that they have written the risk for a time without many problems or that they have a relationship with the agent who needs to be maintained. These two factors can cause an insurer to be reluctant to have no risk.
From what we have seen from the risk, it appears that the insurer would not have approved this risk if it was a new company. It has too many potential problems. So, what does the author insure to do? They can try to help the agent by offering a quote. It is not the quote that the agent prefers, and it is not necessarily something that the insured wants. It enables the insured to look for their coverage elsewhere.
It may be exactly what the insurer looks like.