How Centurisk’s Valuation Estimator Helps Mitigate Underinsurance Concerns

Underinsurance has always been a concern for organizations striving to mitigate their risk — particularly those with large property portfolios and unique structures, where lots of very specific data must be collected to ensure valuation accuracy.  But increasingly, the underinsurance gap has been made even wider by the volatile cost shifts and supply chain challenges associated with the COVID pandemic.

In 2017,  Verisk data analytics group studies showed that approximately 75% of all commercial properties were underinsured. By February 2022, a UK study by Towergate Insurance Brokers suggested that number may even be higher, noting that more than 90% of commercial properties in the UK were underinsured and vulnerable to risk, with UK properties on average, covered for just 68% of the amount of coverage they truly needed.

US homeowners are certainly experiencing this coverage gap. A May 2022 survey of 1,000 U.S. homeowners with property insurance, conducted by the American Property Casualty Insurance Associations (APCIA), showed 70% of them hadn’t updated their insurance to adjust for today’s skyrocketing inflation and building costs, and 60% of those who remodeled or renovated during the pandemic hadn’t updated their homeowners’ insurance policies to include their changes.

Underinsurance and Increasing Risk Events

The COVID pandemic and an increase in natural catastrophes have also combined the past three years to exacerbate property underinsurance conditions for policy holders.  For example, the APCIA states that natural catastrophe claims in the U.S. cost insurers a total of $176 billion during 2020 and 2021 alone. Along with supply chain snags, inflation, and labor shortages in specific areas like the construction industry, this has made new construction, renovation and reconstruction projects experience longer lead times and higher costs. (The APCIA cites the price of construction materials from 2019-21 as rising by as much as 44%!)

These ever-shifting costs affect the amount of risk that insurers can accept, creating new constraints to existing policies, and directly affecting insureds’ property valuations. Today, organizations struggle to adjust for these fluctuations, facing legitimate questions about whether to reappraise their property or to trend.

Addressing Undervaluation Across Large Property Portfolios

To mitigate potential loss, an insurer may request new property valuations, or may leverage in-house valuation software for trending. Yet, depending on the size of an organization’s property portfolio, some on-site appraisal projects can take years to conduct, and that doesn’t help a lot when valuations are fluctuating and risks for natural disaster are increasing right this moment. New on-site appraisals also may not capture all of your buildings, depending on what threshold your organization chooses to appraise — for instance, at the $100,000 level.

Trending becomes an appealing option, but that can prompt new questions, like what percentage to trend and for how long. And it’s important to remember, not every insurer will necessarily notice whether valuations on your submitted SOV look out of range for the current volatile environment. So how do you gain peace of mind knowing that your properties aren’t underinsured in this current, high-risk time?

How a Custom Property Valuation Estimator Tool Can Help

A valuation estimator tool customized to your organization can help you leverage the power, speed and dexterity of trending, while understanding your unique property portfolio and risk potential. Centurisk’s Valuation Estimator software, for instance, draws on multiple resources of the most current trending information to offer a true third-party opinion of value.

Just some of the resources and modifiers we use include, but are not limited to:

  • Valuation Resources, like direct costs, regional market analysis, producers price index, consumers price index, and proprietary valuation resources
  • Base Value Modifiers, such as the zip code, occupancy, ISO construction class, and condition
  • Optional Property Modifiers, like whether it’s a limited access site, LEED/green certification, lifeline facility, seismic/windstorm region, and more.

We back this up with on-site valuations as needed, assessing your property data for any red flags that might be lurking in your SOV. This helps insurers have greater confidence in your submitted values — and can help you avoid the underinsurance pitfalls today’s tumultuous, high-risk circumstances can cause.

The Tools and Expertise to Right-Size Your Valuations

For more information on how Centurisk can help give you greater peace of mind over the valuations supporting your organization’s property insurance coverage, contact us today. And for more information on Centurisk’s Valuation Estimator module, click here.

Want to learn more about how Centurisk’s Valuation Estimator can help you trend your valuations more accurately, year-over-year? Simply contact us and a member of our team will be in touch!

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