On the surface, insure to value might seem simple – even self-evident.
But it’s consistently one of the most talked about and misunderstood topics in underwriting.
On one side of the equation, carriers want to make sure they charge a fair premium. They look at the risk exposure of a property in relation to the costs incurred to restore it after a disaster strikes.
On the other side are the insured. Whether you are talking to homeowners or business owners, you will notice a consistent trend: They consider “full insurance” to match the market value of the property. In effect, they see insuring to replace as shortchanging their investment.
Somewhere in the middle of it all is the underwriter. To make informed decisions that recognize the high stakes for both parties, they need an accurate valuation of each and every property. The more accurate, the easier it is for carriers to achieve their business goals while maintaining the goodwill of insured.
What Happens When Insure to Value Isn’t Followed?
ITV isn’t just a theoretical concern; it has a real impact. These are first felt by the insured, but can end with major business repercussions for the carrier. When properties are undervalued, it can set off a chain reaction at a precarious time. That leaves you with your hands full:
Undervaluing Properties Means You Have a “Ticking Time Bomb” in Your Portfolio
Undervaluing can be concealed for many years when no CAT events take place. When they finally arrive, even partial losses could quickly exhaust the established coverage limits. What happens then is obvious: Property owners feel as if they’re left “high and dry” when they need you most.
Coverage Limits May Be Artificially Low Until It Is Too Late
Depending on how the policy is structured, either the insured or the carrier could face unexpected costs to rebuild underinsured properties. This can accelerate the loss of value. For example, if the insured cannot take prompt and appropriate action after a storm, mold could develop, resulting in further damage.
Insurance Companies Are More Vulnerable to Reputational Harm than Ever Before
Not only could you lose loyal customers, but you may find yourself facing a backlash on social media or even in a broad-based regional industry. Today’s policyholders “demand to be heard” even when it is clear their preferred resolution is not supported by the details of their policy.
Even When No CAT Event Occurs, Failure to Follow ITV Is Still a Problem
Insurers can see this every year with faulty “roll-forward” renewals. When the time comes to renew a policy, adjusters may roll forward bad values for another 12 months. This puts them even further out of alignment with the real risks.
Accurate Valuation Enables Premium Optimization Across the Portfolio
Last but certainly not least, sound ITV empowers you to collect appropriate premiums in good times and bad. Insured are not the only ones who can be left sour after years of inaccurate low valuations – as the carrier, you are also leaving money on the table. Across the portfolio, this may amount to billions.
Ultimately, if your technical pricing is built on faulty data, it could put your long-term financial stability at risk. For best results, properties should be reappraised by qualified experts every five to seven years.
To confidently set pricing based on an accurate picture of the world, you will need underwriting support with a rock-solid valuation methodology and the project management expertise to deliver it. Insurance Risk Services is dedicated to giving you real peace of mind through our unparalleled accuracy.
We Support ITV Every Time by Delivering the Best in Quality Assurance
With decades of experience, Insurance Risk Services leaves nothing to chance when it comes to property valuation. We understand that the work we do supports not only your operations but also your reputation.
We provide the highest level of underwriting support expertise in two distinct areas:
Quality Assurance
Our quality assurance approach uses best practices derived from decades of experience. You benefit from inspection verification that exceeds the highest industry standards for both turnaround time and accuracy. All completed field reports are verified and validated before they reach you. Each member of our team is responsible for rigorous continuing education. Field spot checks are performed regularly.
Underwriting Technology
We’ve developed sophisticated, proprietary systems so you understand exactly what’s happening and who is responsible every step of the way. The inspection and validation process is never a “black box.” Our browser-based, tablet-compatible platform integrates seamlessly with your existing workflow.
Contact us to find out more or get started with the best in underwriting support services.
