Avoiding underinsurance requires the right coverage combined with the right limits. In exchange for providing generous coverage, specialist insurers invest heavily on appraisal services to determine appropriate coverage limit, which is a hard process that can create policyholder frustration, even distrust. Embracing the following principles allows carriers to manage valuations prudently, collect the appropriate premiums for the risks assumed, and delight their policyholders.

A well-constructed insurance program blends smart, comprehensive coverage options with appropriate coverage limits. Successful individuals and families with significant assets are best protected by the coverage options offered by high-net worth specialist insurers. One differentiator between those insurers and mainstream providers is guaranteed replacement cost, or extended replacement cost, when an uncapped guarantee is replaced by a hefty extension of coverage.

Define Replacement Cost

A replacement cost estimate should reflect the cost to build the home at the same location on the date of the appraisal with comparable quality of design, materials and workmanship. It should include profit and overhead for the contractors that will build the home; fees for architects, engineers, designers and other specialists required to build the home; and whatever costs are needed for the finished home to comply with current building codes. Agents and consumers should be aware if their appraisals are inflated by costs in either of these categories:

  • Impossible to predict. These include costs for anticipated demand surge following a catastrophe that will push up labor and material charges, potential overtime charges in case the client seeks to accelerate construction following a loss; and construction upgrades required to comply with future building codes.

  • Covered elsewhere. A charge for debris removal is the most common example in this category. Specialists provide a generous amount of coverage for debris removal in addition to (separate from) Coverage A.

Earn Customer Trust and Loyalty

Too often, sensitivity to the client is sacrificed in the quest for productivity and backlog management. Here are a few ways that infuse empathy:

  • Encourage risk managers to pick up the phone. If the risk manager's initial estimate of the home's replacement cost is higher than the dwelling limit purchased, have the risk manager call the client to discuss it. Sharing the status of the appraisal, confirming assumptions made about rare building materials and techniques and discussing square footage calculated allow the client to participate in the process and correct errors before they go to print.

  • Offer a simple appeals process. Despite best efforts, disputes will continue to arise. Forge consumer confidence and trust by using a formal appeals process in which the consumer can have his or her appraisal reviewed by a qualified, independent expert or panel.

  • Help with the fulfillment of recommendations. Successful high-net worth people are busy people. Assign a resource to help the client implement recommendations, from finding and vetting contractors to scheduling appointments, creates unexpected joy.

The home appraisal process is valuable for both client and insurer. Although the expert risk managers and appraisal consultants in our niche regularly contribute to client enthusiasm and loyalty, the process often creates friction, frustration, and distrust. If we want to attract and retain more high-net worth clients that are currently served in the mass market, specialists should eliminate conflict in the valuation process. That means being more consistent, more transparent and more empathetic.

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