“We are usually aware if values are under reported and rates are adjusted upward to reach needed premium level”. – Senior Underwriter
Periodically we have discussions with underwriters. Recently they indicated a ground-swell of concern over inaccurate property values. Not over or under, but inaccurate. Property values are used to set premiums and measure risk exposures, such as MFLs. When underwriters know values are wrong, they must resort to internal tools and techniques, rather than rely on insureds information, to estimate and measure risk and then set premiums, and they will hedge their bets i.e., higher rates.
Underwriters believe Risk Managers do not intentionally under report their values to lower their premium, but constantly hear comments such as, “the values were inherited from their predecessor” and “we trend year to year”, which does not help bolster the underwriter’s confidence i.e., higher rates.
While a Risk Manager may fear that any digging into the values or performing an appraisal will increase their values and therefore the premium paid, the fact is, appraisals reduce values as often as they increase them. Plus, more accurate values will enhance the underwriter’s trust in the risk and together you can establish proper coverage for your company i.e., appropriate rates.
Accurate property values are vital to your underwriter. It makes sense to assure your property values are accurate to help turn to an insurable value specialist. i.e., build confidence.