Transcript Fire Protection Fundamentals

Insurance To Value
David A. Carter
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Insurance To Value
Objectives:
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Underinsurance
Cost of Materials
Building Valuation Systems
Additional Considerations
Lessons Learned
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What is the acronym ITV mean?
What is the acronym ITV mean?
A. Incentive To Validate
What is the acronym ITV mean?
A. Incentive To Validate
B. Insurance to Value
What is the acronym ITV mean?
A. Incentive To Validate
C. Isn’t This Vacant?
B. Insurance to Value
What is the acronym ITV mean?
A. Incentive To Validate
B. Insurance to Value
C. Isn’t This Vacant?
D. I’m Too Visual
What is the acronym ITV mean?
B. Insurance to Value
What factors should be considered when
determining adequate Building valuation?
What factors should be considered when
determining adequate Building valuation?
A. Replacement Cost/ACV
What factors should be considered when
determining adequate Building valuation?
A. Replacement Cost/ACV
B. Code Compliance
What factors should be considered when
determining adequate Building valuation?
A. Replacement Cost/ACV
C. Unique Building
Features
B. Code Compliance
What factors should be considered when
determining adequate Building valuation?
A. Replacement Cost/ACV
B. Code Compliance
C. Unique Building
Features
D. All the Above and
more..
What factors should be considered when
determining adequate Building valuation?
D. All the Above and
more...
Insurance To Value
• Underinsurance remains an Industry problem
– Average underinsurance remains at 40%
industry-wide.
– Not getting better in the last few years.
 Even with Terrorism and CAT events
Source; Marshall & Swift/BOECKH
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Insurance to Value
• (Underinsurance) What is the Impact?:
Insurance Company Standpoint
Don’t obtain enough premium for exposures
Risk Control’s PMLs are understated
Net and Treaty Impact
Policyholder Standpoint
Politics
Results in prolonged claim handling
After loss, not enough recovery for insured
Adequate Coverage Debate
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Construction Cost are UP:
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Lumber up 23.3%
Plywood up 21.6%
Copper Pipe up 6%
Drywall up 6.9%
Structural Steel up 35%
Electrical Wire up 5.5%
Source: Marshall & Swift/BOECKH
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Building Valuation Insurance Company
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We do estimates, not professional appraisals.
“Insurance” purposes only
Not Market Value or Mortgage Value
Need to know Valuation Method
Historical Buildings - Unique Features
CAT Issues that change requirements
Ordinance or Law issues
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Valuation - Other Property
• Business Personal Property
 Maintain inventory control
 Accounting/GASB 34 Records
 Different basis of values/Different Focus
• Time Element
 Do you have a Business Income/Rental/EE exposure?
 Extended Period issues?
• Fine Arts/AR/VP and others
 Tax Records
 Antique Pictures, Books, Furniture, etc.
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Valuation Mishaps
• Tracking new acquisitions – Is “Purchasing”
talking to Risk Management?
• Need to compare New Construction Cost with
existing structures.
• Establishing or Enforcing “protocol” for ensuring
ALL properties are reviewed by Risk
Management.
• Professional Appraisals needed
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LIBRARY REPLACEMENT COSTS
These are only guidelines, and should be discussed with the
librarian. Every collection is different. Includes an
allowance for shipping and processing replacement books.
Does not include special collections or rare books, which
should be individually appraised
overall collection average
$65 per volume
general collection (excluding
references)
$60 per volume
references
$110 per volume
bound periodicals
$125 per volume
law
$85 per volume
medical
$85 per volume
engineering/technology
$110 per volume
CD-ROM reference
$2000 each
audio cassette
$8 each
audio CD
$13 each
microfiche
$2 each
microfilm reel
$40 each
average new library construction cost
average new library equipment cost
$155/sq. ft.
$17/sq.ft.
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Valuation Methods
• “Replacement Cost”
• “Reconstruction Cost”
• “Functional Replacement Cost”
• “Reproduction Cost”
• “Actual Cash Value”
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Replacement/Reconstruction
• Replacement Cost, which is the cost to
construct or replace, at current prices, using:
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the like kind and quality materials
construction standards
design/layout
quality of workmanship
reconstruction costs includes a number of sitespecific and process-related costs that are
experienced when rebuilding after a loss
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Other Valuation Methods
• Functional Replacement Cost
repair with less costly building
partial loss – repair with less costly material
Or “market value” exclusive of land;
Or cost to repair with less costly materials in the
architectural style of the building
•Reproduction Cost
To building or specific building feature(s)
Reproduce the damage property
Replace with modern materials
Additional cost for research cost with Historic Register
•ACV – either requested or if you don’t rebuild/replace
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Tips and Traps
Historic Buildings: not
valid- warning! BVS
understates replacement
cost and basically
provides a functional
replacement cost. If an
accurate value is really
needed, get a
professional appraisal
from someone
experienced in historic
buildings.
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Historical Courthouse
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Courthouse
1850, 1950 and 1990
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Historical Section on Fire
FIRE
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Fire Damage
• Damage
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Lessons Learned
More can go wrong than you think…..
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Crawl Spaces/Concealed Spaces
Old Lumber - Historical areas
Asbestos, PCBs, Lead Paint
Historical & Additions & Renovations
Who is doing the Renovation work?
Poor Original Construction – numerous
penetrations through walls – failure of
wooden headers
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Lessons Learned
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Activities that increase your fire exposure?
Can Sprinkler System become operational by sections?
What are your other exposures?
Extra Expense/Business Income/Rental
Account Receivables/Valuable Papers
Fine Arts
Debris Removal
Ordinance or Law
Must have Professional Appraisals on some buildings!
Review Locations/Values annually - automatic 3%
increase may not be enough.
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Insurance to Value
Albert Einstein
The important thing is not to stop questioning.
Curiosity has its own reasons for existing. One
cannot help but be in awe when he
contemplates the mysteries of eternity, of life, of
the marvelous structure of reality. It is enough if
one tries to comprehend a little of this mystery
every day. Never lose a holy curiosity."
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Insurance To Value
Thank You!