Ask a School Insurance Underwriting Expert is a quarterly column addressing insurance and risk management related questions for ABACC members.
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Ask a School Insurance Underwriting Expert: Why Am I Being Asked To Significantly Increase My Property Values This Year?
Kevin Beer, President, Wright Specialty Insurance • May 15, 2023
Question: Why Am I Being Asked To Significantly Increase My Property Values This Year?
The property insurance market has been affected by extreme weather and climate disasters, which have put pressure on carrier profitability. The property valuation issue facing the industry is important since insurable asset values have not kept up with inflation or recent supply and demand cost pressures on labor, commodities, freight, etc. Property claims are settling above reported values, making property valuation a leading topic in the property insurance market.
Determining the value of your property portfolio can be challenging. Depending on the structure of your insurance program, having inadequate values could be financially devastating for your school in the event of a claim. Raising your property values now with a potential premium increase is difficult, but may be the prudent direction to take.
To avoid an underinsured property loss, consider the following tips:
- Work closely with your insurance broker to review limits and make necessary adjustments annually. At a minimum, increase values to keep up with inflation and strongly consider obtaining a replacement cost property appraisal from a professional appraisal company. To add some perspective, we have experienced claims where properties were undervalued as much as 30-40% by just not keeping up with inflationary value increases. The issue compounds over time, so it is important to begin with an accurate value and increase accordingly each year.
- Purchase Building Ordinance coverage which provides coverage for costs associated with any new building code requirements.
- Include the value of any additional structures or features on the property that are not a part of the building (e.g., landscaping features, signs and lights).
- Accurately reflect the occupancy of your buildings. Vacancy restrictions in a policy, if not disclosed and addressed, can lead to claim payment denials.
- Review other coverages available with your broker that aren’t automatically included in the property form such as business income, flood, earthquake, etc.
- Consider Blanket Property coverage with an agreed value endorsement to help mitigate issues that may be present with your property valuation. Be aware of any margin clause or coinsurance penalties that may be included in the policy form. If they are present, understand them clearly as they can substantially affect claim payments if incorrect values are reported.
As always, to minimize future risks consider ways to avoid losses before they happen. Installing property sensors and having a sound maintenance plan to keep your property updated, are important methods to help minimize potential loss.
About the Author: Kevin Beer is president of Wright Specialty Insurance, an underwriting manager of specialty insurance and risk management solutions for public and private universities, colleges and K-12 schools. Visit their website or call (877) 976-2111.
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