A week ago, Robert Trautmann, my colleague in our New Jersey office, blogged about how Xactimate pricing for building materials has been steadily declining over the last several years. It was a great blog generating much comment from readers.

It seems that most readers are in agreement that Xactimate pricing has been trending lower and as an estimating tool; it does not always take into account increased costs of labor and materials. No doubt when adjusting a loss, and to ensure the policyholder is getting a fair and proper estimate, actual costs must be considered.

In California, the law requires it. According to California Code of Regulations § 2695.9(d):

The insurer shall take reasonable steps to verify that the repair or rebuilding costs utilized by the insurer or its claims agents are accurate and representative of costs in the local market area.

So, it is important to examine the estimates prepared by the insurer or the insured’s estimator and verify that the costs are in line with what is actually being charged by local contractors and/or subcontractors. The same equally applies to one who is preparing the estimate on behalf of the policyholder.

If pricing utilized by Xactimate, or any other estimating software for that matter, does not capture local market costs, then change the pricing so that it does.