If history teaches lessons, anybody relying upon Xactimate claims estimating software should be fairly warned that the pricing will be woefully low compared to actual Hurricane Ian labor and material costs. Catastrophes result in increased demand for construction laborers and materials. Catastrophes add significant logistical costs to those providing reconstruction services.
For example, following Superstorm Sandy, I wrote a post, Xactimate Price Trend Does Not Reflect Actual Costs, noting the increased costs not being recognized by Xactimate:
Yesterday, our firm hosted a training seminar for public adjusters and others who use the insurance claims estimating software, Xactimate. During the seminar, a common theme began to develop in the comments we heard. Almost every Xactimate user we spoke to said the same thing, Xactimate’s pre-installed prices have been steadily declining over the last several years. This got me thinking, as many of my New Jersey clients are seeing building material prices increase for them.
This begs the question, why is the exact opposite trend occurring in Xactimate’s price list? I would argue Xactimate’s biggest consumers are insurance carriers, and they are simply giving their customers what they want. Sadly, this disturbing trend is hurting insureds who may not have professionals representing them. The average homeowner is not aware of trends in materials pricing and will likely assume the insurance carrier is providing them with accurate information at all times. As the above graphic shows, insurance companies may be underpaying these homeowners by at least 30%.
Hurricane Michael had the same problem, leading to thousands of claims valuation disputes. In Explaining Xactimate Accuracy and the Need to Analyze Details Before Getting the Wrong Turkey Dinner From the Insurance Company, insurance estimating expert Jeff Major made the point that contractors and public adjusters should ask for the digital version of the insurance company’s Xactimate estimate:
Insurance company estimators often say they have estimated to construct a repair or replacement of something just like the policyholder’s estimate and complain about the higher price of the policyholder’s estimate. But, when you look at the details—and especially the descriptions—which are included within Xactimate of what they have estimated to be done, there is a lot missing on the insurer’s side. Pay attention to the details of what is done and the descriptions found within Xactimate.
One practice pointer for policyholders trying to determine the history and accuracy of the insurance company’s estimate based on Xactimate is to always ask for the ESX file. This file will help an expert like Jeff Major to more fully and accurately analyze who is actually doing the estimate, when it was being done and what was being done to the estimate during its drafting.
A Verisk certified trainer of Xactimate, Andrew Behrens, explained that Xactimate is trying to keep up with the changes in pricing and sent the following email warning of a lag between estimated and actual pricing:
Anticipated Impact of Hurricane Ian on Building / Restoration Pricing
While demand surge on building materials and primarily labor are a common occurrence post-storm, the size, anticipated strength and location of hurricane Ian’s pending landfall on the southwest Florida coast, combined with pre-storm labor shortages, could have a significant impact.
Verisk/Xactware’s Pricing Data Services team is closely following Hurricane Ian. While not yet knowing the full impact on damage and therefore any resulting demand surge, we are standing by to ensure the pricing data on which you’ve come to rely will be responsive and reflective of the market.
For our upcoming October price list, which will be published at the end of this week or early next, we are currently performing careful and detailed analysis of the most recent survey data and will make appropriate adjustments based on the current and anticipated trajectory of restoration and reconstruction prices.
We will stay in close contact with our customers in the field, and we encourage you to reach out to us directly at firstname.lastname@example.org or by calling 800-932-9228 (option 4) to speak directly to one of our reconstruction analysts to provide information on current observations on price information and needs.
We will continue to monitor and adjust, and publish interim updates as frequently as needed. Customers will be notified of any updates and program assignments that reference Verisk pricing will automatically have the updates applied.
We also encourage you to make adjustments as needed within your estimates to reflect current market prices if they differ from the prices we have acquired for the individual market.
Please stay safe!
Your Verisk / Xactware Pricing Team
Verisk has always been upfront that its Xactimate pricing is merely a guide. It should be checked against actual local pricing. Behrens noted that the current hourly labor rate in Ft. Myers is a whopping $208.28.
A prominent public adjuster and former FAPIA President from Naples, Florida, George Keys, agrees and suggests “always get local pricing from two or three trustworthy licensed general contractors.” Public adjuster Wes Dillon similarly wrote to me:
The only truly accurate way is to work with licensed general contractors who obtain real life sub bids. However, even those prices will only be good for a couple of weeks. Then, the demand drives up the costs of materials and labor.
The bottom line is this—the pricing from Xactimate is merely a guide and will be low because it lags the current local pricing. Unless the insurance company claims adjusters account for this, their estimates are not going to be reflective of actual costs, and we will have a repeat of inaccurate Hurricane Michael estimates, with thousands of claims valuation disputes.
Thought For The Day
Just make the right estimation of your own strengths and weaknesses, and also that of your opponent.