Insurance Industry's Property Undervaluation Issue Continues to Improve According to Marshall & Swift/Boeckh
MILWAUKEE, Aug. 7, 2013 /PRNewswire/ -- Marshall & Swift/Boeckh ("MSB"), the global leader in building cost information, reports its Insurance to Value (ITV) Index that analyzes insurable value adequacy for residential construction insurers in the U.S. continues to improve. The 2013 report now shows 60% of homes in the U.S. are undervalued by an average of 17%. These figures represent an improvement from last year's numbers of 61% of homes being undervalued by 18%.
"A critical mass of carriers are moving to more sophisticated by-peril pricing models," said Steven Brewer, Senior Vice President, Underwriting Solutions for MSB. "This is motivating homeowners carriers to validate and archive detailed property characteristic profiles on their legacy books of business. These updated profiles not only fuel better pricing segmentation, but also allow carriers to identify and update undervalued homes. This enables them to generate risk-adequate premium on each property in the book, while properly protecting the policyholder," said Brewer.
The ITV Index has improved dramatically since the 1990s, when nearly 73% of homes were undervalued by 35%. Insurance companies that have not instituted new underwriting procedures to carefully value coverage limits at the time policies are first written and at the time policies renew still see 73/35 as their statistical norm.
Since the movement to by-peril rating sophistication has gained broad acceptance, home insurance writers have begun a more diligent review of their legacy books of business, netting the current 60%/17% statistic. Along the way, the industry improved coverage and premium adequacy, with nearly $9B in lost premiums recovered annually from recalculating the base with more adequate protection for policyholders.
Increased use of modern "component-based" estimating solutions like the MSB Residential Component Technology (RCT) has also improved coverage adequacy, since true replacement cost values are now calculated on a risk-specific basis.
The current ITV Index update represents the national average trend for homeowners insurance written in the U.S.
About Marshall & Swift/Boeckh
Marshall & Swift/Boeckh (MSB), a Decision Insight Information Group company, is the leading provider of building cost information, residential and commercial analytics solutions and book of business management services for the property insurance companies, financial services organizations and government entities. MSB offers the industry's most extensive and validated underwriting and claims property data. Throughout their eight decades of experience, they have compiled a strong track record of consistently developing innovative property solutions, analyzing our clients' operations and providing them with the assistance needed to dramatically improve their business results. This track record continues today as they serve as the hub for all of their clients' property needs and work tirelessly to help them maximize their profitability and achieve a competitive advantage. More information can be found at www.msbinfo.com.
SOURCE Marshall & Swift/Boeckh