Marshall & Swift/Boeckh Insurance to Value Index for Residential Properties Once Again Improves

New report shows 64% of homes in the U.S. are undervalued by an average of 18%, a significant improvement over last year's results.

Nov 03, 2011, 07:00 ET from Marshall & Swift/Boeckh

MILWAUKEE, Nov. 3, 2011 /PRNewswire/ -- Today, Marshall & Swift/Boeckh ("MSB"), the global leader in building cost information, reports that its index analyzing insurable value adequacy for residential construction insured in the U.S. improved over the prior year. The 2011 report now shows 64% of homes in the U.S. are undervalued by an average of 18%, a significant improvement over last year's results.

"Given the current downturn in the housing market that was driven by the slowdown in construction and mortgage loans, writers of homeowners insurance are paying more attention to their books of property business," said Steven Brewer, Senior Vice President Underwriting Solutions for MSB.

"This increased focus translates into better underwriting and more accurate coverage limits, which benefit the industry and consumers collectively. At the same time, insuring each home to its replacement value provides risk-adequate premium on each property in the book and increases a carrier's competitive position by eliminating premium subsidization," said Brewer.

The Insurance to Value (or ITV) Index has improved dramatically since the 1990's, when nearly 73% of homes were undervalued by 35%. The 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.

However, since Hurricane Katrina hit the continental U.S., home insurance writers have begun a more diligent review of coverage adequacy, netting the current 64%/18% statistic. Along the way, the industry improved coverage and premium adequacy, with nearly $8B 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 (or 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. State specific calculations can be provided by MSB.

About Marshall & Swift/Boeckh (MSB)

Marshall & Swift / Boeckh (MSB) is the leading supplier of local building cost information as well as residential and commercial property valuation technology and services in the United States and Canada.  Services also include MSB's InFocus Analytics, business intelligence, and industry leading "outsourcing" solutions.  MSB has five offices throughout the U.S. and Canada. 

SOURCE Marshall & Swift/Boeckh