E:/2003/ADMIN/WEST INS TO VALUE.PPT 1 David A. Carter Insurance To Value

E:/2003/ADMIN/WEST INS TO VALUE.PPT 2 Insurance To Value Objectives: Underinsurance Cost of Materials Building Valuation Systems Additional Considerations Lessons Learned

What is the acronym ITV mean?

A. Incentive To Validate What is the acronym ITV mean?

A. Incentive To ValidateB. Insurance to Value What is the acronym ITV mean?

A. Incentive To ValidateB. Insurance to Value C. Isn’t This Vacant? What is the acronym ITV mean?

A. Incentive To ValidateB. Insurance to Value C. Isn’t This Vacant?D. I’m Too Visual What is the acronym ITV mean?

B. Insurance to Value What is the acronym ITV mean?

What factors should be considered when determining adequate Building valuation?

A. Replacement Cost/ACV What factors should be considered when determining adequate Building valuation?

A. Replacement Cost/ACVB. Code Compliance What factors should be considered when determining adequate Building valuation?

A. Replacement Cost/ACVB. Code Compliance C. Unique Building Features What factors should be considered when determining adequate Building valuation?

A. Replacement Cost/ACVB. Code Compliance C. Unique Building Features D. All the Above and more.. What factors should be considered when determining adequate Building valuation?

D. All the Above and more... What factors should be considered when determining adequate Building valuation?

E:/2003/ADMIN/WEST INS TO VALUE.PPT 15 Insurance To Value Underinsurance remains an Industry problem –Average underinsurance remains at 40% industry-wide. –Not getting better in the last few years. Even with Terrorism and CAT events Source; Marshall & Swift/BOECKH

E:/2003/ADMIN/WEST INS TO VALUE.PPT 16 Insurance to Value (Underinsurance) What is the Impact?: Insurance Company Standpoint  Don’t obtain enough premium for exposures  Risk Control’s PMLs are understated  Net and Treaty Impact Policyholder Standpoint  Politics  Results in prolonged claim handling  After loss, not enough recovery for insured  Adequate Coverage Debate

E:/2003/ADMIN/WEST INS TO VALUE.PPT 17 Construction Cost are UP: Lumber up 23.3% Plywood up 21.6% Copper Pipe up 6% Drywall up 6.9% Structural Steel up 35% Electrical Wire up 5.5% Source: Marshall & Swift/BOECKH

E:/2003/ADMIN/WEST INS TO VALUE.PPT 18 Building Valuation - Insurance Company We do estimates, not professional appraisals. “Insurance” purposes only Not Market Value or Mortgage Value Need to know Valuation Method Historical Buildings - Unique Features CAT Issues that change requirements Ordinance or Law issues

E:/2003/ADMIN/WEST INS TO VALUE.PPT 19 Valuation - Other Property Business Personal Property Maintain inventory control Accounting/GASB 34 Records Different basis of values/Different Focus Time Element Do you have a Business Income/Rental/EE exposure? Extended Period issues? Fine Arts/AR/VP and others Tax Records Antique Pictures, Books, Furniture, etc.

E:/2003/ADMIN/WEST INS TO VALUE.PPT 20 Valuation Mishaps Tracking new acquisitions – Is “Purchasing” talking to Risk Management? Need to compare New Construction Cost with existing structures. Establishing or Enforcing “protocol” for ensuring ALL properties are reviewed by Risk Management. Professional Appraisals needed

E:/2003/ADMIN/WEST INS TO VALUE.PPT 21 LIBRARY REPLACEMENT COSTS These are only guidelines, and should be discussed with the librarian. Every collection is different. Includes an allowance for shipping and processing replacement books. Does not include special collections or rare books, which should be individually appraised overall collection average$65 per volume general collection (excluding references) $60 per volume references$110 per volume bound periodicals$125 per volume law$85 per volume medical$85 per volume engineering/technology$110 per volume CD-ROM reference$2000 each audio cassette$8 each audio CD$13 each microfiche$2 each microfilm reel$40 each average new library construction cost$155/sq. ft. average new library equipment cost$17/sq.ft.

E:/2003/ADMIN/WEST INS TO VALUE.PPT 22 Valuation Methods “Replacement Cost” “Reconstruction Cost” “Functional Replacement Cost” “Reproduction Cost” “Actual Cash Value”

E:/2003/ADMIN/WEST INS TO VALUE.PPT 23 Replacement/Reconstruction Replacement Cost, which is the cost to construct or replace, at current prices, using: –the like kind and quality materials –construction standards –design/layout –quality of workmanship –r econstruction costs includes a number of site- specific and process-related costs that are experienced when rebuilding after a loss

E:/2003/ADMIN/WEST INS TO VALUE.PPT 24 Other Valuation Methods Functional Replacement Cost repair with less costly building partial loss – repair with less costly material Or “market value” exclusive of land; Or cost to repair with less costly materials in the architectural style of the building Reproduction Cost To building or specific building feature(s) Reproduce the damage property Replace with modern materials Additional cost for research cost with Historic Register ACV – either requested or if you don’t rebuild/replace

E:/2003/ADMIN/WEST INS TO VALUE.PPT 25 Tips and Traps Historic Buildings: not valid- warning! BVS understates replacement cost and basically provides a functional replacement cost. If an accurate value is really needed, get a professional appraisal from someone experienced in historic buildings.

E:/2003/ADMIN/WEST INS TO VALUE.PPT 26 Historical Courthouse

E:/2003/ADMIN/WEST INS TO VALUE.PPT 27 Courthouse 1850, 1950 and 1990

E:/2003/ADMIN/WEST INS TO VALUE.PPT 28 Historical Section on Fire FIRE

E:/2003/ADMIN/WEST INS TO VALUE.PPT 29 Fire Damage Damage

E:/2003/ADMIN/WEST INS TO VALUE.PPT 30 Lessons Learned More can go wrong than you think….. Crawl Spaces/Concealed Spaces Old Lumber - Historical areas Asbestos, PCBs, Lead Paint Historical & Additions & Renovations Who is doing the Renovation work? Poor Original Construction – numerous penetrations through walls – failure of wooden headers

E:/2003/ADMIN/WEST INS TO VALUE.PPT 31 Lessons Learned Activities that increase your fire exposure? Can Sprinkler System become operational by sections? What are your other exposures? Extra Expense/Business Income/Rental Account Receivables/Valuable Papers Fine Arts Debris Removal Ordinance or Law Must have Professional Appraisals on some buildings! Review Locations/Values annually - automatic 3% increase may not be enough.

E:/2003/ADMIN/WEST INS TO VALUE.PPT 32 Insurance to Value Albert Einstein The important thing is not to stop questioning. Curiosity has its own reasons for existing. One cannot help but be in awe when he contemplates the mysteries of eternity, of life, of the marvelous structure of reality. It is enough if one tries to comprehend a little of this mystery every day. Never lose a holy curiosity."

Insurance To Value Thank You!