In 2268 the Federation learned that the Romulans had developed a cloaking device. Star Trek Enterprise Captain Kirk and crew had a hard time locating the vessel when the Romulans turned on their cloaking device to hide their ship. Of course like all good aliens the Klingons also developed one by 2269 and the race to develop clever ways to avoid being seen is underway.
Cloaking device for Insurance Companies that cleverly hides and omits real costs contractors must bare in the so called unit cost and 10% overhead.
It appears that the intent is to cloak what is really included and not included from homeowners and contractors so that the resulting insurance claim settlements are less. This is directed by the insurance company who says what is allowed and adjusters have to follow the parameters set forth. Xactimate is not the problem. It can be customized to reflect true costs but adjusters are directed to follow the insurance company scope and pricing parameters.
Quote from Insurance Company Adjuster questioned last week; he says" the cost of supervision, job site coordination, RRP, OSHA compliant staging and burdened labor is in the unit cost or 10% overhead. Xactimate figures costs accurately by trade and geographic location"
His estimate is $25,000.00 and our contractor client's estimate is $52,000 for a water damage claim.
FYI; From NAHB and NARI surveys of professional remodelers and builders, overhead costs for professional licensed and insured contractors typically run in the 20 to 30% range. (full disclosure I am a member of both)
In 2015, Massachusetts homeowners and contractors are experiencing the same difficulty when they get insurance claim estimates done on the Xactimate software. We have seen numerous claim estimates from insurance adjusters that are on third to one half of the true cost to replace damage sustained in the winter of 2015.
Another interesting fact is the software can be utilized to write and figure costs above the programmed unit costs. In fact Xactimate does exactly what it was designed to do...Accurately estimate projects based on what the user selects. Let me be clear here, the problem is not with the Xactimate software which is a great product. It is the policies the insurance companies force upon the adjusters to follow when writing the scope and estimate.
(In a following blog post..10% overhead and profit; a tactic insurance companies use to underpay contractors and keep claims down.)
The reason why we have so many low ball claims is because the insurance companies are directing their adjusters how to write, what to include and what not to include using Xactimate.
Insurance companies playing the odds..
A restoration contractor told me quote" the insurance companies want adjusters to write low scope and price estimates knowing that a large percentage of these assessments wil be accepted. They are rolling the dice and figuring that most insureds will just accept the check and go away!"
I asked him why do they do this?
And he replied "it is like rebates. Companies know that most people who take the bait for rebates never follow through to claim the rebate money. Insurance companies know that if they get the check out quickly many claims settle right there. To get more money homeowners have to go through the inconvenience and time to file supplementals, provide receipts, show incurred costs and other hassles. "
He went on to say "Many homeowners do not want to do this due to the time it takes to get things settled because they want to restore their home. Also homeowners have a fear that if they question the insurance company they might be canceled or their rates will go up."
You should share this blog post with your homeowner clients and let them know that they should not accept the first insurance estimate. Then their estimate needs to be vetted to make sure it represents the true damages and the subsequent price is sufficient to hire a professional, licensed, insured and registered contractor. If the estimate is accurate on scope and pricing (yes sometimes a few are) then move on to repairs. If not, ask them if they want you to be their contractor consultant and itemize the damages in a complete assessment.
In our Insurance Claim Workshops contractors are bringing loads of incomplete and low ball insurance estimates done on Xactimate. We show you how to become a contractor consultant and find what is missing by uncloaking the estimate and give you information on what should be included.
For questions and help on how to help your homeowner clients contact us.