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Regular Property Valuations: Helping Businesses Better Manage Risks - Helmsman

Regular Property Valuations:

Helping Businesses Better Manage Risks

Maintaining an accurate valuation of your business’ property can help you avoid financial hardships in a claim situation. In this article, we’ll explore the reasons for shifting property valuations, along with the benefits of regular, accurate property valuations.

Construction woes impact property valuation

Building materials and labor costs tend to rise slowly over time, which plays a role in property valuation. And while construction costs increased an average of 3% per year over the last decade, the turbulent events of 2020 and 2021 — including COVID-19, inflation, supply chain issues, and labor shortages — have led to rapid increases in costs. As a result, a building valued at $1 million five years ago could easily cost 20% more to replace today. For example, from December 2020 to December 2021, the cost of the following products skyrocketed:

  • Steel mill products: +120.9%
  • Fabricated structural metal products: +43.8%
  • Concrete products: +8.4%
  • Precast concrete: +11.6%
  • Plastic pipes: +57.3%
  • Roofing materials: +9.8%
  • Glass: +9.0%

 

In addition to the increase in building costs, contractors are struggling to find skilled workers. According to the U.S. Chamber of Commerce, 92% of contractors report moderate to high levels of difficulty finding qualified workers, and 42% of contractors who cannot find workers have turned down work due to skilled labor shortages. The scarcity of workers and lack of available contractors for projects have driven up construction prices, making it more expensive to rebuild a property that has been damaged.

Supply chain issues that have caused inventory problems and delays for equipment purchases and repairs, are also contributing factors in higher construction costs. Items shipped from overseas are often delayed, and the cost of repairing or replacing items with new materials of a similar kind and at replacement cost value, have been key drivers of higher costs.

Other factors that can influence a business’ property valuation

Beyond construction costs, there are other factors that can influence the valuation of your business property. For instance, the increased frequency and severity of weather activity can magnify the risk of loss.

For example, over the last several years, hurricanes have retained higher wind speeds further inland, and severe storms such as tornadoes are occurring more frequently in areas where they have not historically been as common. After such events, obtaining the right supplies for rebuilding can be a challenge.  Business interruption — due to severe weather, pandemics, or other disruptions — must also be factored in.

Understanding replacement cost valuation

If a claim occurs and your current property value, which includes all the factors mentioned above, isn’t accurately stated in your policy, your business could struggle to quickly recover and resume operations. Using “replacement cost” valuation is a crucial way to keep your property from being underinsured. Unfortunately, many property owners simply don’t understand what a replacement cost valuation entails.

A replacement cost valuation differs from acquisition value or market value, which is the amount a buyer would pay to purchase a given property. It also differs from actual cash value, which is the depreciated value of the property. Simply put, replacement cost is the real-time expense to repair or replace a building with new materials of like kind and quality – without any deduction for depreciation. Replacement cost valuation results in the most accurate determination with the least amount of risk.

Regular property valuations help mitigate risks

The longer the time between valuation adjustments, the greater the difference between the replacement cost of your property and its current valuation. And while it’s always been important to check property values for accuracy, the recent market turbulence and shift in costs stresses the need for even more frequent reviews.

Conclusion

The best way for you to ensure that your business property has the coverage it needs to recover from a loss is to schedule an annual property valuation with your insurance company. With the most accurate information readily available, you can better substantiate your claim and quickly get back to business as usual.

At Helmsman, we keep your business moving –
even in the event of a loss

As a partner third-party administrator (TPA), our control and property engineering consultants are industry specialists with degrees and designations in engineering, safety, or risk control, as well as active players on various national safety committees. We understand the nuances of your business and can help you build a strong, more robust risk management program that includes regular property valuations. 

Callouts:

– A building valued at $1 million five years ago could easily cost 20% more to replace today.

– The longer the time between valuation adjustments, the greater the difference between the replacement cost of your property and the existing valuation.

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Helmsman’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks or as an explanation of coverage or benefits under an insurance policy. Consult your professional adviser regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Helmsman is not endorsing them.

Claims technology with people at the core

Throughout the COVID-19 pandemic, technology has played an important role in helping manage claims and serve customers – safely from a distance. But focusing on technology is only part of the story. In a recent interview, Steve Deane, Helmsman’s chief claims officer, got to the heart of successful technology implementation: people. After all, he says, “technology is only as good as the people who’re responsible for using it.”

Keeping injured workers connected during uncertain times

Many companies have implemented new technologies to keep business going and serve both employees and customers during the COVID era. But, according to Deane, these investments in technology are most effective when the goal is focused on helping people. When businesses start with a people-first mindset, they can make smarter, more impactful decisions around technology implementation that support the overall user experience.

One example is Helmsman’s new injured worker portal, a system that makes the claims process simpler and more transparent for businesses and their employees. Though the technology aspect is “critical” to making the system work – especially during a pandemic – it is second to “putting the injured employee’s well-being first and  identifying ways to reduce stress and anxiety that often comes with a work-related injury, so the worker can focus on recovery.”

 “That mindset — of putting people at ease and focusing on recovery — is enabled by the technology of the portal,” says Deane. “Rather than using highly technical language – essentially claims jargon — in our written and verbal communications, we’re striving to help explain the process in ways that people who aren’t workers comp experts can understand.”

By focusing on its people-first mission when implementing this new portal, Helmsman was able to address common customer pain points and improve overall user experience. People were at the root of this decision; technology was just the right tool for the job.

Using online technology to assess property damage

Helping companies assess property damage during the COVID-19 pandemic is another way that Helmsman is using technology to ensure customers feel connected and supported. Deane explains, “…we introduced a virtual method of assessing property damage where customers can send images to our claims specialists and that speeds our claim estimating and adjustment.” This new method is safer for agents and customers, but it also maintains a people-first culture by ensuring that a live claims specialist stays involved. Rather than replacing personal interactions with a digital interface, Helmsman’s new system makes it easier and safer for agents and customers to connect.

Now more than ever, human contact is the glue that connects us – and technology, while a vital tool, cannot replace that. As Deane puts it, “at a time when there’s so much chaos in the world around us, feeling part of something bigger is more important … than ever.”