Construction material prices and hourly labor rates for the associated trades can shift from one region to another, and even within a state. With 431 regions overall in the United States, condensed into 22 regional indexes, pricing based on actual claims in a specific location is critical for more reliably estimating the cost to rebuild a structure.
The truest test of an ITV solution may be how it performs with an actual total loss, which can yield critical data to validate and calibrate RCEs.
Breaking down the analysis
There’s unparalleled strength in extensive research of real-world prices based on direct data feeds, claims analyses, and communication with a wide network of adjusting professionals and building contractors. Such capability can facilitate the support of recent claims experience in reconstruction cost estimate (RCE).
Verisk compares valuations for specific structures to actual reconstruction estimates written by claims and construction professionals. These are drawn from millions of claims estimates each year, including full and partial losses that span a wide range of property sizes and types, coverages, and locations. Nearly 20,000 contractors are surveyed annually, accounting for roughly 90,000 surveys.
On average, RCEs derived from these capabilities vary by significantly less than 10% from total actual losses for most property types, and as little as 1% for single-family homes.
In further analysis, Verisk compared the percentage change in cost to rebuild across personal and commercial properties. The same six states, Idaho, Washington, Oregon, Minnesota, Wisconsin, and Nevada, led for both lines of business, though ranked in a different order.
With deep property estimating expertise, Verisk has researched the points at which claims and RCEs can diverge. A few examples leading to this may include:
- Total square footage verses interior room measurements
- Quality adjustments
- Commercial building types