Xactimate Estimate Primer (Property)

Want to know how to write an Xactimate estimate? Well, I put together a brief primer on how to write one. This primer provides a step by step guide on how to write an Xactimate estimate. I will post the more detailed version at a later date. For now, this should acquaint you with the process. This is based on Version 2.5. Simply click on the navigation buttons at the bottom right.

The Reserve

With most carriers, the general reserving philosophy is the "Most Probable Outcome” payout of the claim and not necessarily the worst case scenario. In most cases, you will want to reserve an individual exposure based on what the best estimate is of its most probable outcome based on the information available at the time the reserve is being set. As the investigation advances you want to reevaluate the reserve. The reserve should factor in but not be limited to:

• Amount of estimated damages
• Anticipated / updated payout
• Depreciation expected on an ACV policy
• Deductible
• Coinsurance
• Expected payout supported by the documentation or will there be
• Other contributing coverage’s
• Probable, proper and likely negotiations to resolve the claim
• Policy limits – this obviously would place a maximum on the reserve amount
• What coverage items are involved, personal property, building, income loss, value of vehicle, loss of use, rental etc.
• Possible Supplements
And more, depending on your claims reserving best practices

Coinsurance (Briefly Explained)

COINSURANCE IS...

Coinsurance is a contractual requirement that the insured carry agreed upon insurance-to-value, as specified by a percentage (usually 80%, 90% or 100%) entry on the Declarations page. If, at the time of loss, the limit of insurance is less than the value of the property times the coinsurance percentage, the insured will become a "co-insurer," along with the insurance company, when a loss occurs. While the coinsurance clause is effectively an "penalty" for underinsuring, another way to look at it is that it's also an incentive to insure to value. You can also insure on an agreed value basis which suspends the coinsurance clause. This is normally done on a full insurance to value basis.

The purpose of coinsurance is not to punish an insured for carrying inadequate insurance-to-value, but rather to provide a financial incentive that:

(1) encourages them to carry adequate limits in the event of major losses, and (2) rewards them (in many instances) with a significant premium reduction for doing so.

Why do insureds need an incentive to carry limits of insurance approaching the value of their property? Simple...because, in the aggregate, most losses are partial and don't result in a total, or even substantial, loss. Without a financial incentive, insureds who are not risk aversive might be inclined to purchase relative small limits of insurance. Since that inclination depends, in part, on the structure and occupancy of the building, the amount of the incentive is largely determined by those factors.

Claims Coverage Investigation (Property)

Read the Policy

To understand a first-party property policy of insurance, the adjuster must read and analyze the policy in a logical and thorough manner. The facts of each individual claim clarify and color the interpretation of the policy contract and bring different nuances to the policy wording. The adjuster must know what coverage is available to the insured, the limits of liability, the territory limitations, and the exclusions, conditions, and endorsements attached.

Before beginning to investigate a claim, the adjuster must first establish or confirm coverage. Many claims need not go forward if the coverage analysis discloses there is no coverage for the loss. Yet in many cases, the file handler proceeds only to find out later that there was not coverage at the outset.

To do this, he or she must get a complete copy of the insurance policy. The company’s copy usually has only a “declarations page” and partial copies of standard forms. However, the policy can be recreated from the declarations page and standard forms from the underwriting department. By viewing a current copy of the policy in the possession of the insured, or automated information on the insurer’s computer database, the policy coverage can be confirmed. The adjuster must also determine the policy limitations and determine the perils insured against. The adjuster must be familiar with each of the exclusions or exceptions from coverage.

Areas to consider in coverage analysis:

• Date of claim does it fall within the policy period?
• Location of claim - Does this meet the contract definition
• Listed Property - is this actually a property we insure
• Exclusions - is the peril excluded
• Endorsements - Is there an endorsement for this peril
• Person - Is the person we insured involved legally with the property
• Peril covered - do we have a covered cause of loss
• Conditions met - have the policy conditions been met or breachedand other peripherals

When handling property claims, the aforementioned list serves as a viable start. Depending on your best practices guidelines and claims investigation requirements, you may add more to this list

Fire recorded statement

Should You Take a (Property Fire) Recorded Statement?

In the course of an investigation, you need to decide whether or not to preserve a person's verbal testimony in a recorded or written statement. Preserving testimony is valuable because memories fade, stories can change over time and parties can be difficult to locate as time passes.

Try the following:
1. Use General Opening Statement.
2. Identify person being interviewed:
a. Full name (spell it), age, address, marital status. b. Employer, nature of occupation.
c. Connection of person to loss - owner of damaged or destroyed prop­erty, witness, fire investigator, etc.
3. Establish circumstances surrounding loss:
a. When and where fire occurred (date, hour, location of premises)? b. Who discovered fire and turned in alarm?
c. In what part of premises was fire discovered burning?
d. What caused the fire:
(1) Can it be clearly attributed to a faulty product or to a person's negligence?
(2) By what means was fire extinguished - e.g., volunteer, public, or private fire department; sprinkler system? (Determine whether property was protected by sprinkler system and whether it was on at the time of fire; if system was off, find out why.)
e. Were police and fire departments notified? (If so, determine whether they investigated fire, and get names of persons conducting investigation.)
f. Find out if fire spread to premises from another building or from a tenant's residence in the same building. (Check carefully for possible subrogation.)
4. Have there been any previous fires on premises?
5. Does insured have insurance with any other carrier? Has he (it) ever? 6. Obtain facts and estimates of damage:
a. Extent of damage; area involved (e.g., number of rooms, dimensions). b. Repairs already made or under way; date and nature of repairs (i.e.,
temporary or permanent).
c. Estimated cost of repairs; name and telephone number of person giv­
ing estimate.
7. Use General Closing Statement.