Verisk has released findings from an ongoing analysis comparing replacement cost estimates generated by its 360Value platform with actual total-loss reconstruction estimates prepared through Xactimate and submitted through the XactAnalysis claims network. The report reviewed more than 6,923 total-loss claims submitted between January 2016 and January 2023.
According to the report, the claims analyzed ranged from $60,264 to more than $3.4 million and represented properties in all 50 states. Verisk said the study aimed to measure how closely valuation estimates aligned with reconstruction estimates created by claims and construction professionals.
The company used both manual and automated procedures to identify and evaluate a random sample of total-loss claim files. Trained valuation specialists manually extracted dwelling characteristics from each claim file and entered the information into 360Value for comparison purposes. Verisk stated that the hands-on review process enabled closer scrutiny of the data and more accurate valuations than a purely automated process.
The methodology included several steps. First, Verisk identified total-loss claims using database queries that searched for estimates meeting minimum thresholds for estimate value, room count, and labor trades. Claims involving items associated with partial losses, such as water, fire, or smoke remediation, were excluded.
Next, the company standardized claim values by removing costs not directly tied to dwelling replacement under Coverage A of a standard homeowners policy. These excluded costs included personal property, detached structures, demolition, debris removal, landscaping, and other additional coverages.
Verisk then extracted property characteristics from the remaining claim data, including location, living area square footage, year built, foundation replacement, and home finishes and features. The company also applied price list index data to account for time differences between claim estimate dates and valuation dates. According to the report, building cost data is updated monthly and quarterly across more than 460 pricing areas in the United States and Canada to reflect changing market conditions.
The report stated that the resulting comparison valuations were “within a few percentage points” of the total-loss claim estimates. Verisk reported an average total-loss claim value of $243,678 compared with an average 360Value replacement cost estimate of $244,059, a difference of 0.16%.
The study also identified several factors that can contribute to differences between claim estimates and valuation results. One factor involved the year a home was built. Verisk noted that construction techniques and materials can vary significantly over time, affecting reconstruction costs. To improve accuracy, researchers reviewed claim documentation and public tax records to determine the age of each home.
Another factor was the living area’s square footage. The report explained that claim files often provide room-by-room interior measurements rather than total living area calculations. Verisk found that differences between measurement methods ranged from 6% to 15%, with an average difference of 8.7% across 22 structures.
The report also discussed retrogressive index adjustments and home quality assumptions as additional variables that can influence valuation comparisons.
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