Are You Being True to Your (Property Insurance) Values?


By Mike Liguzinski, Divisional President, Specialty Human Services

“Only when the tide goes out do you discover who’s been swimming naked.”
– Warren Buffett 1

In 2017, the issue of property undervaluation became fully exposed.

When a number of severe weather catastrophes struck the country, many US policyholders were caught “skinny dipping”– not carrying sufficient insurance limits.2 Individuals and businesses were left devastated. With an estimated $143 Billion in insured losses,3 2017 is on record as the worst year for property catastrophe losses in US history. 4

In many cases, the reason policyholders did not have enough insurance was because their properties were undervalued. Due to this, their out-of-pocket costs to fix damaged assets ranged from the thousands to the millions. In extreme cases, this devastation forced some businesses to cease operations or merge with other entities to survive.

According to industry valuation expert, Marshall & Swift/Boeckh, more than 60% of homes in the US are undervalued by an average of 17%,5 and more than 70% of commercial buildings are undervalued by 15% or more.6

Any combination of miscalculated figures or faulty procedures could lead to an error in the valuation of your property.

Learn about the four main contributing factors to property undervaluation:

  1. Not keeping up with inflation and rising construction costs
  2. Renewing policies “as is,” a “sin of the soft market”
  3. Human and valuation errors
  4. Lack of understanding insurance contracts

  1. Chairman’s Letter – Berkshire Hathaway Inc., 2017.
  2. Basak, Susan. “Harvey Costs Seen at Catastrophic Levels with Many Uninsured.” Bloomberg, 27 August 2017.
  3. Willis Re Summary of Natural Cat Events 2017, Volume 6, Issue 1. Willis Towers Watson.
  4. “Natural Catastrophe Review: Series of Hurricanes Makes 2017 Year of Highest Insured Losses Ever.” Munich Re. 4 January 2018.
  5. Bronson, Caitlin. “The Problem Affecting 60% of Homeowners Policies.” Insurance Business America, 29 September 2015.
  6. Wilson, Bill. “On the Hook for Property Undervaluation.” IA Insight + Analysis for the Independent Agent, 3 March 2011.