Property insurance values make up an essential component of your property insurance coverage and policies, but for a large part of this year, the routine task of collecting and reporting on property valuation data was challenging. Due to various state government restrictions on travel, the straightforward task of executing an insurance appraisal was like most things in 2020, complicated by the COVID-19 pandemic.
Travel restrictions and the need for social distancing, resulted in some in the valuation space to proclaim “desktop” appraisals are the future and the future is now. Whether the industry completely switches away from onsite inspections as a result of the COVID-19 pandemic is unclear. After all, some folks swore there wouldn’t be professional sports this year because of the pandemic, but in 2020, professional sports adapted to a model that combined some of the traditional with accommodations to keep players, staff, and fan socially distanced. A closer review of insurance appraisals may reveal similar trends happening there.
The Fundamentals
A good property submission speaks volumes about how your organization presents itself to the insurance marketplace and what you will pay for insurance. While remotely conducted or “desktop” appraisals offer an alternative to onsite appraisals, in most instances, the source and quality of the property data is where the rubber meets the road. In an increasingly tightening property insurance market, diligent underwriters want to review your data and know where it came from. The conscientious underwriter wants to have a clear understanding of the risk they are underwriting so they can provide a fair price for the exposure they are covering.
How your organization ultimately collects and maintains property insurance data is up to your organization. Both desktop and onsite approaches can be viable depending upon the situation. The most significant difference between a desktop appraisal and an onsite appraisal is really about the data. Desktop appraisals are reliant upon your organization’s existing data to perform the analysis. An onsite appraisal requires the physical inspection the property, and collection of the requisite Construction Occupancy Protection Exposure (C.O.P.E.) data to complete an analysis to arrive at a valuation conclusion.
If you know the validity and source of your property data, desktop appraisals can certainly present a viable option to confirm your property values. Conversely, if your organization’s property data is open to question, or there isn’t ample data to complete a desktop valuation, it may be very beneficial have this discussion with your insurance professional. It may be wise, particularly when trying to optimize your rate, to find a reputable appraisal service provider and explore a hybrid approach that combines physical appraisal with remote work.
Diving into the Differences between Onsite and Remote Appraisals
What are the benefits and challenges of utilizing a desktop appraisal over an onsite appraisal? The following chart may provide some key pro/cons to evaluate if your organization is one the fence about whether it wants to utilize an all-remote option.
| Desktop Appraisals |
| Pros | Cons |
| Typically they can initially be more budget friendly to perform. - They can typically be produced more expeditiously.
- They may be less burdensome to the client to coordinate and scheduling the onsite work.
- They can result in accurate values if and the correct data is made available and utilized.
- Satellite imaging and Artificial Intelligence technologies can be utilized to augment desktop appraisal data
| - It can be extremely challenging to perform desktop appraisals on complex properties without the appraiser being able to physically collect data or measure buildings to develop the data required for a proper assessment of the property.
- Adjustments that play a crucial role in helping determine appraisal value are not taken into consideration such as: hillside construction, exterior wall finishes, roofing type and pitch, and overall construction quality, etc.
- Appraisers cannot physically inspect the interior of building to verify items such as: multiple occupancies, fire alarms, sprinkler systems, and possible other hidden attributes of the building that impact value and exposure elements of the building.
- Desktop appraisals do not adjust for perimeter of the building (assumes square) and also estimate story height to be average based on occupancy type. Both perimeter and story height adjustments can account for major cost differences.
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The examples below reflect the disparities in just value alone resulting for missing or inaccurate data.
In addition to your data, desktop appraisals in many instances rely on Artificial Intelligence (AI) technologies to complete the task. Once programmed with machine learning capabilities, a system can choose between types of answers and predict continuous values. This all sounds fantastic, doesn’t it? Keep in mind that AI becomes progressively better as the tool accesses more data, and if that input data is flawed, it still requires human oversight to correct those mistakes.
Looking Ahead
Will desktop appraisals become the way of the future and ultimately eliminate onsite inspections? It is certainly possible, but if the quality and source of your appraisal and exposure data is important (and it is), then at least partial onsite inspections are here to stay at least for the foreseeable future.
For more information about gathering values for insurance appraisals, please contact us.