Avoiding underinsurance requires the rightcoverage combined with the right limits. In exchange for providinggenerous coverage, specialist insurers invest heavily on appraisalservices to determine appropriate coverage limit, which is a hardprocess that can create policyholder frustration, even distrust.Embracing the following principles allows carriers to managevaluations prudently, collect the appropriate premiums for therisks assumed, and delight their policyholders.

A well-constructed insurance program blends smart, comprehensivecoverage options with appropriate coverage limits. Successfulindividuals and families with significant assets are best protectedby the coverage options offered by high-net worth specialistinsurers. One differentiator between those insurers and mainstreamproviders is guaranteed replacement cost, or extended replacementcost, when an uncapped guarantee is replaced by a hefty extensionof coverage.

Define Replacement Cost

A replacement cost estimate should reflect the cost to build thehome at the same location on the date of the appraisal withcomparable quality of design, materials and workmanship. It shouldinclude profit and overhead for the contractors that will build thehome; fees for architects, engineers, designers and otherspecialists required to build the home; and whatever costs areneeded for the finished home to comply with current building codes.Agents and consumers should be aware if their appraisals areinflated by costs in either of these categories:

• Impossible to predict. These include costs foranticipated demand surge following a catastrophe that will push uplabor and material charges, potential overtime charges in case theclient seeks to accelerate construction following a loss; andconstruction upgrades required to comply with future buildingcodes.

• Covered elsewhere. A charge for debris removalis the most common example in this category. Specialists provide agenerous amount of coverage for debris removal in addition to(separate from) Coverage A.

Earn Customer Trust and Loyalty

Too often, sensitivity to the client is sacrificed in the questfor productivity and backlog management. Here are a few ways thatinfuse empathy:

• Encourage risk managers to pick up the phone.If the risk manager's initial estimate of the home's replacementcost is higher than the dwelling limit purchased, have the riskmanager call the client to discuss it. Sharing the status of theappraisal, confirming assumptions made about rare buildingmaterials and techniques and discussing square footage calculatedallow the client to participate in the process and correct errorsbefore they go to print.

• Offer a simple appeals process. Despite bestefforts, disputes will continue to arise. Forge consumer confidenceand trust by using a formal appeals process in which the consumercan have his or her appraisal reviewed by a qualified, independentexpert or panel.

• Help with the fulfillment of recommendations.Successful high-net worth people are busy people. Assign a resourceto help the client implement recommendations, from finding andvetting contractors to scheduling appointments, creates unexpectedjoy.

The home appraisal process is valuable for both client andinsurer. Although the expert risk managers and appraisalconsultants in our niche regularly contribute to client enthusiasmand loyalty, the process often creates friction, frustration, anddistrust. If we want to attract and retain more high-net worthclients that are currently served in the mass market, specialistsshould eliminate conflict in the valuation process. That meansbeing more consistent, more transparent and more empathetic.