How to Improve the Valuation of Flooring Losses

Historically, assessing the “like kind and quality” (LKQ) attributes of floor coverings that have been damaged by flood, fire, mold or other peril, has posed many challenges. Myriad private labeling programs at the retail level also exacerbate the “accuracy” dilemma for all involved in the process. It is very typical to find the exact same flooring at various retail shops at differing prices.

Expediting the valuation process is critical. By adopting an on-site valuation protocol, the process can be done in a fraction of the time that it takes to conduct a conventional lab evaluation. This also allows the policyholder an opportunity to understand how the valuation is conducted.

The Challenges

There are few resources available to help adjusters calculate an appropriate floor covering replacement cost. Some insurance companies continue to send a piece of the flooring to a specialized laboratory to help determine LKQ valuation, even though it can take up to a few days to obtain the result. In an effort to save time and costs, some adjusters simply call on past experience to make a subjective opinion on the LKQ and resultant valuation. This practice can be problematic.

Floor coverings typically follow the standard 80/20 rule in terms of product identification and valuation for LKQ – 80 percent of content or structural components in a home fall in the “middle of the road” price range, where the remaining 20 are unique. These outliers present the greatest risk in terms of valuation and settlement.

For example, 90 percent of all carpets fall into the average retail price range – so the great majority of carpets are tufted vs. woven, have basic synthetic backings, and are made of standard fibers such as nylon or polyester. The remaining 10 percent are the ones that are extremely unique or made of wool and other expensive blends. These unique floor coverings in particular need to be evaluated with great scrutiny.

One of the main reasons why policyholders push-back on the valuation of damaged flooring is when there is little transparency in evaluating the loss. By offering a way for the policyholder to engage in the process of identifying and evaluating the damaged flooring, adjusters can reduce litigation exposure and improve the customer claim experience.

An effective way to do this is to carry out the valuation process at the site of the loss. An on-site valuation process allows the customer to view, if not actually participate in, the logical process of identifying the various manufacturing characteristics of the damaged flooring.

This can be done through a logically designed deductive reasoning process whereby the assessor answers a series of identification questions on a web-based device about the manufactured attributes of the damaged flooring. Each answer reduces the potential matches until the system reaches a final conclusion.

Customers appreciate knowing the flooring allowance early in the claim, so they can move forward with the completion of the restoration and make more informed decisions throughout the restoration process.

New Technologies

In order to bring the valuation process on-site, insurance professionals must explore newer technologies including flooring category reference materials for visual identification and web-based deductive reasoning logic technologies. They must include a vast database of floor covering manufacturing statistics with verifiable retail pricing for local market accuracy and like kind quality matching.

Today’s leading valuation technologies can send a report immediately to the adjuster via email, as well as aggregate the data for more in-depth management reporting analysis. Ideally, the program also pulls in preapproved flooring retailers who can adhere to the systems’ pricing conclusion and assist the policyholder to returning to a pre-loss state.

With such systems, the on-site valuation process can be conducted by a trained property damage restoration provider or the adjuster. The technologies that calculate flooring pricing based on visual and mathematical modeling significantly improve acceptance of the valuation and decrease the settlement cycle. Most importantly, because the process is defensible and logical, policyholders are much less likely to push-back on the results and extend the claim process and associated costs.

Steps to Improve the Valuation Process