With almost 60% of its homeowners insurance business consisting of coverage for homes valued at $1 million and up, Novato, Calif.-based Fireman's Fund Insurance Co. understands that appraising affluent homes is an extremely tall order.Expensive dwellings don't come equipped with run-of-the-mill furnishings. Often, such homes feature rare and exotic items ranging from Pella French doors, Italian granite countertops, premium carpeting and elaborate building materials.
As part of its Prestige Home insurance line, Fireman's provides added protection for homeowners in a single policy, offering broader coverage than the average home can obtain. But in providing this additional protection, Fireman's appraisers must quickly and accurately determine the replacement values of all items-both inside and outside the dwelling.
"The nature of home construction is advanced such that tolerance is much finer than it used to be," says Steve Arcia, senior director, residential program, personal insurance segment, Fireman's Fund.
"An oven, a refrigerator or flooring materials used to be limited on an overall cost scale. But if you walk into a Home Depot these days, the valuation range of many upscale items is unbelievable," he says. "A floor, for instance, can consist of tile, ceramic or marble."
Realizing the difficulty of compiling an appraisal report and understanding the importance of the high-end market to its overall business, Fireman's Fund last summer began testing a new tool touted for its ability to substantially enhance the process for its home appraisers.
The initial pilot passed with such flying colors that Fireman's rolled out the solution throughout its Prestige Home appraiser network, which includes about 100 internal appraisers and a handful of external surveyors who help augment the overall effort.
The solution Fireman's selected, branded the Expert Valuation System (EVS), was developed by e2Value, a Stamford, Conn.-based hosted-application software provider that delivers replacement costs valuations for homes in all price ranges in the United States.
e2Value offers six versions of EVS, from a simple appraisal of perhaps the exterior of a home to a more comprehensive internal-external appraisal. e2Value is able to customize the front-end interface for customers, which so far number about 30 insurers and another 30 vendors who license the solution and, in turn, make it available to their clients.
Without providing specifics, Fireman's costs to use EVS are dictated by how often it uses the solution, says Arcia.
"We expect customers will be able to save time and improve quality for their clients," says Todd Rissel, president of e2Value.
Using a laptop computer, Fireman's surveyors enter a dwelling to appraise homes for both new business accounts and existing Fireman's customers, many of whom must have their homes re-appraised-perhaps to secure a mortgage refinancing. Appraisers download data from EVS' extensive database to determine exact replacement costs for all types of items found in an upscale home.
Saving time
Prior to implementing EVS, Arcia estimates that a home valued from $1 million to $3 million could take an appraiser several hours to assess, a process marked by scouring through three-ring binders to retrieve data on various home furnishings.
Compounding the problem is that replacement costs of upscale items often appreciate, and this data had not always been updated in a timely fashion. As a result, Fireman's field staff often referenced outdated cost figures while filing their appraisal reports.
Realizing the challenge it faced, Fireman's Fund in 2002 began to seek a better way to streamline the process. After conducting due diligence in selecting an electronic appraisal solution to best fit its needs, Fireman's Fund picked e2Value last August for a host of reasons, says Arcia.
One advantage was the broad capabilities housed within EVS, which integrates with building supply companies, such as lumber suppliers, drywall contractors and millwork providers to keep its data base current. E2Value uses actual costs originating directly from these building suppliers.
Fireman's Fund also recognized other compelling characteristics embedded within the system, such as the availability of Census Bureau data for new-housing starts, the availability of historical data sources used to gather architectural style costs, and historic construction techniques and costs.
Arcia says the company also stepped to the plate with "phenomenal support and flexibility to customize the EVS tool to fit our needs. They had the ability to modify the tool so that it reflected valuations on a geographic scale, from 'Middle America' homes to ones in coastal areas to homes in the desert," Arcia comments.
"We insure homes where a property in Vail, Colo., might have an exterior made from unique granite stone. If a loss occurred and that exterior structure was damaged, we can now easily track down the manufacturer and the replacement cost in one easy search."
Once data is entered into EVS, it's stored permanently. Appraisers are issued a user name and password to access e2Value's database, which the provider itself hosts.
Skeptical appraisers
Fireman's appraisers weren't immediately sold on the e2Value program, states Arcia, because-as creatures of habit-many were content to appraise homes in the traditional fashion. Some might also have been averse to adopting a new technology and undergoing the training necessary to master EVS.
However, those reservations were quickly quashed. "I have to admit, our surveyors-both internally and the ones we contract with-were reluctant to train on a new tool," says Arcia. "But they changed their minds once they saw the capabilities of EVS.
"In the past, appraisers would conduct an inspection, and then mail a paper report to one of our offices. Now, they can electronically transmit the report, along with digital photos of the home, and it's immediately downloaded into our system. It's making a huge difference to our agents and underwriters, who once waited a week for an appraisal to come through."
Fireman's appraisers, working from a manual checklist of home items, take notes in the field and then transfer the data onto a laptop when they return to their offices.
Activating the e2Value data base is a point-and-click process. Appraisers always start by selecting a ZIP code of the area in which the home is located. The ZIP code is a key part of the process since home valuations vary by a geographic location.
"It takes appraisers anywhere from three minutes to 15 minutes to complete a report," says Rissel. "The 15-minute version involves about 1,500 data entries. Using our Smart Data Warehouse, they can compile an electronic report and then can either e-mail it to an underwriter or agent, or put in on a company server for those parties to access."
EVS is making a substantial difference in appraiser productivity at Fireman's, says Arcia.
"Using the solution, appraisers increased the number of home appraisal completions by 10% during the first year because of the ease e2Value brought to filing reports," he says.
The power harnessed within the solution has been reflected in the accumulation of business for e2Value, which added 12 new customers over the past year. The company pledges that if the solution is deployed properly, insurers can realize an ROI in about one month. "The thing we offer is not only the data base to determine valuations of high-end homes, but we deliver a data-exchange process that enhances workflow," Rissel says.
