New Assessment Approach Provides Alternative to the Floor Covering Replacement Cost Process for Adjusters
For many years, property adjusters have had few resources or options available to help them calculate an appropriate replacement cost value based on LKQ for floor coverings when replacement is warranted. In the P&C claims industry, the acronym “LKQ” (Like Kind Quality) is used to describe an item or material that is similar in appearance, quality and value to that which is being replaced after suffering damage or total loss. LKQ is a determinant of value to ensure the policyholder will receive equitable coverage for what they lost. To accomplish this valuation task, many adjusters and insurance companies utilize the services of a specialized labouratory to help determine LKQ valuation. The process is initiated by filling out a request form, cutting out a piece of the damaged carpet and mailing it to the lab. Within a day or so, the lab returns a report that denotes the manufacturing specifications of the sample and includes a suggested benchmark retail price for a comparable replacement product. Alternatively, to save time and money, some simply rely on their experienced adjusters or other sources to make a professional yet subjective valuation opinion. Obviously, this practice can often be inefficient, inaccurate and difficult for the adjuster to defend the outcome.
There is little doubt that the use of a qualified lab or professional opinion is a valid and accepted way of getting to the desired valuation result. The better question may be is it required each and every time? As is the case with so many content or structural components in a home, the old 80/20 rule often applies in terms of product identification and valuation for LKQ. In the world of floor covering, nearly 90% of all carpets fall in a retail price range that may be considered “middle of the road”. That is to say that the great majority of carpets are tufted vs. woven, have basic synthetic backings, are made of standard fibers such as nylon or polyester and fall firmly in the middle of the 90% category. The remaining 10% are the ones that are extremely unique or made of wool and other expensive blends which may cost upwards to $250/yard. It is this 10% that most adjusters are concerned with, as it presents the greatest risk in terms of valuation and settlement. Carpets like this should be evaluated with great scrutiny, not the typical 90%. However, the remaining 90% should not be left to evaluative assumption or conjecture. They should and now can be evaluated through a fast, yet economical process that is defensible, logical and based on the results of calculated visual, tactile and mathematical modeling.
New Solutions to Old Problems
Recognizing that adjusters have very few resources to help them calculate LKQ pricing of floor coverings, PuroSystems Inc., the franchisor of the PuroClean franchise network, has developed an onsite floor covering replacement cost valuation assessment system branded as OnSightLKQ™, to take care of the typical 90%. The system produces a floor covering description and local retail replacement valuation in as little as 10 minutes, and the resultant report transmitted to the adjuster immediately.
The process is gaining positive attention as it achieves all important goals for property claims adjusters, including:
- Reducing litigation exposure
- Reducing file cycle-time
- Reducing loss adjustment expense
- Reducing claim indemnity costs
- Improving customer claim experience satisfaction
- Eliminating need to cut and destroy the carpet for valuation purposes
The OnSightLKQ™ service is executed by a trained PuroClean service provider, as one of the many services they provide in fulfilling their role in water/fire mitigation and cleaning. The system takes approximately 10 minutes to perform at the loss site, and is conducted through a web-based deductive reasoning logic engine supported by a 47,000 line item database. The database is comprised of virtually every conceivable floor covering permutation of manufacturing characteristics with matching retail pricing for local market accuracy and like kind quality matching. The resultant assessment valuation report is sent immediately to the adjuster via email, as well as aggregated for more in-depth management reporting analysis. The system has been proven to significantly reduce cycle time and related processing costs while increasing customer service satisfaction.
Another prominent feature of the system is that it allows the customer to view, if not actually participate in, the logical process of identifying the various manufacturing characteristics of the damaged flooring, thus drastically reducing valuation pushback. Customers and adjusters alike, 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 about the restoration protocol. The PuroClean operator also records other important information about the loss in the OnSightLKQ report, noting subrogation opportunities, type and origin of the loss, pre-loss condition of the flooring, and area(s) affected along with the actual valuation report. Within the first hour of arrival on the loss site, PuroClean and the OnSightLKQ system can help the adjuster be more informed than ever before possible, concerning the loss and the flooring. OnSightLKQ can also integrate with favored flooring replacement program retail networks for instant notification and replacement allowances.
About the Author
Steve Leger serves as the Executive Vice President for PuroClean, a national property damage restoration company with nearly 300 offices across the U.S. and Canada. Leger, who has 30 years of experience in P&C claims information technology, has served as the CIO of two industry leading system providers as well as the Vice President of Insurance Replacement for one of the world’s largest flooring manufacturers.
Leger holds a Bachelor of Science degree in Computer Sciences and an Executive MBA certificate from Tulane University. Originally from Southern California, Leger now resides in Coral Springs, FL.