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Insurance Valuations and Loss Preparedness An insurance appraisal fulfills three needs: these are independence, placement value data, and proof of loss preparedness. Differing levels and types of insurance appraisals fulfill each of these needs to differing degrees. Addressing each need in turn below: Independence: the insurance company would like to see an appraisal from act outside firm. This is somewhat obvious so that there is not fraud perpetrated by the assured. Yes some insurance companies now have their own appraisers but nasty loss situations may still occur. Placement: an independent valuation will inform the assured about the amount of insurance to carry. Such an analysis may be completed in great detail with say a+/ -10%o possible variance or in an overview manner with a +/-20% or greater variance. Be wary, just because the insurance carrier does an insurance placement value analysis, as stated before a very nasty loss situation may occur, with the insurance company denying the proper amount of insurance is carried. Proof of Loss: along with having the appropriate amount of insurance, this is the most important element of an insurance appraisal. Directly stated, if one is not prepared to prove one's loss instantly 10% of a fair settlement is gone. If not prepared this lost amount. may he 25%. The strategy is to get a balanced "fair/ equitable and timely" settlement. These thoughts are directly linked. Yes one can get a fair settlement say 5 years hence, but it is not timely. Or one can get a quick timely settlement if one accepts 75 cents on the dollar. Again, not good. One wants the fair settlement at full value in say 6-12 .months or whatever time is appropriate for the loss situation, balancing.the wishes of"fair" and "timely" is the critical concept. So let's address what is adequate Proof of Loss. The fixed asset accounting record most often is ,grossly inadequate for a loss situation. Without going into a long explanation, many fixed asset accounting systems contain data that includes intangibles in the values, non -value entries, allocated values from acquisitions, "ghost" assets, transfers in at'net book, values net of trade-ins, % value upgrades, and on ant- on. Flow diagrams help to prove ones loss. Photographs and movies / videos of specific assets and systems help. Files that have original purchase costs and descriptive detail are wonderful (but rarely are available). Engineering records may help. Sorry, but in the instance of most facilities /.operations the assured is not prepared. Oversight in this regard is strongly suggested: Why. do I say that? Because I worked for the pre-eminent "insurance lossmachineryexpert" firms (my family three generations).. No we were not "mean!', yes helping assureds as professionally / sensitively possible, but ultimately to reasonablyprove one's loss is the assured's reiRonsibilfty. Repeating. it is the assured's reaRonsibilijy to prove the loss, that is. the. essets that ate / were in place: and "in. use" and the values of the assets. Yes, for those facilities where the appraiser has had the opportunity to prepare a detailed valuation for fair value accounting the information may be very good, at that instant. This mumes that -112-