Xactimate Price Warning—Xactimate Finally Admits It Is Not So Exact!

Ten years ago, I warned that Xactimate pricing was woefully underestimating construction costs, resulting in underpayments to policyholders in Xactimate Price Trend Does Not Reflect Actual Costs:

Yesterday, our firm hosted a training seminar for public adjusters and others who use the insurance claims estimating software, Xactimate. During the seminar, a common theme began to develop in the comments we heard. Almost every Xactimate user we spoke to said the same thing, Xactimate’s pre-installed prices have been steadily declining over the last several years. This got me thinking, as many of my New Jersey clients are seeing building material prices increase for them.

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This begs the question, why is the exact opposite trend occurring in Xactimate’s price list? I would argue Xactimate’s biggest consumers are insurance carriers and they are simply giving their customers what they want. Sadly, this disturbing trend is hurting insureds who may not have professionals representing them. The average homeowner is not aware of trends in materials pricing and will likely assume the insurance carrier is providing them with accurate information at all times. As the above graphic shows, insurance companies may be underpaying these homeowners by at least 30%.

Five years ago, I referenced expert insurance construction estimator Jeff Major following a speech he gave warning about Xactimate pricing in Explaining Xactimate Accuracy and the Need to Analyze Details Before Getting the Wrong Turkey Dinner From the Insurance Company Estimator:

Insurance estimating expert Jeff Major gave one of the best speeches about Xactimate I have ever seen at the First Party Claims Conference West. I have seen Jeff give a number of presentations over the years, even teaching federal judges, magistrates, and mediators following Superstorm Sandy. But his warning about getting an insurance company’s “turkey dinner” Xactimate construction estimate is his latest masterpiece.

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Insurance company estimators often say they have estimated to construct a repair or replacement of something just like the policyholder’s estimate and complain about the higher price of the policyholder’s estimate. But, when you look at the details—and especially the descriptions—which are included within Xactimate of what they have estimated to be done, there is a lot missing on the insurer’s side. Pay attention to the details of what is done and the descriptions found within Xactimate.

One practice pointer for policyholders trying to determine the history and accuracy of the insurance company’s estimate based on Xactimate is to always ask for the ESX file. This file will help an expert like Jeff Major to more fully and accurately analyze who is actually doing the estimate, when it was being done and what was being done to the estimate during its drafting.

We provided another warning about inexact pricing from Xactimate two years ago in Warning—Xactimate Pricing For Hurricane Ian Claims is Not Exact:

If history teaches lessons, anybody relying upon Xactimate claims estimating software should be fairly warned that the pricing will be woefully low compared to actual Hurricane Ian labor and material costs. Catastrophes result in increased demand for construction laborers and materials. Catastrophes add significant logistical costs to those providing reconstruction services.

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The bottom line is this—the pricing from Xactimate is merely a guide and will be low because it lags the current local pricing. Unless the insurance company claims adjusters account for this, their estimates are not going to be reflective of actual costs, and we will have a repeat of inaccurate Hurricane Michael estimates, with thousands of claims valuation disputes.

Xactimate has finally issued a warning to users about its inaccurate pricing. A recent update to the End User Licensing Agreement (EULA) for Xactimate software, Section 12.3 now provides:

We do not warrant the accuracy of pricing information in the Price Data. Price Data is intended to represent historical information and should be used as a baseline or place to begin creation of an estimate. We provide Price Data for informational purposes only. You must ensure that estimates include pricing consistent with actual materials, equipment, labor pricing, etc. You acknowledge and understand that the Price Data provided as part of the Services is intended to target the most representative price of the various price points collected relevant to the specific line item in question. Having this single representative price per line item computed from all valid price points researched in the market means that some market price data is higher and some market price data is lower than that which is reported. You agree not to prohibit or preclude deviations from the Price Data where contractor requirements, market conditions, demand, or any other factors warrant the use of a different line item price in a specific situation.

The previous language from Section 10.3 stated:

You acknowledge and understand that Price Data provided as part of the Services are intended to target the most representative price of the various price points collected relevant to the specific line item in question. Having this single representative price per line item, computed from all valid price points researched within the market, means that some market price data are higher, and some market price data are lower than that which are reported. You agree not to prohibit or preclude deviations from the Price Data where contractor requirements, market conditions, demand or any other factor warrants the use of different line-item price in the specific situation.