Appraisal Program – 2019 Results

Peggy Wilson

Area Vice President – Member Services, Gallagher

Ever wonder about the Appraisal Program that provides values for your buildings approximately every four (4) years?  Those that may be new or if you were not aware about the Appraisal Program that MUSIC provides to its members, here is some background that may be helpful.

Since 1998 MUSIC has been providing, as part of their Membership, a certified appraisal for all the members’ structures that are over 3,000 in square footage.  This was done in conjunction with the primary property carriers that write excess property insurance for the MUSIC Program.

Appraisals are done on the Replacement Cost of the building value, not the contents. However, each year MUSIC is given an inflationary increase factor to be applied to the contents.  This value comes from you, the member, and MUSIC increases slightly each year to keep up with inflationary costs, unless a physical appraisal is provided.

The Gallagher Appraisal Service uses Marshall, Swift & Boeckh software to input all data provided by the physical information that is gathered by the appraiser along with the CADs and even Google Earth for linear footage, dimensions, material, usable space, geographical location, and so much more.  MUSIC wants to make sure that your structures are insured for the cost to rebuild or repair in today’s values.  You always hear about friends, neighbors or commercial properties that were underinsured and MUSIC has provided this tool, so that never happens to any of its members.

In 2019, 850 buildings, over 3,000 square feet, will have been appraised.  Each year inflationary factors that are based on the type of materials used for your structures are applied to building values, so the membership’s buildings that were not appraised in the policy year, stay current in their values.

The average inflationary factors for the last 12 months are:

Frame (1) –                                                          2.2%

Joisted Masonry (2) –                                      2.2%

Non-Combustible (3) –                                   3.2%

Masonry Non-Combustible (4) –                 2.4%

Modified Fire Resistive (5) –                         5.0%

Fire Resistive (6) –                                             1.6%

Contents were increased by 3.1%

Currently, the average inflationary factors are lower in some areas, this could be due to the President issuing  an executive order in July that is meant to “enforce the Buy American Act to the greatest extent permitted by law”.  The act, created in 1933, general requires that American-made products be given preference on certain projects that receive federal funding.

The President made buying internationally sourced products less attractive by imposing tariffs on steel and aluminum manufactured in foreign countries more than a year ago.  The administration has since placed additional tariffs on products made in China.

In May, however, the President lifted the tariffs on steel and aluminum imported from Mexico and Canada in exchange for assurances that countries do their best to make sure that Chinese materials didn’t make their way into the U.S.  This basically leaves a lot of uncertainty as to how the construction industry will be affected.

Building material prices flat as gypsum and lumber slow overall growth. First 5 months of 2019 have been historic in the gypsum market with prices falling 4.3%. Also, recent expansions of mill capacity have helped push softwood lumber process lower, as there have been five decreases over the last 7 months.

With construction firms having to pay higher wages to attract skilled workers from a shrinking labor pool.  Average hourly wages and salaries increased 3.2% in the last 12 months. This is what is mostly causing any increases.