Restoration Rewind

Delta Development Group Monthly Newsletter

March 2015

Convention Countdown Today, we are officially 10 days away from the 3rd Annual

Franchise Convention for Delta Disaster Services. Here at DDG, we are hustling around getting all of the last minute loose ends

tied up to make this the best convention yet!

We are very excited for all of the speakers, demonstrations and education that we have lined up for everyone. Stay tuned to your

email over the coming days for Denver weather updates, convention teasers, and much more. If you have any questions about the event please contact Ragan at rneblett@delta-us.com.

We can’t wait to see everyone there!

Here's how a quiet year for catastrophe claims became one of the most

expensive ever for insurers

The average fire loss estimate in 2014 was $41,256.

A quiet year for major catastrophes did not translate into fewer losses for insurers, according to the Xactware 2014 Property Report.

“Although 2014 was a quiet year for catastrophes overall, severe weather damage from wind, hail, lightning and tornadoes was at the fourth-highest level in history,” said Greg Pyne, Xactware’s assistant vice president of Pricing Data Services in a statement. “The trend of high damage from severe weather continued to trouble the industry in 2014.” Total insured losses due to thunderstorms saw the fourth highest number on record with $12.3 billion.

The report tracks claims from events such as fires, water damage, hail and wind and highlights trends so insurers can see areas of risk.

According to the study, Xactware’s XactAnalysis network processed 4,218,586 claims estimates valued at $38,569,780,316. Year-over-year, the January 2014 total of $3.02 billion for property estimates was over $270 million higher than the January 2013 figure of $2.76 billion. The month seeing the most claims activity was June with a reported $4.44 billion in estimates. July came in second with 3.96 billion in property estimates, followed by October with $3.39 billion. The two months with the lowest estimate totals were November with $2.28 billion and December with $2.46 billion.

The cost of the average fire loss continued its downward trend, dropping almost 9% from $45,268 in 2013 to $41,256 in 2014. The average cost of a fire loss in 2012 was $46,374.

The number of water losses increased from 865,043 in 2013 to 1,208,297 and were the most common types of losses reported in 2014. The average cost of a water loss claim dropped 4% from $6,360 in 2013 to $6,089 in 2014.

Hail damage estimates also continued to increase, growing by almost 15.5% from 986,010 in 2013 to 1,173,099 in 2014, but the average cost of the estimates remained basically the same from year to year.

Xactimate tracks the losses from five primary sources: contractors, independent adjusters, mitigation providers, specialty providers and staff adjusters. The majority of the claims (65%) were compiled by staff adjusters (2,768,753), followed by independent adjusters with 958,447 claims (22%). Contractors (255,077) and mitigation providers (235, 301) each only compiled 6% of the claims, and specialty providers (32,239) only 1%. According to the study, the claims estimates did not include any reassigned estimates.

The average price of the estimates for all of these professionals dropped from 2014 to 2013. Specialty providers saw the biggest drop in estimate costs going from $6,635 to

$3,871, a drop of $2,764. Independent adjusters saw a $1,390 decrease in their average estimates. Contractors and mitigation specialists saw minimal decreases.

Fire losses uploaded by staff adjusters were the highest estimates with an average value of $46,363, but the number was still 10% lower than the 2013 figure of $52,012. Fire estimates from independent adjusters averaged $41,565 per estimate, and contractors submitted the lowest estimates at $22,713.

Hail losses from specialty providers were the next highest estimates, running just over $20,000, almost twice as high as the estimates submitted by staff adjusters, independent adjusters and mitigation providers.

Texas reported the highest number of personal property claims valued at $322.3 million, but California actually reported the highest total value at $411.3 million. Colorado reported the most personal property claims with five claims per 1,000 residents. Nebraska reported 4.36 per 1,000 residents; Washington, D.C. had 3.62 and Maryland came in fourth with 3.35 per 1,000 residents.

Florida residents were the least likely to file property claims with only .53 per 1,000 residents.

Jim Loveland, Xactware’s president and CEO said, “The property industry continues to face rapidly changing conditions” and the report “offers property professionals an edge by helping them identify and respond to trends in 2014 that are likely to continue into 2015 and subsequent years.”

What causes the most HVAC systems claims? You might be surprised

When a structure is damaged, whether by a natural catastrophe, such as a tornado or hurricane, or a catastrophic event, such as a fire or explosion, HVAC (heating, ventilation and air conditioning) systems are often among the components that are damaged.

These systems are the subject of thousands of property and casualty insurance claims each year, with significant variations in reported versus actual damage, according to the 2015 Annual Claims Report, issued Feb. 17 by HVAC Investigators.

The 2015 report includes data for both onsite inspections and desktop reviews of residential, commercial and large loss claims. The report includes data from claims

across all 50 states, for all major perils and for all major equipment types and manufacturers.

The new research topics that were added to the current report include the following:

• individual residential and commercial claims data segregation • Large loss claim data • Desktop review data • Frequency of “like kind and quality” proposals from an insured’s contractors • Contractor quotes versus market pricing comparison • Frequency of claims by HVAC system type • Smoke and fire claim data (including frequency by month and recommended actions)

More than 50% of causes of loss misreported The 2015 HVAC claims report compared the reported cause of loss for residential claims at the time the claim was filed to the actual cause of loss, determined after an independent field-based investigation. Following the investigation, more than 44% of claims fell into the categories of wear-and-tear, claims withdrawn or not damaged. A field investigation also resulted in re-categorizing a significant percentage of HVAC claims that were initially reported as lightning or hail.

For commercial claims, 35% of all HVAC claims were categorized as wear-and-tear, claim withdrawn or not damaged. Of the 45% of claims originally reported as hail damage, only 33% had actual damage. Of the 9% reported as lightning damage, only 2% of claims had actual damage.

Xactware Publishes March 2015 Price List

Are you keeping up with trends in the industry? Check Xactware pricing monthly as we do in Denver!

— Monday, March 02, 2015 —

The March 2015 price list updates for more than 460 regions in the United States and Canada are now available for download.

A summary of price changes reported in this update is as follows (this percent change is based on the national averages that have been reported since the February 2015 price list publication and from March 2014 to March 2015):

February to March

U.S.

30-yr. Laminated Shingle Labor and Material 0.29%

Common Drywall Material 4.40%

Common Labor and Material 0.21%

Common Lumber Material -0.81%

Common Material Only 0.21%

Retail Labor Rates 0.12%

Customers remember the little things By: Michael Mastous

As severe and dramatic as a large-scale property loss can be to a property owner, little things do make a difference.

One of the best examples I have was with a customer named Kathy Justin. Kathy had a very large fire to her home and lost most of her contents as a result. A little background on Kathy, she is a veteran of the skies! She has been an international first-class stewardess for the past 25 years. She knows good customer service when she sees it!

I met Kathy the day after her house was nearly demolished by the fire. She was strong, but was having a very difficult time dealing with all the memories that were lost during the fire. One item in particular she had clutched in her hands when I met her. It was a

book of recipes, some of them written in the book, some of them loosely held in the book, they were all written by her deceased grandmother. The edges of the papers were all heavily burned and some were even falling apart due to their age and the fire damage. Her adjuster, told her that there was nothing they could do as the only value was the value of the paper. As we all know too well, insurance does not place any sentimental or emotional value on items lost.

I asked Kathy if I could take this disassembled and fire damage book of recipes with me and personally work on it in an attempt to restore it. I set very little expectations, other than I would attempt to remove the smoke odors.

That night I returned to our shop and put the tattered book of recipes and articles in our ozone room. To my surprise when I came back in the next day the odor was gone without the need of additional ozoning. I then took the book and the tattered loose leaf recipes to a local album store in the Denver area. I worked with the store manager and we cut and reassembled a lot of the recipes and placed them within plastic sheathing creating basically, a brand new album.

That afternoon I told Kathy I would like to meet with her and had a surprise for her. She had no idea what it was. I met her back to her home when she was still sorting through her contents. I brought out the album to show her what we have done with all of her grandmother's recipes. She broke down. She stopped everything she was doing and sat down on her smoke damaged sofa to review every single recipe, page by page. Granted, there was still some fire damage to some of the pages, but she understood that.

From this point forward, this small act changed our relationship. I'm not saying she was an easy customer to work with. But I am saying that I had earned her trust and her understanding for the ordeal that was ahead of us. One small act set the stage for the next five months of our relationship. One final note. When we put together our Delta Disaster Services video, Kathy Justin was asked by me if she would like to participate. She said absolutely, even with her busy schedule she came in and spent the day doing the lead testimonial on our Delta video. Take a look at the video, she is the one that talks about the large fire that occurred while she was asleep on her sofa.

Improve your bottom line

How do you improve your bottom line? Or, increase your margins, thus increasing your profits!

Number One: Have your estimates reviewed by someone else! Mike, and in his absence, someone in the Denver office will always review your estimates. Leaving money on the table will affect profits. Even if it appears to be a simple estimate please consider having Mike review it. You would be surprised how simple can change to complex very quickly. You lose out on nothing and have only money to gain.

Number Two: Follow our system. Simple as that – do what you were taught in training.

Mitigation: The number one way to improve profits on mitigation is with labor.

• Watch your overtime. You may be able to hire another person for what you are paying in overtime.

• Every trip to the job costs money. Plan your trips, and minimize those trips. Unnecessary trips are wasted money. That extra trip back to the shop because someone forgot something is very costly. For the franchises in major cities with traffic concerns, this become even more of an issue. It can take two hours round

trip in Denver to make an unnecessary trip to a job site. Two people, with a box truck and two hours will easily cost over $100. On a small job, this could equal as much as 5-10% of your profit. • Make sure everyone on the job is productive. A tech that is “watching” rather than working can be very costly and can drastically effect the margins. • Do not waste supplies. As easy and obvious as this sounds, your mitigation supplies are costly and you can only bill for so much. • Make sure you bill for all legitimate equipment

usage, supplies and labor. This comes back to your estimate reviews. Are you billing for trash bags on those big jobs? We had a job that used over $1,000 in trash bags last year. Billing for these does make a difference in the bottom line of the job.

Construction: The number one way to improve profits on construction is with your subcontractors and subcontractor budgets.

• Are you requesting and getting discounts from your subcontractors? • Are you “factoring” your sub bids correctly? • Have you really worked to find two or three “handyman” type subs to do just as

much as possible on those smaller jobs? • Are you trying to run the jobs like a traditional GC? If so, this will drastically

effect your margins and you will never meet your objectives. • Are you managing the job and managing the home owner and their

expectations? • Are you tracking your supplements and making sure they are billed correctly with

the insurance company? • Are you holding your subcontractors accountable to their warranty issues and

back charges? • Are you truly treating your subcontractors like your business partners and

appreciating what they do for you?

Admin:

• Collect the money! • Collect the money timely! • Watch your D.S.O. If it is over 50, why? How can you reduce it? Why are you

not able to collect? • Are you “booking” everything correctly in QuickBooks? Remember, the job is

booked as income or a receivable when the job is completed. If you book it before you can collect it, it is effecting your D.S.O.

• If you have difficult collection accounts, be aggressive and do not let them sit. Turn them over to a collection company; have your attorney help; file liens; go to small claims court. In short, do what you have to do to collect the money.

• Always, have signed work agreements! Without a signed work agreement, you cannot collect the money.

• Always, have signed draw agreements when you are collecting money direct from the home owner.

Hope this helps! Anyone of these items can and will affect your margins. Having multiple problems, also multiplies the amount of loss you take on the job.

And we will leave you with this…