Average

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VAR Average

• Average VAR Calculations
• Whenever a Sum insured is declared to be subject
  to Average, if such sum shall at the commencement
  of any Damage be less than the value of the
  property covered within such Sum Insured, the
  amount payable by the insurers in respect of such
  Damage shall be proportionately reduced.

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VAR Average

• Basic Example
• 250,000(Sum Insured) x 100,000 (loss)
  
• 400,000(Value at time of fire)
• Amount Payable 62,500

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VAR Average

• Types of Average
• The Condition of Average
• Day One Average
• Reinstatement Memorandum Condition of Average
• Special Condition of Average
• Two Conditions of Average

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• 85 Average
• Sum Insured X
  Loss
• Cost of Reinstatement at time of fire
• Day One Average
• Declared Value at inception X Loss
• Cost of Reinstatement at inception

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VAR Average

• Calculating a VAR
• The real purpose of calculating the VAR is to
  establish if average applies and if so, to what
  extent.
• The insured may be keen to suppress the VAR
  although our aim is to arrive at a fair
  valuation.
• Important to confirm that VAR agreed is purposes
  of the claim settlement

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VAR Average

• Remember to use the same measure of value in
  the Operative clause as the value. In the
  claims condition e.g
• .
• Reinstatement
• Indemnity(wear tear)
• Diminution in market value.

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VAR Average

• Method of Calculating a VAR
• .
• Relate to cost when new
• Produce a full Bill of Quantities priced by a QS
• Relate to another building
• Produce elemental Bill
• Use tables showing average /m2
• Use sum insured to act as a check

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• ABC

Named remove to protect the innocent
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• What to include
• .
• Demolition
• Local Authority requirements
• Fees
• Special features-roads,drainage
• VAT
• ( Check what is covered in the Building
  definition within the policy)

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• 1 Relate to cost when new
• This is the most accurate form of valuation, as
  the cost comes from a real life costing and can
  be evidenced.
• Use indices to update the cost to the appropriate
  time (time of fire, inception of policy, time
  when repaired)

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• 2-Produce a full Bill of Quantities priced by a
  QS
• This is not a viable option as it would cost too
  much. Should, however, a significant proportion
  of the building be damage and a bill is to be
  produced for these elements then reference could
  be made when producing the VAR.

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• 3- Relate to another building
• Adjust for Price (location time)
• Quantity
• Quality

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• 4-Produce elemental Bill
• This process is similar to producing a bill,
  although is much quicker as the element is
  measured. Historic cost information is required
  to price, although this method can be used in
  conjunction with the use of tables, or the method
  detailed above when comparing to another building.

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• 5- Use tables showing average /m2
• This is the most common method used due to the
  availability of tables.
• Tables give building costs only Demolition,
  Fees and external works are to be added.

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• 6-Use sum insured to act as a check
• .
• Pro rata area affected
• Review ratio of sum insured to damaged
• Repairs and small areas are less cost efficient.
• Temporary roof, hand demolition,
• VAT- on domestic dwellings

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• Tips for Negotiating
• .
• Produce detailed records and use a tape to
  measure the building.
• Dont use too high a rate per meter
• Professional fees 10 to 15
• Demolition between 5 and 10
• Suggest the insured pays for a professional VAR.
• Remember to adjust cost to the right period of
  time, i.e. date of loss or day one

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• The End