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Administration asks for property-value analyst after audits find over-insured assets
Summary
Department of Administration's insurance office requested a property valuation analyst to audit the state's insured building portfolio after finding agencies had entered incorrect or outdated replacement values, including buildings that had been demolished.
Department of Administration officials told the Joint Finance-Appropriations Committee they want additional staff to audit property values and reduce over-insurance in the state's insurance portfolio.
Faith Knowlton, administrator for the Division of Insurance within the Department of Administration, said the division currently has one analyst responsible for a very large portfolio: "over $11,000,000,000 in property" and more than 8,500 vehicles. She said the office has found multiple instances where agencies were paying insurance on buildings that had been demolished and that many agencies lack the insurance expertise to enter accurate replacement values.
"When we have discovered buildings that have been demolished, we do request and do remove them from the property value, but we can only get a refund for the the within the current year," Knowlton said. She described an ongoing four-year appraisal process and said adding a property-value analyst would mean agencies would need to coordinate with the division before adding or changing property entries, improving accuracy and timeliness.
Committee members asked whether the office could quantify past overpayments. Knowlton said that, with the initial set of appraisals, the division had removed about $500 million in over-insured property values and that change saved the state roughly $120,000 in premiums in the first year of adjustments. The division told members it can continue additional appraisals over the next three years but that going back five years would be difficult because historical records do not capture the present inventory reliably.
Legislators also heard that the retention of risk and group insurance funds include continuously appropriated components that complicate year-to-year fund balance comparisons. The committee requested additional detail on continuous appropriations and directed the analyst to provide the breakout.
Knowlton said the requested analyst position would allow the office to catch errors sooner and reduce overpayment and miscoding across the portfolio. No formal action was taken; the Legislature has not yet approved the position request.
