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Risk management seeks property-value analyst after audits find over-insurance and demolished buildings still on rolls
Summary
The Department of Administration requested a property-value analyst to audit state-owned property values after staff found buildings listed for insurance that were demolished or misvalued; early appraisals removed roughly $500 million in overvalued property and produced an estimated annual premium savings.
Department of Administration risk and insurance staff told the Joint Finance–Appropriations Committee they need an additional position to audit and correct the state’s property valuations after finding agencies had entered inaccurate or outdated replacement values.
Faith Knowlton, administrator for the department’s insurance division, said the division currently has one analyst responsible for an $11 billion portfolio of state property and more than 8,500 vehicles. “It would be possible for our staff of 1 to be able to manage what the agencies are doing outside, which is the reason we are requesting this position,” Knowlton said. She told the committee agencies sometimes put inaccurate values in the system, “for example, replacement value doesn't include land,” and the division has found instances where insurance covered buildings that “had been demolished years ago.”
Knowlton said the office now uses a four-year appraisal cycle and that, when they discover demolished or incorrectly listed buildings, the division removes those properties from the portfolio and may secure a refund for premiums only within the current year.
Director Steve Bailey said the department had reviewed earlier appraisals and removed roughly $500 million in over-insured property values in the first set of appraisals reviewed; he said that initial correction produced about $120,000 in premium savings in the first year the correction was applied. Bailey added the department has begun a multi-year appraisal plan to improve accuracy and the requested analyst position would be required to ensure agencies coordinate with the division when adding or changing property values.
Committee members asked whether staff could quantify historical overpayments farther back than the initial year of corrections. Bailey and Knowlton said they could produce a year-by-year account for the period where records and appraisals allow, but going back five years would be difficult without existing, consistent valuation records.
No formal vote was taken; the committee heard the risk division’s request and asked staff to provide additional detail on continuous appropriations that affect retained-risk and group-insurance accounts.
