Abstract:
PURPOSE OF PAPER : This paper illustrates how a simple yet effective
cost model based on manipulated and refined
quantity surveying techniques can assist South
African homeowners to improve the accuracy of
replacement cost estimates and thus sufficiently
insure their residential properties.
DESIGN/METHODOLOGY/APPROACH : Raw data for 21 residential units was generated
through a quantitative process by applying
recognised quantity surveying measuring and
estimating methods. The data was further
processed to derive multipliers for use in the cost
model. A two-pronged approach was applied to
the analysis of the data, firstly regression and
correlation statistical analysis were conducted to
illustrate the integrity of the data and secondly
the proposed cost model was applied to
demonstrate the ease of its use. The data of 15 residential units was used in the comparative
analysis while the data of the other 6 units was
used as test cases for the cost model.
RESEARCH LIMITATIONS/IMPLICATIONS : This paper is based on a pilot study limited to a
select sample of residential designs varying in size
2 2 from 56m to 660m . The results and can thus not
be viewed as conclusive.
FINDINGS : The findings suggest that the proposed cost
model is fit for purpose and can produce accurate
estimated replacement costs based on the input
of the seven identified variables. However, the
statistical analysis indicates instability due to
large variances within the sample. This could be
corrected by improved data.
VALUE OF PAPER : Improved replacement cost estimation of
residential buildings based on an understandable,
reliable and affordable cost model would place
residential property owners and insurance
industry role-players in a much-improved
situation in the event of an insurance claim and
lessen the potential financial damage to be
suffered.
PRACTICAL IMPLICATIONS : Insureds are reliant on building cost information
to comply with their responsibility to determine
the insured values of their properties. Without readily available, reliable, relevant, understandable and cost effective information in
the public domain, insureds are dependent on
third parties to supply such information.
Developing a cost database through the
implementation of the proposed cost model is
envisaged in the longer term.
