When Xactimate Estimates Are Low, Blame the User — Not the Software

The Myth: “Xactimate Is Wrong”

It is common in the insurance claims world to hear someone say “Xactimate is wrong” or “Xactimate's pricing is too low.” This criticism — while understandable from the perspective of a policyholder or contractor holding an underpaid estimate — fundamentally misidentifies the problem.

Xactimate is a tool. Like any tool, it produces results that depend on how it is used. A tape measure is not “wrong” if the person using it reads the wrong end. Xactimate is not wrong when an estimator fails to adjust pricing, ignores site conditions, omits line items, or uses inappropriate labor efficiency settings. That is user error — and Verisk, the company that makes Xactimate, says so explicitly in their own documentation.

What Verisk's Own EULA Says

Section 12.3 of Verisk's End User License Agreement contains extraordinary language that most people in the insurance industry have never read. Here is what Verisk tells every user of their software:

Read those statements again. The company that makes the software:

1. Disclaims any warranty that the pricing is accurate
2. Calls it a “baseline” and “place to begin” — not a final answer
3. Says pricing is “for informational purposes only”
4. Places the responsibility on the user to verify pricing matches actual costs
5. Contractually requires users not to treat Xactimate pricing as a ceiling that cannot be exceeded

That last point is critical. Verisk's own license agreement says users must not prohibit deviationsfrom the published pricing when market conditions warrant it. An insurance adjuster who refuses to pay above Xactimate pricing — regardless of what the work actually costs — is violating the terms of the software they are using.

What Verisk's Pricing Methodology Says

Verisk publishes white papers explaining exactly how their pricing is developed. The Pricing Research Methodology document states:

• The goal is to provide “cost information to the estimator that is reflective of the most common price recently submitted.”
• That cost information is “an extremely valuable tool in creating appropriate repair estimates, providing a basis from which the estimator can then decide whether the price should be accepted or adjusted.”
• “Having this single representative price per line item, computed from all valid price points researched within the market, means that some market price data are higher, and some market price data are lower than that which are reported.”

In plain English: Xactimate reports a midpoint. Half the actual prices in the market are higher than what Xactimate shows. The software is telling the user: this is what we found as a common price — now you decide whether that price applies to your specific job.

The 50-100% Variation Acknowledgment

Xactimate has published a bulletin on roofing prices acknowledging that they frequently see a 50% variation in price from low to high within a single market — and that 100% variations are “not uncommon.” Their published price sits somewhere in that range. It is categorically not a maximum, not a ceiling, and not a number that represents what the work actually costs on every job.

If Xactimate itself acknowledges that actual prices may be double what they publish, the software is not “wrong” when a contractor charges more. The software reported a reference point. The user's job is to determine whether that reference point applies to the specific job in front of them.

The RIA/Xactware Joint Position Statement

Verisk and the Restoration Industry Association (RIA) issued a joint position statement on deviation from standardized price lists. The key points:

1. “Standardized prices may not accurately represent the usual and customary price.”
2. “Software providers are ‘reporters’ of price information at a specific moment in time.”
3. “Insurers and their partners must not prohibit or preclude deviations from standardized price data.”
4. “The usual and customary cost of work is determined between buyers and sellers in the marketplace.”

Xactware itself — the company that makes the software — is saying publicly: our prices may not be accurate for your specific situation, we are just reporters of data, and insurers must not treat our data as a cap.

Where Users Fail: The Most Common Errors

When an Xactimate estimate comes in low, it is almost always because the user made one or more of the following errors:

1. Failing to Adjust the Yield Factor

Every labor-intensive line item in Xactimate has a built-in production rate — how much of the work can be completed per hour under typical conditions. But “typical conditions” rarely exist in real-world restoration. The yield factor (or production rate) should be adjusted for:

• Height and access— hanging drywall on a third-floor ceiling takes far more labor than hanging it on a first-floor wall. Materials must be carried upstairs, scaffolding must be set up, and the work is slower at height.
• Occupied structures— working around the homeowner's furniture, protecting finishes, managing dust, and limiting noise during certain hours all reduce productivity.
• Small and complex areas— a 4x4 closet takes more time per square foot than a 20x20 room because of constant stops, starts, cuts, and maneuvering.
• Matching existing conditions— replicating existing textures, matching paint colors to aged surfaces, and blending new work with old is slower than new construction.
• Limited access— narrow hallways, low clearances, limited staging areas, and the inability to use efficient equipment all reduce output.

When an estimator uses the default yield factor on a job with difficult site conditions, the labor comes in too low. This is not the software being wrong — it is the user ignoring a feature the software provides specifically for this purpose.

2. Omitting Necessary Line Items

Xactimate line items have specific inclusions and exclusions. Each line item covers only what its description says it covers. Related work must be added separately. Common omissions:

• Masking, taping, and protection of adjacent surfaces before painting
• Moving furniture and contents to access work areas
• Hauling materials to upper floors (the line item price assumes ground-level delivery)
• Sealing and priming before finish application
• Final cleaning after construction
• Temporary protection of flooring during work in adjacent rooms
• Removal and re-installation of hardware, fixtures, and covers
• Matching existing textures (separate line item from standard texture application)

Each of these is a separate, billable operation that the software can capture. When the estimator leaves them out, the estimate is incomplete — not because the software lacks the line items, but because the user did not include them.

3. Using the Wrong Labor Efficiency Setting

Xactimate provides multiple labor efficiency categories because it recognizes that the same physical task takes different amounts of time depending on conditions:

• Restoration/Service/Remodel— accounts for reduced productivity from matching textures, working in occupied homes, protecting finishes, and handling the complexity of repair work
• Total Rebuild or Similar— assumes large-scale work with easy access, unoccupied structures, and separation from finished areas

An estimator who uses the more efficient labor setting on a job that involves working in an occupied home with matching requirements will produce a number that is too low. Verisk's own Labor Efficiencies Design paper states: “Factors such as job size, complexity, accessibility, and whether the structure is occupied all have a significant effect on the time needed to complete the work.”

4. Not Adding Labor Minimums

Standard Xactimate line item pricing does not account for mobilization, drive time, or setup. For small repair jobs — which is what most insurance claims are — a trade worker will charge a minimum regardless of how small the task is. A plumber does not drive across town, set up tools, and complete a 20-minute repair for the per-unit price of the line item alone. Xactimate provides labor minimums specifically to address this, but many estimators do not apply them.

5. Failing to Verify Pricing Against the Local Market

Xactimate's EULA says the user “must ensure that estimates include pricing consistent with actual materials, equipment, labor pricing.” If a licensed plumber in your area charges $150/hour and Xactimate shows $95/hour, the user is supposed to change the rate. The software gives them full capability to do this. Failing to verify is user error.

6. Excluding Overhead and Profit

Verisk's Overhead and Profit white paper states that “general overhead expenses aren't included in Verisk's unit pricing.” The unit prices are deliberately incomplete — they represent trade-level costs without a general contractor's overhead or profit margin. When a general contractor manages a job involving multiple trades, overhead and profit must be added. An estimate without O&P on a multi-trade job is not what Xactimate intended — it is what the user failed to include.

A Real-World Example: Drywall on a Third-Floor Ceiling

Consider hanging drywall on the ceiling of a third-floor unit in a multi-story building. Compared to hanging drywall on a first-floor wall:

• Materials must be carried up three flights of stairs (no elevator access in most residential buildings under construction or restoration)
• Scaffolding or stilts are required for ceiling work
• Ceiling installation is physically more demanding and slower than wall work
• Waste increases because ceiling sheets are more likely to break during handling at height
• Fewer workers can operate in the space simultaneously due to scaffolding setup

The correct approach in Xactimate is either to reduce the yield factor (because less drywall can be hung per hour under these conditions) or to add additional labor hours for the hauling, scaffold setup, and reduced productivity. Either method produces a realistic price. Using the default line item price without any modification produces a number that has nothing to do with what the work actually costs.

Is that Xactimate's fault? Xactimate provides a default price for typical drywall installation. It also provides the tools to modify that price for atypical conditions. The software was never designed to automatically know that your specific job involves third-floor ceiling work. The user is supposed to know that and adjust accordingly.

Where Verisk Does Share Some Responsibility

This is not an absolute defense of Verisk's pricing research. There are legitimate critiques:

• Survey methodology bias— Verisk collects pricing data from submitted estimates. If a disproportionate number of those estimates come from insurance company adjusters (who have incentives to estimate low), the database may drift downward over time.
• Lag in volatile markets— during periods of rapid price increases (post-disaster demand surge, supply chain disruptions, inflation), the database may not update quickly enough to reflect current market conditions.
• Cluster analysis methodology— Verisk uses cluster analysis to identify the “largest group of prices” and pick a point within that range. This methodology could systematically underweight high-cost markets or specialty contractors.
• Market concentration— in markets where insurance work dominates, contractors may submit prices that are already suppressed by carrier pressure — creating a circular problem where low carrier expectations produce low submitted data that Verisk then reports as “market pricing.”

These are valid concerns about the pricing data itself. But even if every single price in Verisk's database were perfectly representative of the typical case, the estimate wouldstillbe wrong if the user failed to account for the specific conditions of the job in front of them. The base data and the user's application of it are separate issues.

What This Means for Your Claim

When you receive an Xactimate estimate from your insurance company that seems too low, the question to ask is not “Is Xactimate wrong?” The questions to ask are:

1. Did the estimator include all necessary line items? Check the line item descriptions — are there steps and operations that should have separate line items but don't?
2. Did the estimator adjust for site conditions? Is the work on an upper floor, in a tight space, in an occupied home, or otherwise more difficult than standard? Was the yield factor or additional labor adjusted?
3. Is the labor efficiency setting appropriate? Restoration work in an occupied home should not use new-construction efficiency rates.
4. Does the pricing reflect the actual local market?If your contractor charges more than the Xactimate default, does the estimator's own EULA require them to adjust?
5. Are overhead and profit included? Multi-trade jobs require O&P. If it is missing, the estimate is incomplete by design.
6. Are labor minimums applied? Small jobs and trade call-outs require minimum charges that standard line items do not include.

The Bottom Line

Xactimate is a powerful estimating tool that provides a researched starting point for pricing construction work. It is not a final answer. It is not gospel. It is not a ceiling. Its own maker says so in their EULA, their white papers, their training materials, and their joint industry position statements.

When an estimate comes in low, the responsibility lies primarily with the person who used the software without verifying pricing, without adjusting for site conditions, without including all line items, and without applying appropriate yield factors. The software provided every tool needed to produce an accurate estimate. The user chose not to use them.

Is it possible that Verisk's base pricing is itself below market in some areas or for some trades? Yes — and Verisk shares some responsibility for that. But even perfect base data cannot save an estimate where the user ignored site conditions, omitted line items, and refused to deviate from defaults. The blame belongs where the decisions were made — or not made.

Sources and References

• Verisk End User License Agreement, Section 12.3 — “Price Data”
• Verisk Pricing Research Methodology white paper
• Verisk Pricing Methodology Summary white paper
• Verisk Labor Efficiencies Design white paper
• Verisk Overhead and Profit white paper
• Verisk How to Calculate Labor Minimums documentation
• RIA/Xactware Joint Position Statement on Deviation from Standardized Price Lists
• Xactimate “Roofing Prices in Xactimate” bulletin

A Note on This Information

This article is based on publicly available Verisk/Xactware documentation and industry position statements. It is educational and does not constitute legal advice. If you are disputing an Xactimate estimate on a claim, a licensed Public Adjuster can prepare a properly documented counter-estimate using the same software with appropriate adjustments for your specific conditions.

This article is for informational purposes only and does not constitute legal advice. Insurance policies and applicable law vary by state and by policy form. Consult with a licensed professional regarding your specific situation.

Written by Leland Coontz III, Licensed Public Adjuster, CA License #2B53445.