The Future of Appraisal and the Rising Standard of Competency

In property/casualty insurance, appraisal has long existed as a mechanism to resolve disagreements over the amount of loss. For decades, it has been viewed as a useful—if occasionally underutilized—tool in the claims process.

That perception is changing rapidly. There are clear indicators across the industry that appraisal is not only here to stay, but that it is poised to become a far more prominent feature of claims handling. In many cases, it is already evolving into the first meaningful battleground in disputed losses, often preceding or even replacing litigation.

As this shift occurs, the expectations placed on appraisers are changing just as quickly. Courts are taking a more active role in shaping how appraisal functions. Losses themselves are becoming more complex. And perhaps most importantly, the industry is beginning to confront a long-standing issue that has never been fully defined: what it actually means to be a competent appraiser.

Historically, competency has been treated as something assumed rather than measured. That is no longer sustainable. The future of appraisal will increasingly demand that competency be demonstrated, observable and defensible in real-world application.

A Process Under Pressure

Several forces are converging to reshape appraisal.

First, courts are increasingly involved in defining the boundaries of the process. Questions such as what constitutes scope versus coverage, what issues are appropriate for appraisal, and how much authority an appraisal panel possesses are being addressed with greater frequency.

In February 2024, the Florida Supreme Court addressed this directly in American Coastal Insurance Co. v. San Marco Villas Condominium Association, ruling that trial courts have discretion to compel appraisal before resolving coverage issues effectively overriding prior appellate decisions that had required coverage issues to be settled first. That same month, the Texas Supreme Court answered a certified question from the Fifth Circuit in Rodriguez v. Safeco Insurance Company of Indiana, holding that payment of an appraisal award plus statutory interest extinguishes the insured’s right to recover attorney’s fees under Chapter 542A of the Texas Insurance Code. Meanwhile, a Middle District of Florida court issued detailed appraisal orders in 2024 setting specific criteria for appraiser qualifications, including prohibitions on contingency-based compensation and restrictions on ex parte communications with panel members.

This judicial involvement will continue to refine appraisal, but it will also increase scrutiny. Appraisal awards are more likely to be challenged, and the reasoning behind those awards will matter more than ever.

Second, the nature of claims themselves is evolving. Losses are no longer limited to straightforward structural damage. Global insured losses from natural catastrophes reached $137 billion in 2024, according to Swiss Re, marking the fifth consecutive year that insured losses exceeded $100 billion. Munich Re reported that weather-related events drove 97% of those insured losses, with hurricanes, severe convective storms, and flooding creating increasingly complex causation questions. In the United States alone, severe thunderstorms accounted for $41 billion in insured losses in 2024—the second costliest year on record for that peril type. The first half of 2025 saw insured losses reach $100 billion globally, a figure 40% higher than the same period the prior year, driven significantly by the Los Angeles wildfires.

Appraisers are encountering climate-related causation issues, engineering complexities, code and compliance violations, functional obsolescence, and emerging exposures tied to technology and intangible impacts. These developments are transforming appraisal from a process focused primarily on estimating cost into one that requires deeper technical understanding and broader analytical capability.

Finally, the industry is facing a growing talent gap. The U.S. Bureau of Labor Statistics projects the insurance sector will lose roughly 400,000 workers through attrition over the coming years, with 50% of the current workforce expected to retire within the next 15 years. The number of insurance professionals aged 55 and older has increased 74% in the last decade, and fewer than 25% of the current workforce is under 35. Graduates from risk and insurance programs are meeting only an estimated 10–15% of the industry’s hiring needs. A 2024 survey by the International Association of Claim Professionals found that while more than two-thirds of respondents believed claims service is becoming more important, only one-third believed their organization was “very committed” to investing in claims talent.

This combination—greater demand, increased complexity, and reduced supply—places significant pressure on the concept of competency. It raises a fundamental question: What qualifies someone to serve as an appraiser in today’s environment?

Moving Beyond Assumed Competency

Traditionally, appraiser qualifications have rested on two pillars: impartiality and competency. While impartiality has been examined and reinforced through case law, competency has remained largely undefined.

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In practice, competency has often been inferred from years of experience, professional designations, or familiarity with estimating platforms. These indicators, while useful, are insufficient. They do not guarantee that an appraiser can effectively analyze a loss, reconcile competing positions, or produce a defensible conclusion.

As expectations rise, competency appears to be evolving from an abstract concept into a measurable standard. It is increasingly being demonstrated not through credentials alone, but through performance. This is where a structured framework becomes essential.

The Seven Pillars of Appraisal Competency

A meaningful definition of competency must be comprehensive. It must address not only technical ability, but also judgment, discipline, and professional conduct. The following seven pillars provide such a framework.

1. Relevant Experience

Competency begins with alignment between experience and assignment. Not all experience is transferable. An appraiser who has handled residential hail claims for years may not be equipped to evaluate a complex commercial loss or a high-value custom property.

The distinction is not about capability, but about context. Experience must match the complexity of the loss, the type of property, and the nature of the argued issue. When that alignment is absent, the appraiser is not applying expertise—they are developing it. That introduces risk into a process that depends on informed judgment.

Competency requires the discipline to recognize those limitations and the integrity to ensure that the right expertise is applied to the right assignment.

2. Technical Knowledge of the Scope

At its core, appraisal is not a financial exercise—it is a technical one. Determining the amount of loss requires understanding how property is constructed, how damage occurs and what methods of repair are appropriate.

Estimating software can produce numbers, but it cannot determine whether those numbers are correct. That responsibility rests with the appraiser. A competent appraiser can explain why a particular repair method is necessary, how quantities were derived, and what factors influence cost.

Without that knowledge, the appraiser becomes dependent on others to define the scope of work. That dependency undermines the objectivity and reliability of the appraisal. Competency, therefore, requires more than the ability to generate an estimate. It requires the ability to understand and defend it.

3. Familiarity with Policy and Appraisal Boundaries

Appraisal exists because the insurance policy allows it. It is not an independent process, nor is it a universal right. The policy defines when appraisal applies, what issues can be addressed, and the authority granted to appraisers in the process.

A competent appraiser understands these boundaries and operates within them. This means focusing on the determination of the amount of loss while avoiding coverage determinations—which remain the carrier’s responsibility—and limiting advocacy outside appraisal authority. As the Florida Supreme Court affirmed in the San Marco decision, even when courts compel appraisal before resolving coverage issues, insurers retain the right to raise coverage issues afterward. Appraisers who understand this distinction help preserve the integrity of both processes.

Failure to respect these limits can undermine the validity of the appraisal and create unnecessary obstacles. Competency, in this context, is as much about restraint as it is about knowledge.

4. Ability to Evaluate Competing Estimates

Appraisal is inherently comparative. It involves reconciling differences between opposing positions. This requires the ability to analyze estimates in a structured and meaningful way—identifying omissions, recognizing duplication, and weighing whether each line item is reasonable and supported as appropriate.

It is important to emphasize that appraisal is not about splitting the difference. It is about arriving at the correct number for the correct reasons. Competency demands that conclusions be based on analysis, not compromise.

5. Communication and Documentation

Appraisal is only as strong as its ability to be understood. The process, from inspection through final award, must be documented in a way that clearly explains what was observed, what considerations were made, and how a conclusion was reached. This is critical not only for transparency, but also for the broader claims process. Carriers rely on this information to apply coverage, assess causation, and finalize claims decisions.

A competent appraiser produces work that stands on its own—work that can be reviewed, understood, and defended without additional explanation.

6. Local Market Knowledge

Cost is not universal. It is determined by local conditions. Labor rates, material availability, contractor practices, and regulatory requirements all vary by region. Industry data bears this out: recent research has identified coverage gaps exceeding 30% in many insurance-to-value calculations, often driven by disconnects between generalized cost assumptions and actual local replacement costs. As construction costs have surged in recent years and labor shortages persist, these regional variations have only widened.

A competent appraiser understands these dynamics and ensures that their estimates reflect real-world conditions. Without this knowledge, valuations become disconnected from reality, relying on generalized assumptions rather than actual market data. Competency requires grounding every estimate in the specific market where the loss occurred.

7. Professional Reputation and Track Record

Competency is not established in a single assignment. It is demonstrated over time. Patterns of behavior—how an appraiser approaches disagreements, supports conclusions, and interacts with others—shape their professional reputation. A competent appraiser is known for being fair and balanced, consistent in reasoning, and credible in conclusions.

This reputation influences how their work is received by umpires, opposing appraisers, and carriers. In a field where trust is essential, reputation becomes an extension of competency itself.

The New Standard

As appraisal continues to evolve, the expectations placed on appraisers are becoming more defined and more demanding. Competency will no longer be assumed. It will be evaluated on every assignment, challenged in every assignment, and measured by its ability to survive scrutiny and opposition.

This shift appears to be necessary. As appraisal becomes more central to claims resolution, the consequences of inadequate competency become more significant. At its core, competency is not about credentials or titles. It is about the ability to consistently deliver outcomes that are clear, credible, and most importantly, defensible.

When appraisers meet this standard, the process functions as intended. Conflicts are resolved efficiently, and confidence in the system is maintained. When they do not, appraisal becomes a source of friction rather than resolution.

The future of appraisal in property/casualty claims is one of increased importance, complexity, and scrutiny. As the process evolves, so too must the standards by which appraisers are evaluated.

Competency can no longer remain an abstract concept. It must be clearly defined, consistently demonstrated, and rigorously applied. The seven pillars outlined here provide a framework for achieving that standard. They reflect not only what is required today, but what the industry is increasingly likely to demand in the years ahead.

In a process built on judgment and trust, competency is not simply desirable—it is essential. And as appraisal becomes a more prominent part of the claims landscape, that reality will become impossible to ignore.

Johnson is the founder of Johnson Dispute Resolution, a carrier-side appraisal and dispute resolution firm based in Texas.