Insurers using private companies to calculate material costs

I am seeing a trend in insurance companies including a line item that has wording like this:

This item includes a material allowance which reflects current material pricing in your economic 


Material costs verified by Material Supply Warehouse LLC or some other "LLC" to set the price of 
materials. Then pay for installation for installation separately. 

We are seeing as much as a 15% difference in our costs and their costs. Of course we could buy the cheapest stuff on the market, but I thought these “price lists” were “average market value”?

Is anyone else running in to this? What insurance companies do you see it? What course of action do you take?

My thoughts in the comments.

Thanks for your input!


Take the actual material invoice and add 20% to it. Include the State Insurance Commissioner bulletin on O&P. Most have one.

Write up an Xactimate with normal costs, same line items with an additional section for any line items not included.

Develop our own price list that includes the necessary margins we need to operate and grow. I’ve seen this talekd about a bunch, especially in the water mitigation field. Look for Restoration Rebel on Facebook if you want to know more. Huge group of contractors and a wealth of information. To grow, I am thinking the minimum is 35%. (thoughts on this matter?)

Thanks again for taking the time to read this and for your input and advice. Let’s work together, shape our own industry, and create our own destinies.