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Something is changing inside Xactimate, and it may already be affecting the bottom line of restoration companies across the country before many owners have even heard about it.

Verisk, the parent company of Xactimate, has introduced updated labor efficiency settings—including a new designation called large loss efficiency—that alter how labor time is calculated and, by extension, what an estimate pays out. According to industry consultants Ben Justesen and Nate Cisney of Restoration Made Simple (RMS), the average restoration contractor is not yet aware that this is happening.

“It’s going to get even hotter because many people don’t even know about it yet,” Justesen said.

What’s actually changing

To understand the impact, it helps to know what Xactimate’s labor efficiency settings actually do beneath the surface. Each line item in Xactimate is supported by a set of time assumptions Verisk calls supporting events—built-in allowances for things like drive time, breaks, setup, cleanup, and what the software describes as overall loss of productivity from working in a restoration environment.

Those time allowances get factored into the labor pricing. The new large loss efficiency setting reduces several of those allowances significantly. According to Justesen, the setting removes the 60-minute daily drive time assumption entirely, trims the setup and cleanup allowance from roughly 42 minutes to 35 minutes, and eliminates the 37.5-minute restoration environment productivity loss factor altogether.

Justesen pointed out that the information presented here is an example of one of the trades they analyzed. “Each trade is a little different in how they are reduced,” he explained. “What’s really happening on the inside is it’s reducing the waste time on the labor,” Justesen said. “They’re not giving us drive time. We’re not getting the overall loss of productivity working in a restoration environment.”

The net result, based on calculations Justesen and Cisney have run, is an average reduction of 4% to 5% off the total estimate compared to standard restoration pricing. That may not sound dramatic in isolation, but when applied across every job where a carrier or adjuster chooses to use the large-loss setting, the cumulative effect is significant.

“Most of us as contractors don’t realize when something maybe happens that hurts us adversely because we’re just running businesses,” Cisney said.

The definition problem

At the core of the concern is a question nobody seems to have a clear answer to: What, exactly, is a large loss?

Justesen said Verisk’s definition, as communicated so far, is vague—and that vagueness creates opportunity for misapplication. The parallel he drew is instructive. For years, insurance carriers disputed overhead and profit by arguing that a job lacked sufficient complexity or involved too few trades. The definitions were never clean, and the ambiguity consistently worked against contractors.

“I don’t know what large loss is,” Cisney said. “That’s another one of those where I go, there’s going to be a million opinions from somebody. And I’m going, I don’t think that’s the right way to quantify.” He offered his own example: some of the most labor-intensive, time-consuming jobs he ever handled were small-dollar losses complicated by difficult property owners. What makes a loss large isn’t always the dollar figure.

Justesen put a finer point on it: if an insurance company knows that applying a large loss setting saves 5% on an estimate, the incentive to push that threshold lower is real.

The global change problem

Beyond the definitional ambiguity, Justesen raised an objection that goes to the architecture of the setting itself. It applies globally across an entire estimate—meaning it adjusts labor pricing on every trade, every line item, all at once.

To illustrate why that’s a problem, he described a $2.5 million church restoration job. On trades like framing, drywall, and painting—where large quantities were involved and efficiency gains were legitimate—a modest downward adjustment might be defensible. But the same job required a specialty contractor to cut six feet of concrete for drainage work. That subcontractor had a minimum mobilization charge of roughly $2,000. Xactimate, even at standard pricing, was generating something closer to $200 for that line item.

“If I use this setting for large loss, sure, maybe it does for the framing, for the drywall, for the paint—it is okay, my efficiencies are better,” Justesen said. “But this one trade or these two trades are completely the opposite… and now you’re going to reduce my price by another 5% when I need to go up about 200%. It doesn’t make sense that we have a global setting. It should be by trade if they’re going to do this.”

The inverse problem applies on small jobs as well. A minor drywall patch—32 square feet—still requires multiple coats applied at precise humidity and temperature thresholds, with required curing time of up to 14 hours between coats. The labor inefficiency on a small job is arguably higher than on a large one, not lower. The same logic applies to carpet cleaning: the setup time to run hoses, mix chemicals, and place bumper guards is essentially fixed regardless of whether the job is 50 square feet or 500.

What contractors should do now

Justesen recommended that restoration professionals visit the Verisk website and ensure they are signed up to receive notifications about product and pricing updates. The large loss setting, he said, was released or is being released now, and most estimators and business owners have not seen the notification—either because it went to a spam folder or because the email is routed to ownership and never reaches the person running estimates day to day.

More broadly, both Justesen and Cisney emphasized that staying passive is not a viable response.

“The RIA is doing their best,” Justesen said, noting that the Restoration Industry Association is holding meetings, preparing position statements, and developing educational materials in response to the change. There have already been internal conversations with Verisk about making labor efficiency adjustments trade-specific rather than global, and about building in separate considerations for smaller jobs. Justesen said he is cautiously hopeful.

“I think they see [the concern],” he said. “And Verisk isn’t the only one—we have to look at all the estimating software programs and what they’re doing in their pricing and what they’re doing in their labor efficiencies.”

Cisney’s closing message was simpler: get educated, get involved, and get organized. “We need to come together and try to keep ourselves educated and let’s push for what we think are fair rights,” he said.