Removing PMI on personal residence

[Justin Mespelt]

I'm looking for a little advice.  My wife and I bought our current home (only home purchase we have done) in 2013.  Original loan amount of $152,950, current principal balance $143,617.  However, in those 3 years the local marked has appreciated significantly.  For whatever it is worth, the Zillow "estimate" is over $250,000.  Even with a huge grain of salt, I would say our property has increased in value to over $200,000.  

With those facts, I messaged my mortgage provider and asked about removing the $90/month PMI. Their response was:

*********

Thank you for contacting Mortgage Services regarding your
mortgage account.

In order to remove your PMI requirement, your loan must reach
a loan to value ratio of 80%. Your current loan to value ratio is
89.20%. You may pay down your principal balance to reach the
80% at any time.
You may also order a new appraisal if your value has increased.
In order to have a new appraisal done on your property, you
must have made improvement on the property since your loan
was originated. You will need to send us the list of
improvements along with a check of 540.00 to request a new
appraisal to be completed. The new loan to value ratio must be
below 75%.

We hope this information is helpful. If you have any follow up
questions related to this concern, please let us know.
Sincerely,
Mortgage Services Department

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Is this industry standard?  It sounds to me like they would only take into account the forced appreciation from improvements we have done (new roof, remodeled bathroom), and would not take into account market appreciation.  For example, our home is 1400 sq foot 3/2, and a 750 sq ft 2/1 across the street just sold for over $200,000.  I feel our home is safely above the $193,000 value needed to reach 75% loan to value ratio.  However, it would be really frustrating to pay $540 just to have them tell me my home is now worth $165,000.  

Thanks for the advice.

Justin