The Importance of Good Notes for the Restoration Contractor
Recently, I wrote an article for Cleanfax about why having a Consultant like me is important to protect the interests of the homeowner. While I will always believe that to be true until necessary changes in the restoration industry are made to protect the homeowner from both unethical Insurers, TPAs, and Restoration Contractors, I also believe there are things that the Restoration Professional can do to protect their interests. By so doing, you will find that you also protect the interests of the policyholder and the Insurance Companies.
I am not a fan of TPAs and I sincerely believe that if Restorers will pay attention to what they’re doing on the job and document well, they can eradicate this unnecessary and cumbersome middle entity.
In the truth of things, the Insurer, the Insured, and the Restoration Contractor all have a true Material Interest in an Insurance Claim. The Insurer has an interest in paying out the claim without taking a huge hit, but they must handle the claim fairly. The Insured has an interest because it is their home or business that has a covered damage, and they have the right to expect fair and proper settlement. The Restoration Contractor has an interest in the claim due to their service provided. They’re the ones that put it all back together. So one can see that each has an interest in the claim. All have the expectation of fair, honest, equitable services to restore a policyholder to pre-loss condition.
But then there is the TPA, the Third Party Administrators. I remember some Third Party Administrators coming onto the scene in the early 2000s when I was in the field as a restoration contractor. Honestly, I’m not sure if there were TPAs before then; if so, I’d not heard of them. I remember one particular one, Code Blue, contacting me several times by email and phone, urging me to sign on with them with promises of more work than I could handle. All I had to do was provide them with a monthly fee and give them a discount on services. I couldn’t justify such a relationship. My thoughts were that if any ordinary home or business owner called me and needed my assistance either outside of insurance or with an uncovered damage, I wouldn’t offer them a discount. In my mind, it wouldn’t be fair to them if I then turned around and gave someone else a discount just to “give me more work than I could handle.”
You see, the TPA has no interest at all in the job, other than for themselves. They’re job is simply to save the Insurance Company money on the invoice submitted by the Restoration Contractor. They are in it purely for profit. They’re not in it for the policyholder as the other entities are. Here’s how they work: They offer to handle the claim for the insurer for a fee. This helps the insurer because they don’t have to have as many field or desk adjusters. They don’t have to pay salaries or benefits. The TPA receives the invoice and immediately goes about slashing the invoice and advising the Restoration Contractor what they will and won’t pay for. The services they slash are services required to bring the home or business back to pre-loss condition. The work has been authorized by the policyholder, and in many cases approved by a representative for the insurance company. Eventually, they beat the restorer down enough that he or she agrees to the price slash in order to get it over with and to just get paid for the job, even if it is only partial payment. Do you think the TPA then passes this new discount on to the Insurance Company? Maybe partially, but in reality they’re increasing there own profit margin on the job.
Ultimately, you would think these savings would go back to the Insured in reduced premiums, but if anything, the premiums increase instead.
Insurance is a good thing, overall. There are lots of great people who work in Insurance, but the purpose of insurance in modern day America is increased profits for the company and its shareholders. Many years ago, Insurers did their best to honor the policy—the contract—they had with Insureds. One might think that fraud and less than honest contractors caused Insurers to become a little more tightfisted. While I won’t surmise or deny that such things may have caused extra scrutiny by the Insurer, the new thought process came from a study done in the 1990s in which Insurers sought more profit. And the report found that by making claims into profit center as opposed to a claims center, profits could indeed be increased.
Insurance Departments across the United States need to do a better job monitoring what’s happening out there. They need to ensure that Insureds are receiving the monies owed to make proper repairs to their damage properties as the policy states, and they need to ensure that those doing the work are paid properly. Severe penalties need to exist for Insureds who commit fraud, restoration contractors who are scammers or who do shoddy work, and for Insurers who don’t honor their commitment to the policyholder.
By doing these things, TPAs can be ushered to where they belong—out of the marketplace.