Simply Snap, Speak & Send

Tags - Popular | FAQ  

PrevPrev Go to previous topic
NextNext Go to next topic
Last Post 01/02/2009 1:33 PM by  Ray Hall
Carrier "Forced" Pricing in Property Claims
 26 Replies
Sort:
You are not authorized to post a reply.
Page 1 of 212 > >>
Author Messages
johnpostava
SIMSOL.com
Member
Member
Posts:141


--
09/11/2008 9:46 AM

    The news wire just released a story about a fairly large restoration company in Denver being sued by the state for "fraud" because their pricing was 20-30% above what the insurance carriers wanted to pay for repairs to damaged structures.  In the words of a popular news anchor, "I may not be a restoration contractor but I am a thinker", so what the state is telling contractors, if you don't match the prices being offered by insurance companies to do the repairs to a building, you will be brought up on fraud charges for overcharging consumers!  We all know what software program's datawaste (sp) they are talking about so now if your estimates' prices are not in line with the carrier you (as a restoration contractor or an adjuster) are not allowed to make a living wage and may end up in jail.  This issue is coming to a head in several states and it will be interesting to see the fall out.  IMHO, property claims will NEVER be as price-controlled as auto claims have become simply due to the nature of the beast.  Carriers, either purposely or by accident (all majors using the same price database) are making an attempt to do so and it seems some states are backing the carriers and other are for the consumers.  Very interesting state of events if I do say so..   

    0
    Medulus
    Moderator
    Veteran Member
    Veteran Member
    Posts:786


    --
    09/11/2008 10:38 AM
    The times - they are a-changin'!

    It has historically been the insurance companies who have been accused of low balling (generally not true) and price fixing (also generally not true). If the contractor's bid is higher than the insurer's estimate, it has been often taken for granted in many jurisdictions that the contractor's bid represents the true cost of repair. It has always been my understanding that the pricing in estimating software should reflect what a typical contractor would charge rather than a standard where contractor's should charge what the estimating software allows.

    I would like to know the whole story on this one. I can think of one restoration contractor in particular which has been being accused of being a public adjusting firm. I somehow got on their email list and wasn't sure myself (based on their emails) what kind of company they were for awhile. Bringing in a team of "experts" and "engineers" to evaluate losses after a catastrophe seems an unusual practice for a restoration company.
    Steve Ebner CPCU AIC AMIM

    "With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
    0
    johnpostava
    SIMSOL.com
    Member
    Member
    Posts:141


    --
    09/11/2008 10:48 AM

    Steve,
    Here is the link to the story: http://www.rockymountainnews.com/ne...rance-case

    You may have to cut and paste to your browser to link to it...

    0
    Gale Hawkins
    PowerClaim.com
    Member
    Member
    Posts:386


    --
    09/11/2008 12:12 PM

    www.rockymountainnews.com/news/2008/sep/11/defense-lawyers-see-motive-behind-insurance-case/

    Thanks for the link. The meaning of the below paragraph was not clear to me. If the subs were making both a true estimate and a higher false bid to DRI that could be an issue. If DRI is just marking up the sub bids by 20-30% for profit and overhead I do not see the issue. That would be no different than an adjusting company paying an IA 60% of the fee they get from the carrier. Without that 40% margin it would be hard of the adjusting vendor to keep her doors open.

    "In a 60-count federal indictment returned this week, prosecutors said employees scammed insurance companies by getting subcontractors to submit bills 20 to 30 percent higher than their actual costs.

    Sears said Wednesday the industry imposes a rigid pricing structure that doesn't allow contractors to recoup all of their costs.

    He said Disaster Restoration has challenged those practices and that a "much larger story" will come out at trial."

    0
    Ray Hall
    Senior Member
    Senior Member
    Posts:2443


    --
    09/11/2008 12:28 PM

    This could turn some carriers off a program that is well known.Its about time these scam artist were taken to court. THIS is the problem with any estimate that has measurable units.

    0
    Medulus
    Moderator
    Veteran Member
    Veteran Member
    Posts:786


    --
    09/11/2008 1:54 PM
    I edited the url so you could link to it directly, John. When you take out the slash at the end, it provides a direct link that does not require cutting and pasting.
    Steve Ebner CPCU AIC AMIM

    "With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
    0
    Medulus
    Moderator
    Veteran Member
    Veteran Member
    Posts:786


    --
    09/11/2008 2:11 PM
    Auto pricing has been far more standardized for a long time. It is the nature of vehicles that certain vehicles need certain parts and those parts take a certain time frame to replace by someone who knows how to replace them. Buildings are different. The possible variants in materials are virtually unlimited. Witness the hotel in Minnesota made out of ice or the bottle houses in a couple California ghost towns.

    When I worked for State Farm Auto, this is how we arrived at our pricing:

    Every so often we gathered together most of the adjusters, treated them to a training video (this is what a mig welder looks like, etc.), and sent them out to all the local body shops with a questionairre about their facilities, practices and pricing. When they came back, the pricing data was analyzed. The hourly rate that most shops charged at or below became the standard for payment. If a shop had adequate facilities and quality of practices and charged that price or below they were certified as a preferred shop. If they had adequate facilities and quality of practices and charged more than that amount, they were considered as a second level of preferred shop, but the insured was responsible for the labor rate difference and the insured was informed of this from the start of the claim. This way the local body shops appeared to drive the reasonable cost of repairs. In reality, it did keep the pricing somewhat in check because the shops agreed to use that rate for the next year, but that was ultimately the shop's decision in order to obtain State Farm business.

    Even though I prefer to pay less on my claims rather than more, the market should drive the cost of repairs rather than the insurer. It sounds like there may be some behind the scenes excalation of the subcontractor pricing in the situation that led to this lawsuit. I have, however, from time to time encountered insured who admitted to me that the contractor planned to charge the insurance company one price and the insured a lesser price.
    Steve Ebner CPCU AIC AMIM

    "With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
    0
    yumadj
    Guest
    Guest
    Posts:34


    --
    12/21/2008 3:59 PM
    I don't know of any contractor estimators that have ever taken an ethics class. Has anyone else? I think there is a learning curve problem there.
    0
    ChuckDeaton
    Life Member
    Senior Member
    Senior Member
    Posts:1110


    --
    12/21/2008 7:55 PM
    Bids and Estimates are two very different animals.

    What adjusters/claims reps do is write an estimate. Most use a computerized estimating system, of which there are several, and have little first hand knowledge of any thing to do with pricing. That is, the cost of the the elements that make up a a unit price. Unit prices, in computer estimating systems, are set, maintained and updated by the purveyor of the instant computer estimating system. In any event an estimate is what the adjuster/claims rep thinks the repair should cost. The adjuster/claims rep is not bidding on the job because the adjuster/claims rep is not going to make the actual repair.

    Bids may or may not be based on a computer estimating system. Some contractors/repair professionals base their bids on a computer estimating system. Almost all contractors/repair professionals use a computer estimating system because almost all insurance companies want to see a line item bid. Some contractors/repair professionals formulate a bid by pricing materials and labor for portions of the repair and collecting sub contractor bids for portions of the job. So that the bid is a mashup of work the contractor is going to accomplish and work that is going to accomplished by a sub contractor. In any event a bid is what the contractor/repair professional is charging to complete the repair. It is a given that general contractor is entitled to overhead and profit. And it is a given that different contractors/repair professionals have different cost structures that cause their bids to be more or less.

    Contractors/repair professionals, that are successful year after year, maintain a job cost system and know what elements of their chosen profession cost and generate unit prices from that job cost system. Obviously, there are other contractors/repair professionals that see a bird nest on the ground and their bids reflect that mentality.

    I make every attempt to pay what is owed on a claim. "It is what it is." If the scope is correct and agreed and the pricing is correct then there is grounds to agree with the contractor/repair person. To finish up the coverage has to be applied, RCV/ACV, Co-insurance, replacement provisions, depreciation and deductibles are all elements.
    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
    0
    BobH
    Veteran Member
    Veteran Member
    Posts:759


    --
    12/22/2008 10:58 PM
    Posted By Jeffrey Finley on 21 Dec 2008 03:59 PM
    I don't know of any contractor estimators that have ever taken an ethics class. Has anyone else? I think there is a learning curve problem there.
    Although I have run into my share of opportunistic contractors over the years, I refuse to look at my job as though I am negotiating with unethical contractors, or any sort of "us vs. them" kind of attitude.
    Contractors are the "working" side of getting the property actually repaired and we are the financial side.
     
    I agree 100% with what Chuck just said, you walk onto a damaged property site, and that building will start talking to you - what is the direct physical loss from a covered peril.  "It is what it is."
     
    And more often that not, it is the inexperienced adjuster that overlooks scope items. It's not a simple thing of contractors padding (always) or grouping them into a broad category of being unethical.
     
    Working cleanup recently, I had to fix a claim where the first field adjuster estimated to sand-stain-refinish 5 large rooms in a furnished house with no allowance for content manipulation, dust control, or how that process may have affected base (or at least 1/4 round) at the point where the work on the floor meets the wall.
     
    If you think the majority of contractors are unethical...  well... if  they have been in business very long at all they will come to learn the various sub-products that are NOT included in Integri-claim, Xactimate, or whatever estimating program you are using.  The computer doesn't know if you are walking into an unfurnished building, or a home that was lived in.  You have to make those decisions, and to stand at a site and list EVERYTHING that needs to be done if it isn't included in the unit cost. Even a really accurate roof diagram that has the vital measurements so someone can confirm it against a contractor estimate later - well you would be surprised how many adjusters don't know how, or won't take the time because they are focused on the money more than doing the job right.
     
    I have been doing this a while, not as long as Chuck, Tom, et. al, but I always take the opportunity to speak to a contractor as a time to learn a new viewpoint, pick up a thing or 2, or at least make sure that homeowners house is going to be put back together with what the carrier is willing to pay.
     
    And it does always come down to the SCOPE of work, not the price.  The money will take care of itself if you really know what is, or isn't included in the unit costs.  Are the dumpsters (haul and dump) included in the shingle removal price, or do you need to add it, etc.

    If the occasional contractor is price-gouging and the scope is the same on both adjuster and contractor, simply tell the homeowner that the contractor is estimating higher than standard pricing.  It is what it is.

    Bob H
    0
    Tom Toll
    Moderator & Life Member
    Senior Member
    Senior Member
    Posts:1865


    --
    12/23/2008 5:23 AM
    Bob and Chuck both have excellent posts on this subject matter. I learned many, many years ago to learn as much as I could from whomever I could, and that did include contractors. I have met all types of contractors, those who have honor and integrity and those whose integrity and honest is highly suspicious, and that is inclusive of public adjusters. I learned a great deal from several contractors in my home work area many years ago that were very thoughtful and honorable and knew what they were doing and knew how to do it. Like Bob, and probably Chuck, I have worked behind some adjusters, newbies and experienced, that seem to have the "how much can I make on this file" syndrome, instead of concentrating on coverage issues, proper scoping/analyzation, diagrams, and photos. They left much to the imagination and examiners, nor companies like imaginary analysis. Everything we do as adjusters must be concise, well thought out, descriptive, and accurate to the best of our ability. When we quit learning is the day we defeat ourselves and present an injustice to those which we serve.
     
    Scoping a loss properly saves an adjuster a ton of heartache and work. Concise, accurate, and well thought out scoping is absolutely necessary in this business, as it is the footprint of your knowledge. You want to be able to leave a site and if your scope notes are needed by another adjuster, you want to be prideful in what you submit to him for assisatance. No matter how hard you try, some files will re-open, even though you have done an exemplary job. So, your scopes should be organized, thought out, concise, accurate, and complete. Proper photography is necessary, as it reflects pictoraly the damage you have just inspected and scoped. Learning to be a well rounded adjuster is not an overnight task, it requires years of education and experience. Learn from whomever you can and you will become an ace adjuster.
     
    Success is not final, failure is not fatal: it is the courage to continue that counts.
    0
    Ray Hall
    Senior Member
    Senior Member
    Posts:2443


    --
    12/23/2008 5:12 PM
    This is something that you can become much better at with very little effort and great rewards. I remember a meeting with my State Farm supervisor about 15 years ago. After she looked at  my face and we shook hands, her first statement was "I love your photos". I was also quite proud of my photos also being an old casualty adjuster. Learn to take long, then close up photos and good labels and your files will sail throught, even if the logs and scopes are weak point and needs  lots of impovemnent.
     
     
    0
    okclarryd
    Veteran Member
    Veteran Member
    Posts:954


    --
    12/25/2008 9:24 AM
    I really think adjusting, not just cat adjusting, is a "work in progress".

    The guidelines change (daily), the policies are re-written, the endorsements have their own endorsements, ad infinitum, ad neauseaum.

    An open mind, a willing attitude, and a modicum of libation as the sun sinks in the West will get you through the trials and tribulations.
    Larry D Hardin
    0
    Davidad1
    Guest
    Guest
    Posts:42


    --
    12/25/2008 10:30 PM
    Posted By Jeffrey Finley on 21 Dec 2008 03:59 PM
    (I don't know of any contractor estimators that have ever taken an ethics class. Has anyone else? I think there is a learning curve problem there.)
    Jeff
    My ethics class is something called morals and being a professional at what I do......... I was raised with it and I follow it....... When I am scoping a loss I like to think I walk a fence. I do not sway to the carriers side and I do not sway to the insured's side. I have had insured's want me to add this or add that and I do not and will not..... Anything I scope I want to be able to stand up in court and swear that it was or was not required in my professional opinion... Like Chuck said " it is what it is" ... Every estimate is different and that loss must be looked at for what it is.... I have a fire loss where the house has no street in front and it is a 300 foot walk from the parking area to the house all materials and debris must be hand carried in and out and it will be winter.
    Another is a 5 story condo where 20 + units have water damage from a fire sprinkler head...... All materials hand carted in and up an elevator, 20 plus homeowners , the HOA board and property manager to deal with along with city building inspectors..... These will cost alot more in terms of repair costs due to the problem location and weather etc ... It is not a one size fits all .
    Bob Harvey likes say you need to know what is and what is not included in each estimating program to make music..... There are alot of estimators in my field ,just as there are alot of adjusters in your feild that do not know what is included in the estimating programs.. An estimate is only as good as the data being entered.

    Welcome Back Bob H....





    Estimating is living on the edge between greed and fear
    0
    Tom Toll
    Moderator & Life Member
    Senior Member
    Senior Member
    Posts:1865


    --
    12/26/2008 8:38 AM
    Excellent post David.
    Success is not final, failure is not fatal: it is the courage to continue that counts.
    0
    BobH
    Veteran Member
    Veteran Member
    Posts:759


    --
    12/26/2008 11:10 PM
    Welcome Back Bob H....
    Thanks Dave, just got back in California. Been working some long hours out of state.
    Some interesting scenarios you described.  As a contractor, I know you can lose money on a project if it is not estimated properly. 
    I have seen contractors go out of business from underbid jobs, which is why I don't see all contractors as "overcharging" or lacking ethics.
     
    If I see something that is damaged that is not on a contractor estimate, I will bring it up and include it so they don't have to "eat it" for free or have supplements later.  The flip side to that is a poorly explained bid with a single lump sum that shocks everyone who sees it.  That's where the skill comes in, breaking it down to time and materials, or measurable unit costs without overlooking the sub-products like scaffolding, cartage, tie-in, etc.
    Bob H
    0
    Tom Toll
    Moderator & Life Member
    Senior Member
    Senior Member
    Posts:1865


    --
    12/27/2008 9:01 AM
    Bob, that must be why they call it adjusting.
    Main Entry: adjust
    Pronunciation: „a-‚j„st
    Function: verb
    Etymology: Middle English ajusten, from Middle French ajuster to gauge, adjust,
    from a- (from Latin ad-) + juste right, exact— more at  JUST
    Date: 14th century
    transitive senses  
    1 a : to bring to a more satisfactory state: (1) : SETTLE, RESOLVE (2) : RECTIFY  b : to make
    correspondent or conformable : ADAPT  c : to bring the parts of to a true or more effective
    relative position ²adjust a carburetor³
    2 : to reduce to a system : REGULATE
    3 : to determine the amount to be paid under an insurance policy in settlement of (a loss)
    intransitive senses  
    1 : to adapt or conform oneself (as to new conditions)
    2 : to achieve mental and behavioral balance between one's own needs and the demands of
    others
    Success is not final, failure is not fatal: it is the courage to continue that counts.
    0
    okclarryd
    Veteran Member
    Veteran Member
    Posts:954


    --
    12/27/2008 11:17 AM
    Ahhhhhh

    So that's what it means.
    Larry D Hardin
    0
    HuskerCat
    Veteran Member
    Veteran Member
    Posts:762


    --
    12/27/2008 1:31 PM
    To put it in layman's terms, it reminds me of myself after eating too much yesterday.  I performed an adjustment ala Frank Barone (Everybody Loves Raymond)  by releasing the top button of my jeans.  It made me very comfortable, but did not necessarily meet the behavioral expections or demands of all.  Plus some of them did not have all buttons, they only had 1 button and a zipper. The comfort I received with very little effort or exposure was not within their achievement lest they suffer a some extra embarrassment. Ahhh! 
    0
    okclarryd
    Veteran Member
    Veteran Member
    Posts:954


    --
    12/28/2008 4:08 PM
    We had our dinner here at home and I wore sweats.

    No buttons, no zippers, no sweat.

    More pie? Thought you'd never ask.
    Larry D Hardin
    0
    You are not authorized to post a reply.
    Page 1 of 212 > >>


    These Forums are dedicated to discussion of Claims Adjusting.

    For the benefit of the community and to protect the integrity of the ecosystem, please observe the following posting guidelines: 
    • No Advertising. 
    • No vendor trolling / poaching. If someone posts about a vendor issue, allow the vendor or others to respond. Any post that looks like trolling / poaching will be removed.
    • No Flaming or Trolling.
    • No Profanity, Racism, or Prejudice.
    • Terms of Use Apply

      Site Moderators have the final word on approving / removing a thread or post or comment.