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Last Post 11/14/2006 9:28 PM by  host
Computerized Estimating Part 1
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host
CatAdjuster.org Founder
Posts:709


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11/01/2006 8:31 AM
    I believe most people would agree, remember the Isabel Hot Potato thread, the price list was a part of this debate. In another post John Postava stated; "In my day (early 80's) adjuster's calculated a fair price for the work to be done and then "adjusted" (i.e. negotiated) the estimate with the contractor doing the work and the specific situation surrounding the loss. Today it seems all adjusters want to do is have a cost database in their computers that pays enough claims dollars that no one questions and the claims are just paid. When did we become an industry of "payers" rather than "adjusters".

    There have been posts on CADO where the future of adjusters is questioned. This, in my opinion, is the reason why. We have forgotten our primary responsibility and have lost our way. Not all of us, but some of us.

    We were taught to "pay what we owe, not a penny more or a penny less". We have thrown a way the penny more proposition and fallen back to paying to make the claim go away. In the long run, this hurts EVERYONE. Carriers lose by paying more in claims. Adjusters lose by allowing inside adjusters, contractor networks and lord-know-who pay claims that once were adjusted by licensed adjusters and in-the-end policyholders lose by paying more premium (look at auto rates and be prepared for homeowners to be rated the same in the years to come).

    We all want what is fair to the insured. One day we may find ourselves in that position dealing with someone like ourselves! In reality, however, overpaid building estimate dollars go to the contractor, not the policyholder. I believe it is the responsibility of the adjuster to guard the bank and see that all of the dollars we write in our estimates are spent wisely and correctly - not simply because that's what the XXXXXXXX (insert "computer", "contractor", "public adjuster", "insured's brother-in-law handyman", whatever) says it should be. "


    Good advice.
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    Tom Toll
    Moderator & Life Member
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    Posts:1865


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    11/01/2006 10:56 AM
    Roy is absolutely correct when he says pay no more and no less than what the claims for damages is. By inflating estimates to increase your income is  flagrant act of dishonesty. The insured, in most cases could care less what the amount is, as they just want their home put back to an event pre-condition.

    No estimating program is correct in pricing, due to increase of costs when an event occurs. The program is merely a guideline. Something every vendor and adjuster should do is call around and determine what costs are for the typical repairs for that event, such as drywall, roofing costs, painting, etc. We have numerous programs that reflect costs, but, unless that particular program gives you a storm database, the prices will be incorrect. Everyone, including vendors, should submit a product where all adjusters are on the same page for pricing. As a professional adjuster, it is left to you, and your vendor, to submit verifiable prices. Your doing an insured, vendor, and company an injustice by not being as accurate as you can be in your database prices.
    Success is not final, failure is not fatal: it is the courage to continue that counts.
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    ebrooks
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    Posts:13


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    11/05/2006 10:51 AM

    I agree with Roy Cupps, and ask the same question, what happened to the "agreed cost"? I also had my heavy property adjusting experience in the 1980's.

    I think the Xactimate quote is a cop out:

    Per Xactimate says Hromas--"(What a computerized estimating system does is to try to make that an EDUCATED GUESS by analyzing as many factors as possible that are involved in those costs. That is why I often refer to the document I prepare as a "GUESSTIMATE".)"

    What happened to the AGREED COST?

    The guesstimate approach is connected with the loose reliance on "supplements". Supplements are the way to make everything feel good when somebody wants more money. I think a supplement is only for an item that was missed or was truly mis-valued, as in the contractor/insured or the adjuster was misinformed and would not have entered into the agreed cost if he had been informed.

    This does not mean that the contractor/insured comes back with register receipts, or worse, proof of "incurred costs" by way of a contract, showing that he bought something not on the agreed cost or paid more for certain items on the agreed cost and is now submitting a "supplement". Or that it is claimed that it took more time to do certain work than agreed to. What about all the items that went the other way? You will never hear about them.

    The agreed cost is a give and take negotiation process. The contractor/insured can’t have it both ways–negotiate concessions from the adjuster in exchange for the contractor/insured’s agreement, and then modify the agreement with "supplements".

    The supplement approach seems to boil down to a cost-plus agreement–as in, bring me your receipts/other documentation and I will pay on them, but first I’ll make an "estimate" of what those receipts are going to total and front you that money (or the ACV part of the money).

    Speaking of ACV/RC, there will be proof of incurred costs to document the RC payment. The agreed cost is the only control on that, especially if the proof of incurred costs is merely the insured’s contract with the contractor–another reason of course for a real agreed cost.

    Now I begin to see why I have heard folks talking about estimates as guesses–that is the no-agreed-cost school of adjusting. I responded at that time with what I personally thought about that approach when it came up–not realizing at the time that this was a trend speaking.

    If you are in the estimating software business, it is in at least your short-term interest to buy into this trend, since you are only responsible for providing a tool to reach a "guess"–not a real challenge, which would among other things relieve the software developer of the need for time consuming market research to nail down costs.

    Treating the adjuster scope and price as a "guesstimate" is a bad idea. It devalues the adjuster’s expertise, and basically tosses the process of negotiation. Certainty (with some small room for truly justified supplements) is replaced by the anything-goes guess and supplement approach.

    What happened to the expertise of the contractor, by the way? He plays a double game, I suppose, in this new trend–pretending to not know prices, and then coming back documentation in hand (with who knows how much hidden markup), having "discovered" the price. This is bogus of course.

    In reality, we know that the contractor is usually MORE expert than the adjuster (since he lives by his wits by knowing the prices of things). The adjuster’s answer to the contractor’s greater expertise is his estimating handbook (read software program). I will sometimes use both, actually. If an issue comes up around a particular cost item, rather that bore down into the intricacies of the software database, it can be easier to refer to a paper reference like the National Construction Estimator.

    By the way, the comment that all the insured wants is to get the job done and get his life back together is not always the case. I think we all know, and certainly my experience has been, that once the insured begins to grasp that he is in control of the process as in the last word on what work is done and how much is paid to the contractor(s), he may become quite involved in the process. He sees large sums of money passing his way, and begins to see that he can legitimately siphon off money for work he does himself, or doesn’t do at all, or works outside deals with the contractor or other workmen, with the insured as the general contractor.

    This aspect of things is just one more reason to impose some reasonable control over the process of spending the money.

    How does the carrier ever take a position on how much it legitimately owes if supplements are routinely accepted? Imagine, you inspect a fence loss, apply what you know is the going rate according to current industry references, pay the insured, and then along comes a letter from the insured (coached by contractor/PA/agent) saying "Oh, so sorry, the contractor couldn’t do it for that price, here is his (lump sum!) invoice," which happens to be double the adjuster’s carefully documented scope and price.

    This raises more issues regarding overpayment of claims than I’m ready to deal with at this time–I will only mention in passing that I recall the issue coming up in the context of a violation of state-regulated insurance premiums. If a carrier overpays a claim, that can be treated as an illegal premium rebate.

    I will close this post on a recollection of the take of a claims manager on this general subject–though from a different standpoint involving a coverage denial. I had been in correspondence with an agent who had taken a wrong coverage position, thinking he would be a hero to this large account. I denied the claim, and the agent made quite a ruckus.

    From a business standpoint, the agent was trying to make it embarrassing for the carrier, but to his credit, the claims manager maintained the autonomy of the claims department and supported the denial.

    The manager’s comment to me was, complaint or not, the alternative was "HANDING THE CHECKBOOK TO THE INSURED." I think that says it all.

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    khromas
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    Posts:28


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    11/05/2006 12:12 PM
    Posted By E Brooks on 11/05/2006 10:51 AM

    Per Xactimate says Hromas--"(What a computerized estimating system does is to try to make that an EDUCATED GUESS by analyzing as many factors as possible that are involved in those costs. That is why I often refer to the document I prepare as a "GUESSTIMATE".)"

    What happened to the AGREED COST?

    The agreed cost is a give and take negotiation process. The contractor/insured can’t have it both ways–negotiate concessions from the adjuster in exchange for the contractor/insured’s agreement, and then modify the agreement with "supplements".

    MY RESPONSE:

    A MAJOR stumbling block in this entire discussion is the CARRIER'S DICTATE TO THE ADJUSTER to NEGOTIATE with a CONTRACTOR  on the costs of a covered repair.

    I am going to let of my seldom used JD slip in here and point out that the INSURANCE CONTRACT is between the CARRIER and the INSURED. No one else (save the mortgage company, if applicable) is a party to that contract!

    YOU (ADJUSTER) DO NOT HAVE A LEGAL RIGHT TO NEGOTIATE REPAIR COSTS ON A PROPERTY YOU DO NOT OWN! Do I need to repeat that for the hard-headed ones out there?

    If you are not making the payments - you do NOT own the property!

     

    The computerized estimating system - IF properly used and is properly updated - REFLECTS the current costs involved in a repair. IF it used properly, by a TRAINED and KNOWLEGABLE ADJUSTER, it should reflect the REASONABLE AND NECESSARY COSTS OF THE REPAIRS. (That phrase sound familiar? It's out of the frigging policy!)

    I will gladly discuss my estimate with a contractor chosen by the insured - strictly out of the principle of providing customer service - I WILL NOT NEGOTIATE IT WITH HIMTHAT process is between the insured and the contractor.

    My use of the term EDUCATED GUESS had more emphasis on the EDUCATED part than it did on the GUESS part, but the previous posts seemed to focus in on the 'guess' mostly. Most reputable estimating systems (at least those that don't have to be given away free!) have a process in place for the establishing the prices in the system from a BROAD RANGE OF FACTORS. I am going to trust that principle far quicker than I am a SINGLE price submitted from a SINGLE contractor. THAT is the EDUCATED part!

    Remember that an INSURED is required to PROVE their loss. ONE estimate at higher costs does not reach that threshold of 'proof'.

     

    Make sure you look at the entire picture - AND the ENTIRE discussion about computerized estimating systems on my site.

     

    Kevin Hromas

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    cantonking
    Member
    Member
    Posts:60


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    11/05/2006 10:06 PM

    Do carriers not approve data bases?

    Do the carriers not need losses to justify premium increases. It is a numbers game.

    As an adjuster in todays enviroment we can only provide an honest, fair estimate based upon the parameters dictated by others and submit it to the carrier to dispose of as they deem proper.

    We are the first line of defense for the carriers phone bank. The carrier sees one of our responsiblities as keeping the insured from calling them disgruntled. If an insured does call in disgruntled they will usually get what they want(new roof). Squeaky wheel gets the grease. IA gets called on carpet.

    If the neighbor across the street got his roof replaced and your carrier refused to replace yours what are you going to do? Switch carriers. This is especially true of regional carriers.

    Yes the carriers have become payers in order to market themselves and to justify premium increases which will cover any short term loss.

    As an adjuster you should write up your estimate as you see it ,use the numbers supplied and submit it to the carrier. You have done your obligation to all parties and provided the carrier with the information needed to make an informed decision. 

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    khromas
    Guest
    Guest
    Posts:28


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    11/06/2006 10:05 AM

    Mr. Brooks,

    As for case citations upholding my assertions, I have NO desire to spend time buried in legal research obtaining those cases. Since you apparently are practicing, have one of your associates do that as a project.

    My assertions are based in the most basic principles of CONTRACT and PROPERTY LAW. A person NOT A PARTY TO A CONTRACT has NO right to negotiate terms and conditions of that contract! Plain and simple. I would be interested in hearing of cases to the contrary if you can so provide.

    The same principle applies to PROPERTY RIGHTS. Property rights are some of the most highly protected we have in this country. In the light of the highly litIgious society we live in today, how long do you think it would take for an insured to sue the ADJUSTER who negotiated prices downward with a contractor and subsequent additional damage occurred? The contractor's claim? "Well, I had to cut corners because the ADJUSTER/INSURANCE COMPANY refused to pay what I really needed to do the job!" (Forget any responsibility on the contractor's part to do quality work.) A jury will not give a rat's a** about whether the claim was handled properly in the first place, they will BLAME the ADJUSTER AND CARRIER.

    Now, my explanations above are provided for the benefit of the adjusters who visit this site.

    (edit text removed)
    I stand by my recommendation to STAY AWAY FROM NEGOTIATING WITH CONTRACTORS!

    Kevin Hromas

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    Tiger
    Guest
    Guest
    Posts:26


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    11/06/2006 11:11 AM
    I work under the assumption that we are in the customer service business. I may provide a service to the policy holder, and the policy holder is a customer of the carrier, but my CUSTOMER is the carrier. If the carrier requests an agreed price, why would I not attempt to reach an agreed price with the insured's representative? Bottom line is keeping my customer happy. If my customer wants an agreed price which means overpaying an insured - and they consider that a more attractive alternative than paying lawyers to get the claim settled, so be it. I may not like it and I agree that we ALL eventually pay for it, but, is that not their prerogative?
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    host
    CatAdjuster.org Founder
    Posts:709


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    11/14/2006 9:28 PM
    The discussion on Computerize Estimating as been moved to here > http://www.catadjuster.org/Forums/t...fault.aspx
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