Managed repair is the rage of many insurance companies. To reduce claims costs and better compete on low price, some insurance company adjusters use various techniques to steer or pressure policyholders into using contractors the insurance company wants the policyholder to hire. Independent restoration contractors and public adjusters have legions of stories about how adjusters achieve these low-ball payment goals through pressure techniques of innuendo or threats of non-payment.

The North Carolina Department of Insurance recently issued a bulletin condemning these practices.

[T]he Department has also received some reports that some outside adjusters are insisting that consumers use the services of certain firms for damage repair. I would like to remind the companies that North Carolina has very strict anti-steering laws that prohibit companies, agents, adjusters, or appraisers from requiring consumers to utilize a particular service or source for repair of autos or property damage. I refer you to N.C. Gen. Stat. §§58-3-180 and 58-33-76, as well as other statutes and regulations, for review of our anti-steering laws. Please ensure that any out- of-state adjusters or any in-state adjusters you use to adjust claims in North Carolina are familiar with and adhere to our anti-steering laws.

We have started looking at managed repair programs many major insurance companies have been devising and entering into. One example is through a third-party administrator, MadSky, which describes their program as follows:

MadSky Managed Repair Program, LLC (“MRP”) is a nationwide third party administrator for insurance companies specializing in roof repair and restoration. The initial pilot program was launched in partnership with a major nationwide insurance company in the spring of 2015. Since the launch of the pilot program, MRP has entered into further partnerships with other national insurance companies and third party administrators, providing access to property owners insured by several carriers all over the country.

MRP is leading the revolution to re-engineer the restoration industry by working directly with insurance companies to streamline all aspects of the inspection, restoration, and claim process. By utilizing MRP’s extensive training and technology, our robust and skilled national network of program contractors (“Program Contractors”) are rewriting the roofing industry standard by focusing on evidentiary facts that lead to accurate recommendations. Through their partnership with MRP, insurance companies are able to standardize the claim process and provide homeowners the hassle-free experience they deserve.

Since its formation, MRP has developed a nationwide network of Program Contractors that employs hundreds of skilled workers.

From stories we have heard, “re-engineered” programs like this have insurance companies buying materials in bulk, setting prices the third-party administrator then requires of not so “independent” adjusters to place in estimates and then requires program contractors to approve. The “independent” adjuster then pressures the policyholder to do the work with the program contractor with a threat made in various forms that the insurer will pay no more money than the amount agreed to by the program contractor.

I am certain we will hear a lot more about these situations in the future. At least the North Carolina Insurance Commissioner is protecting Hurricane Florence victims from this wrongful claims practice.

We would suggest Hurricane Florence and Michael policyholders follow some of the guidelines we recently published in Do Not Make These 7 Mistakes When Choosing a Roofing Contractor After a Hurricane.

Thought For The Day

We shape our buildings; Thereafter, they shape us.
—Winston Churchill

  • Jim Johnson

    I am surprised this post hasn’t generated more feedback from
    everyone. Several of the majors carriers that I am familiar with are subtly pushing
    their customers to use these managed program contractors. One of the major
    benefits of these programs to carriers is that they can further control the
    scope and pricing, while reducing their adjuster labor force at the same time.

    For some customers who do not have the ability to negotiate
    with contractors, this can be a good service. However, from what I have observed in many instances, the program contractors tend to take the view that the policyholder’s wishes are secondary to the process and they learn how to
    manipulate the system to their benefit rather than the customer. While the
    carriers will say that they system is voluntary, they have subtle ways to
    encourage use of the program contractor. One, is the customer is sometimes given a choice to waiting several weeks for an adjuster to even come out to inspect or are willing to send a contractor out right away to get started. Often, the unwitting customer is not advised of their policy benefits such as ALE, personal property coverages, especially their right to choose, and more.

    Chip, I hope your firm will have success in the future by going
    after the carriers and contractors who commit bad faith when these managed
    contractor programs are abused and mishandled.

  • Kyle Larson

    Winners:
    1. Carriers- Save money because scope and cost is reduced and they get to hide behind third party admin.
    2. Third party administrators- skim off the top while doing carriers biding

    Losers:
    1. Insureds- no one looking after their interests.
    2. Contractors- go into it thinking it is gravy cuz all their acquisition costs go away, but most of them discover after having to conform to limits in scope, there is not much left. Often times third party admin. is making just as much as they are, yet they are doing all the work including providing scopes that fit within the tight controls dictated by the carriers hiding behind the third party admins.

    The MRP statement:
    “…are rewriting the roofing industry standard by focusing on evidentiary facts that lead to accurate recommendations”
    is laughable at best.

    • Jim Johnson

      Kyle, I have noticed a trickle effect for several reasons, all related to the programs. The quality of workmanship has declined as the vendors still answer to first the carriers even though they usually have to get customer satisfaction certificates to get paid. Also, because of the middle man cuts there is less money to pay the actual construction workers and in turn they will try to cut corners on work or the worker turnover is such that the inexperienced workers just don’t have the skill level to do quality workmanship,..

      • Kyle Larson

        Jim,
        The customers have no idea what needs be done. If everyone involved in the process is telling them the provided scope is all that is owed, of course they will answer survey that it was done.

        It is more then just inadequate labor, it is the carriers controlling every aspect of the claim with no possibility of a dissenting opinion. I believe in many cases an actual licensed adjuster never visits property.

        Years ago, State Farm, had a preferred vendor program in Colorado. We were all jealous cuz the contractors pretty much got to write their own checks. They invited me to join but I declined because I never wanted to have to question who I was working for, and they required the contractors to push IR shingles, which I could not get behind.The head of the program in CO. told me the plan was for SF to be responsible for so many sales of IR shingles that they would eventually hold the manufactures responsible when hail did damage the IR shingles and I believe Tamko quit making IR shingles because SF threatened, or did go after them. Eventually they ended the program, due in large part to the fact that their contractors were taking advantage of the situation.

        The point is, anytime you let the fox in the hen house, no matter which side the fox comes from, the hens are going to suffer

  • Lawrence Meyerhofer

    Good article Chip as usual,
    This problem is getting out of hand for sure. I had a client who went with a vendor the insurance carrier recommended because of “guaranteed pricing” and it was disastrous. The carrier likes to use the “guaranteed pricing” as a catch all. This was in PA. and the job should have been done in about 3 weeks and its over 1 1/2 years and still not done correctly. after investigating myself, I found the company which I will not mention hired local contractors who botched up the job so badly it was redone 3 times already and still looks like amature done the work. In fact my 17 year old daughter would have done a better job hands down.
    The problem is getting over the “guaranteed pricing”. Once the carriers hear that they think they can stop adding supplements to the claim which is a real problem. Chip as this is becoming more and more frequent, I hope you will be prepared to receive more and more cases that will help turn this around.
    Keep up the good work chip, Love your constant input and the ammunition we need to help those in need.
    Larry

  • shirley heflin

    Dear Chip:

    This practice is ludicrous but hardly surprising. Was the N.C. Ins. Bulletin just a “…Bulletin condemning these actions…”? Are you aware of any arrests made for those violating North Carolina’s anti-steering laws? Just curious.

    So MRP provides “….extensive training and technology…and has “… robust and
    skilled national network of program contractors…” A description for those on the payroll.

    Respectfully,