Managed Repair Programs versus Google Adwords – FNOL costs

Managed Repair Programs versus Google Adwords – FNOL costs

The TPA Trade-off: First Notice of Loss (FNOL)

[In order to remain strong and viable into the next version of the restoration industry, contractors must change their mindsets and approach to the market.  The RESTORATION2.0 Movement advocates changes to six main areas of contractors’ businesses. FNOL is one of them.]

Why do we put up with third-party administrators?  These so-called “programs” were put in place for one reason (officially), but we all know what the real reason is.

The “official” reason is to “ensure a better customer experience.”  Sure, so why is it that TPAs interact so little with the actual customers?  Fact is, contractors and “vendors” deliver the customer experience, so THEY are the ones being managed.

TPAs enforce their program rules ONTO vendors and service providers.  Their SLAs (service level agreements) were not designed to deliver better service.  These contracts and rules were designed for a completely different goal: reduction of claims severity.

Someone please explain to me how reducing claims severity translates into a better customer experience.  The metrics and surveys which point to a “better experience” through reduced cycle times, were designed with the answer in mind – before the question was asked.

I will admit that the less time customers have to actually interact with TPAs and claims departments, the happier they are.  That doesn’t mean that reduced cycle time is the best tool to use in order to create satisfied customers.

No, claims departments and carriers have know the truth for a very long time; the shorter the cycle time, the smaller the claim.  Small settlements DO NOT necessarily mean happier customers.  But we contractors are still playing along with the charade.  Why?

I believe the main reason restoration contractors (and body shops and doctors for that matter) still play around with TPAs, HMOs and the like, is because they either 1) don’t know how to get their own customers or 2) can’t see another way of doing business.

It’s all about F.N.O.L. : First Notice of Loss.

You see, service providers have been spoon-fed customers for so long, they’ve forgotten how things worked BEFORE managed repair programs.

Since the carriers, and then programs receive a large percentage of losses FIRST, they are perceived as the holders of the keys.  Once contractors get used to having their jobs just appear every day/week, they get lazy and forget how to feed themselves.

Then, just when the contractor has hired staff and added capacity, the program turns off – or goes away completely. Now what?

The new battlefield of restoration is FNOL.  He who gets the call first, gets to call the shots.  If you caught the fish, would you continue to let someone else tell you how to gut and cook it?

The RESTORATION2.0 Movement is all about helping contractors become more self-sufficient, in order to survive and thrive into the coming next version of insurance repairs.  Make no mistake, the future of our industry will look VERY different from today, and likely unrecognizable to some of the old guard.

When it comes down to it, you as a contractor are paying for every lead that comes in the door, no matter the source.  First notice of loss will not come easily.  Incumbant networks and carriers are actively fighting every day in order to maintain their positions as the “first call” from insured property owners.

They have been telling us contractors for years that without their “programs”, we would all starve.  At the same time, they have built up huge organizations to “administer” the claims process.  They get First Notice, then sell it to contractors with a markup.  So, in a way, we are paying for the privilege of paying for leads… twice.

Now the smart among us understand that there is always an alternative.  If you’re going to pay for leads, shouldn’t you understand the FULL costs of every option?  Google Adwords is one of my favorite alternate lead sources.

Let’s break down an example of TPA “program” work versus Google Adwords.

Most “managed repair” program fees start at 5% of gross revenue. (We won’t talk about CodeBlue because their fees start at 20%).  That means that for every dollar of sales, you give five cents to the TPA – pre-tax.

If your sales volume is $1mm, that means you are paying the TPA $50,000 a year ($4,166/mo) in exchange for these leads.  On the surface, this doesn’t sound unreasonable.  After all, a full-time sales person is going to cost AT LEAST that much before commissions and overhead expenses.  But the up-front fee is only part of the story.

Managed Repair also means managed PRICING.  Program contractors are forced to agree to the carrier-specific pricing schedule.  In most cases, this means the off-the-shelf Xactimate pricelist for your region.  Those of us who know (and teach Xactimate pricing courses), understand that the “standard” pricing from the monopoly-in-Orem makes zero consideration for contractor overhead or profit.

The prices from Xactimate are inclusive of contractors’ COSTS only.  It is a very detailed and thorough pricing and estimating system, but it is up to the user (you, the contractor) to customize it to their specific business needs and goals.  Xactimate will not tell you how much overhead your business has, nor what an appropriate profit margin for you is.  How could they without price fixing?

Smart, proactive contractors understand this and revise their pricing accordingly.  If the regional pricelist has zero profit or business overhead built in, then they must build it in.  My clients are increasing their pricing by 20-36% depending on their individual needs.  And no, there is no rule or law against this.  It’s called being a contractor.

If we take our hypothetical $1mm annual revenue and add the Pricelist Penalty of 15% (a conservative guess of what you could be charging if you weren’t on the program), your revenue should have been $1,150,000.  Or, put another way, you only made $850,000 compared to your non-managed peers who made a million.  Oops, make that $800,000 after the TPA fee.

But wait, we’re not done.  There’s also the Program Penalty to consider; aka “We don’t pay for that” rules and guidelines.

How many things can you name off the top of your head that the non-licensed-adjusters at the TPAs say they “don’t pay for” or are “included in your overhead”?  I’ll take a quick stab at it:

  • Mask and Prep for paint
  • Emergency Service Calls
  • Mileage or Travel Time
  • Equipment monitoring and decontamination
  • Daily progressive cleanup
  • Professional services like testing, engineering and estimating
  • Anything above “standard quality” materials
  • O&P on “one trade” projects
  • Any drying beyond three days
  • And on, and on…

What do you believe these things add up to as a percentage of revenue?  Can we agree that it is AT LEAST 5%?  That’s another $50,000 drag on your top-line revenue.

Finally, there’s the Admin Tax for performing managed repair work.  This is the added staff and time needed to administer the program and adhere to the SLAs (service level agreements) and maintain KPI dashboards.  Many of you will recognize the POMS scores from programs like Contractor Connection.

The majority of companies I’ve worked for and consulted with have hired at least one full-time person to their administrative staff in order to remain compliant with the various TPA programs they were on.  Often I see a dedicated division of people whose sole responsibility is to maintain the button-pushing and paper-processing involved in operating in the managed repair environment.

Let’s pick a fairly conservative Admin Tax rate of 3%.  That adds another $30,000 in burden to your business to remain compliant in the TPA environment.

For those of you playing at home, we’re now at a total operations cost of $280,000 (15% Pricing Penalty + 5% TPA fee + 5% Program Penalty + 3% Admin Tax) for the simple pleasure of servicing the managed repair program.  All those “steady claims files” are starting to look a little pricey, aren’t they?

So what’s the alternative?  There are many that I cover in my RESTORATION2.0 course, but today we’re talking about Google Adwords.

What is Google Adwords? Here’s a little snippet from the interwebs.  Bottom line: Adwords is a great way to generate leads and get FNOL.

As you can imagine, if it were easy or cheap then everyone would be doing it.  But it IS effective.  There are national franchise restorers who spend six-and-seven figures monthly on the Google Adwords platform.  That doesn’t mean that YOU have to spend $50,000 a month in order to replace the current TPA lead stream you enjoy.

Let’s use a round number of $5,000/mo for your Adwords budget. I know this is higher than the $4,166/mo TPA fee, but I need some round numbers.  Keep in mind that we are trying to replace actual revenue of $720,000 – our revenue after fees and burden in a managed repair environment.

While no two ad campaigns are alike or 100% predictable, we can expect a $5k spend to generate about 35 leads per month.  If you close 60% of those leads (and really, who couldn’t?) that is a NET of 21 jobs per month.

The average water claim of $3,500 means you could expect revenues on closed jobs of $73,500 per month for an annual revenue of $882,000.  Subtract the $60,000 in advertising and you’re at $822,000.  That’s a full $102K MORE than your expected post-TPA revenue of $720k.

And that is all before you land that big $250k rebuild or $65k dry-down.

And that’s really it. No program rules, no referral fees; just you fishing for your own work – then eating what you catch.

What happens when a catastrophe hits your area?  Turn off your ad campaign.  You won’t be forced to take on more work than you can handle.  Rest assured: there will NEVER be enough restoration contractors to handle the crap when it hits the fan.

Need more volume? Turn up your ad spend. Period.

This business doesn’t have to be as complicated as we’ve made it out to be.  We can simplify our businesses AND make for profit.  It’s just the R2.0 way.

If you would like to learn more, and join the movement yourself, check out one of our upcoming courses:

R2.0 class in L.A. and DFW.

Change the industry by changing your business.

Los Angeles, CA  Wednesday, August 15th, 2018:

Dallas, TX  Friday, August 24th, 2018:

Adwords Info:

Check My Math:

Ultimate Xactimate Opening Statement

Ultimate Xactimate Opening Statement

The Xactimate Opening Statement is one of the most overlooked and under-utilized tools in the Restoration estimator’s tool box.

Buy it now here:

The opening statement is your first best opportunity to introduce your client to the claims process.  Properly written, an opening statement sets the tone of the rest of the claim.

Why do so many folks overlook the importance of opening statements?  I believe it’s because a lot of people don’t understand what an Xactimate estimate really is.  They think it’s just another step in the process of doing work as a restoration contractor.

They treat it as a flexible, fuzzy document that somehow gets them the money they need to do the work they really came here to do.  This lack of seriousness when it comes to Xactimate estimates is why some of you are not experiencing the success that you could.

Xactimate Equals Revenue

As I’ve mentioned before, the Xactimate estimates you write are EQUAL to your company’s revenue.  Think about it; have you ever settled a claim for less than the Xactimate estimate?  If the entire revenue of your company is dependent upon the estimates your write, shouldn’t those estimates be taken very seriously?

I teach my clients that the Xactimate estimate is an official claim document.  It is used as a legal document in a contract negotiation between two parties: the insurance company and your client.  Once your estimate is accepted by your client, the insured, the insurance company must consider it as part of the claim file.  Any changes must be made with the utmost seriousness and detailed accountability.

That’s why most adjusters and TPA’s ask you NOT to show your estimate to your client.  Until your client accepts it, the carrier can beat you up all they want.  It’s just an opinion at that point.  They don’t have to take the estimate, or you, seriously yet.

That also happens to be the reason I tell my consulting and coaching clients to send their estimates directly to their client – the homeowner or business owner who has suffered the loss.  Once that happens, the adjuster is forced to take a much more serious tack with you in regards to your estimate of damages.

This helps YOU avoid the sticky situation of being an unlicensed adjuster, trying to negotiate the claim on behalf of your client.

Xactimate Estimates are Settlement Tools

Now that you’ve got a deeper appreciation for what the Xactimate estimate is, a settlement tool, let’s give you a tool to super-charge it with a powerful Opening Statement.

The Ultimate Opening Statement I use covers a lot of bases.  It allows the project manager/estimator to begin having some helpful conversations with their client.  It also addresses some common trouble spots.  This allows you to deepen your client relationship and avoid tricky situations which may arise later in the claims process.

I’ll give you a brief overview of the main sections.

The Price is Right

Right up front you’ll notice something that I believe most folks are shy about: the PRICE.

I don’t like to make people search through the estimate to know what the bottom line is.  Isn’t that what most people want to know first anyway?  Why do we hide it behind forty pages of mumbo-jumbo that the client won’t understand anyway?

Give it to them. Then you can start the conversation about how you’re going to earn it.  Keep in mind, this is THEIR claim and THEIR money.

CODE, OPEN items and Scope Changes

The first three sections lay the groundwork for the concept that this estimate will change.  It’s important for your client to know that this is a work in progress.  There is a long road ahead and they will need your help to navigate it. See what I did there?

Insureds don’t know how to talk to their adjuster about these things.  They need the help of a professional.

This also opens the door for you to start doing some fortune telling.  What are the “OPEN” items?  When will they be added?  Will you talk to the adjuster about them?  All good questions for you to answer right up front.

Overhead and Profit: The Three Trades Myth

This is a biggie.  Carriers are beating the O&P horse to death these days.  And if you find yourself on any TPA programs I’m afraid you’re gonna have to lose this section all together.  Don’t complain to me, you’re the one that agreed to their “rules.”

Adjusters and carriers have become very adept at throwing up objections to General Contractors getting Overhead and Profit.  This section is your answer: we’re charging it, so deal.

In case you didn’t realize it, the property damage repair industry is still the wild west in many regards.  There are no federal or state guidelines regarding with a contractor can or cannot charge a markup on their work. The reason insurance companies are so eager to tell you “we don’t pay that” is because it’s an easy 20% to shave if the contractor happens to be uneducated on the process.

The fact is that I, along with hundreds of estimators across the country, have been writing one-trade estimates for contractors for years which include a 10% overhead and 10% profit calculation.  All you have to do is stand your ground. And bill your client.

Change Orders and Credits

I used to hate it when clients would start “cherry picking” my estimates.  “I’ll do my own cleaning,” and “I can paint that room,” are the most frustrating.  What would happen, before I implemented this section into my opening statements, is that clients would take all the high-margin trades out of my estimate in an effort to either save money or get upgrades.

And they always seemed to do it AFTER we’d started the job.

So let’s get all that nonsense out of the way right up front.  Your client needs to understand that your time as an estimator has costs involved.  They need to realize that the value you bring as a company goes beyond the $1.25 a foot you’ve got for paint.  There are certain sunk costs associated with contracting their job.

Talking about this first usually sets the proper understanding.

This section also lays the rules by which you agree to play.  There’s nothing wrong with changes, they just need to be in writing.

Owner Responsibilities

The next three sections set the expectations you have for your client to follow.

Matching is a huge issue, and the contractor usually gets stuck in the middle.  This is your way out.

When your client says, “This new flooring doesn’t match the existing,” you can remind them of this section.  Any problem they have with matching can then be addressed with the adjuster WITHOUT you in the middle.

I do this all the time with drywall texture.  Why do adjusters believe that a perfect texture match is possible 100% of the time?  The reality is that there are few drywallers that can match a knock-down patch without floating out the entire continuous area.

I always tell the client that we’ll do our best to patch the affected area.  If the adjuster is digging in, I say that we can’t guarantee a match, but we’ll try.  (This is usually best done in writing, sent to BOTH the adjuster and the client.)  When the patch doesn’t come out perfect, I let the client chew on the adjuster, not me.


The warranty section is one that you’ll probably want to talk to your owner about.  I believe it’s important to set up front, but different companies have different warranty periods.

That’s it folks.  If you want to super-charge your Xactimate estimates, get your hands on this opening statement today.

And if you need some instructions on how to create your own opening statement, I’ve got you covered there as well.


Organizational Culture Determines Organizational Success

Organizational Culture Determines Organizational Success

“We are creating an industry which is creating jobs that are less and less appealing to the potential employees in the job market.” ~Thomas Underbrink


Last month I had the pleasure of attending the Oregon Casualty Adjusters Association annual symposium.  It had been a while since I had attended this event.  I’ve been on the consulting side of claims for some time now, and it was great to connect with folks who I hadn’t seen since my time as a Restoration contractor.

It was also very interesting to see and hear how the claims industry has continued to change since my departure.  Restoration project managers and front-line claims adjusters operate in a much different environment than the one that existed only ten years ago.  “Programs”, TPAs and continued specialization and consolidation have created a far less personal (and appealing) working environment all involved.

The Symposium keynote was given by Thomas Underbrink, the Director of Litigation at Mutual of Enumclaw.  I was fascinated to hear things from his point of view, and very much felt like a fly on the wall as former contractor-turned-adjuster.  As the contractors and other vendors chatted it up in the exhibit hall, Thomas treated me to an inside view of the claims world that I was unaware of till that point.

“You’ve got to serve somebody.” ~Bob Dylan

The keynote began with this quote.  What Bob was telling us is that no matter who you are, you’ve got somebody to answer to.  In each of our own lives, we have to recognize who we’re serving, and learn their rules of engagement, in order to succeed.

In my experience on the contracting side of claims, there were always three masters: the insured (Clients), the adjuster (Carriers) and my boss (the Company).  This tri-chotomy (yes, I just made up a word) led to a great deal of cognitive dissonance in my own life (as I’ve mentioned in a previous video/rant).

What I was surprised to hear is that contractors aren’t the only ones who struggle with the often unfair rules and systems that they’re forced to work in every day.  Adjusters and attorneys, as it turns out, are feeling the same frustrations at how our industry is changing as contractors.

The rise of the “-ations”

Thomas spoke about the increasing use of financial metrics to manage the various litigation and adjusting services.  It’s only natural.  Big business and management have always looked to measurement metrics and financials to help boost bottom line profits and shave costs.

The problem, as I heard it, was that when you ONLY make decisions according to the “score board”, you miss some of the important things that make great adjusters and attorneys – the human factors.  An example he used was the increasing use of IAs to handle claims.

In and of itself, hiring outside adjusters isn’t a bad thing.  There are many qualified and experienced adjusters out there.  The problems arise when the IA and the hiring carrier have different intentions.  Things used to be more straight forward.  An independent adjuster was a partner in the claims process.

They were the eyes and ears.  They were the trusted party to help the carrier bring the claim to a successful settlement.  This isn’t the case any longer.

Increasingly carriers are turning to outside help for one singular reason: reduce claims severity.  That’s another word for pay less on claims.  For those who “grew up” in this industry, this runs contrary to the old way.  This becomes a problem and leads to a clash of cultures.  And when cultures clash, the carrier wins.

Thomas talked about the rise of the “-ations.”  By these he meant Segmentation, Specialization and Centralization.  These are another way to reduce claims expense and increase claims efficiencies.

Segmentation means the splitting of claims to certain groups or departments dependent on the level of complexity of a claim.  The thought is that if people can keep doing one kind of claim, every day, they can maintain a higher level of output.

Specialization is similar to segmentation except that claims are assigned according to claim type.  Glass only, BI, theft, liability; all these have been sent to special departments or vendors dedicated to each type of claim.  Some carriers have even begun to split parts of the same claim between two or more adjusters or departments: the water mitigation portion of homeowners claims are adjusted by a separate adjuster from the structure adjuster.

Centralization refers to the increasing popular strategy of physically moving claims centers to one geographic location.  This also coincides with the move to rely more heavily on outside adjusters and “vendor partners” (contractors) to handle the heavy lifting of claims documentation.

All of these things are riding on a culture of reducing costs in order to boost corporate profits.

If you don’t understand this culture, you lose. 

IA firms lose contracts, law firms lose clients.  The ones who succeed learn how to work the system.  The key is to learn what the rules of engagement are, decide that you can accept them, and then play the game.

If the rules are not ones that you can succeed at, it’s time to find a new client/employer.

Someone asked the question, “How can someone [like an inside adjuster] change the current culture?”

You can’t.  Tom’s answer fell with a thud.  I think some folks thought he’d come with some magical answer, but there isn’t one.  The fact is that the only thing that we can affect change on is ourselves.  If we can’t succeed in the environment we’re in, the answer isn’t to change the environment.

The answer is to change ENVIRONMENTS.  You have to choose who you’re going to serve.  “It’s up to you to change your existence in this industry,” Tom said.  And he’s right.

We can’t hope to change the company culture to fit our needs. 

It works the other way.

We see this happening every day in other areas of the insurance juggernaut.  Take health care for example.  There are doctors who refuse to “accept” certain insurance programs.  There are even doctors who don’t accept any insurance at all.

Why would they do that?  Because they don’t have to.  They don’t agree with the rules of the game, so they take their ball and go home.  And I say “Good for them.”  The health insurance world is even more dehumanizing than the property damage world.  And the property carriers are trying harder every day to be more like the big “health” companies.

Profit over people.

I see contractors doing the same thing.  Making the conscious decision to choose clients over carriers.  The biggest “restoration” contractor in Bend, OR where I live is NOT a Servpro or ServiceMaster.  Even the Belfor outpost here is tiny.

CODR succeeds where these other “program vendors” don’t because they put their clients, the local people in Central Oregon front and center in their business plans.  They understand that programs exist to put carrier profit before contractor profit, and that translates to lower quality work for CODR’s clients – home and business owners.

Remember the “trichodomy” I mentioned?  It doesn’t really exist because in that situation someone always loses in order for someone to win.  And the contractor is just the lacky delivering the bad news and substandard work product.

Before you get all mad, let’s look at the numbers.  If you are part of the Code Blue “network”, what do you give on every single water loss?  30%? 40%?  Do you even have a chance to make that up by boosting your invoices? Nope.  They write YOUR sheet don’t they?

Let me get this straight: you go out in the middle of the night and perform services for a “client.”  Then you report to Code Blue and THEY tell YOU how much your invoice is going to be.  Oh yeah, and then they take 40% off and write you a check.  And then they pass a PORTION of that savings to their client, the insurance carrier.

Now you’ve got to compete with a business across town who does their own marketing, has established their own name and referral base in the local market, writes their own invoice and gets to keep ALL OF IT?  How do you survive Mr. Program Vendor? By handling more volume?

I’m sorry if you’re hearing this for the first time right now, but the only thing you’re doing is losing money on more claims than your competitor.

I know there are many out there, friends of mine included, who believe deeply in the programs.  They are viewed as a revenue foundation for growth.  And they may be – for now.

If there is any sure thing in this day and age it is this: things are changing faster than any of us can possibly comprehend.  The rate of change is only increasing.

The other sure thing? The insurance industry is due for a reckoning. With half a trillion dollars in claims every year, and ZERO true innovation in the last twenty years, the industry is just begging for disruption.

Do you think the taxi companies of the world saw Uber coming? No one saw Uber coming.

Did the founders of AirBnB ask Hilton permission to create their company?  The founders didn’t even come from the hospitality industry.  They just saw a big problem and solved it.

The main reason the insurance world hasn’t been rocked by a startup tech company is because it is an amazingly complicated machine.  Lots of moving parts and lots of invested players – players who are more concerned about the status quo than where the industry is going.

My take away from Thomas’ talk was this: adjusters and attorneys are finally feeling the squeeze that contractors have been feeling for the last ten years.  Profits before people.

The days of the 20-year adjuster are over.

Am I the only one noticing this trend?  The “old timer” insurance adjusters are now mostly folks who started in this game AFTER I did.

Yes, I realize that I’ve been at this a while. And yes, I am getting older.  But what happened to the adjusters who were here before I started?  They’re all gone.

Carriers have shown an incredible distaste for adjusters with years of claims experience (and expensive pensions).  The focus is now on reducing overall claims expense. That means it’s more important that a claim is settled quickly, than it is to thoroughly examine the loss, coverage and policy for the benefit of the insured.

Remember those days?  When the insured was treated like a client?

Now we’ve got a crop of college graduates who are taught one thing – the claims system.  The application of policy language and proper loss analysis is all but dead.  It doesn’t fit the new metrics.  So those who are accustomed to the old metrics and slowly weeded out to early retirement – or worse.

What is going to happen when Google’s AI machine figures out that it is better at applying your “program rules” to Xactimate estimates than you are?  Guess what slick, you’re gone too.

Just like Amazon will kill the Postal Service and UPS with their autonomous delivery initiatives, the button pushing you do as a “desk adjuster” will be deemed better suited to a machine sooner than anyone expects.  Just ask any taxi driver in San Franscisco, they’ll say the same thing, “Man, that happened quicker than I thought.”

The Times, They Are a Changing

I took a stroll around the exhibit hall after Thomas’ opening statements.  The changes were incredible.

“Back in the day” there would be all manner general and restoration contractors in at the booths.  I used to jokingly call the Symposium a contractor’s love fest.  It used to be wall to wall.

Now guess who’s exhibiting: lawyers.  Attorneys, benefits companies and forensic/analytics providers.  That and a couple IA’s thrown in for spice.  Is that any indication as to the direction the industry is headed?  Yes, there were some contractors represented, but their position as drivers of the industry has now shifted.

And the funny part is, the attorneys and IA’s were complaining about the EXACT same things us contractors used to complain about. Program rules, cut rates and layers of bureaucracy.  That’s just another day in Restoration to us, but to them, this is all new.  Forgive me if I happen to be all out of tears to shed.

We Should Have Seen it Coming

None of us should be caught off guard by these changes.  We’ve had an exact mirror image of our future right in front of us for years; the health care industry.  What is happening in the P&C space is nothing more than “managed care” for property.

What makes us all the more stupid is that we’ve all be part of HMO’s and PPO’s for years.  These companies were not created to enhance “patient care.”  They were created for profit.  I just got done paying off an ultrasound that my wife had THREE YEARS AGO, because our “provider” at the time deemed the procedure “unneccisary” – despite the fact that our doctor had ordered it.

If this had been a property claim, I would have known what to do – and how to fight.  But I had no idea what to do, so I paid $3,000 out of pocket for a procedure that should have been “covered” by my insurance.  And now they’re coming for property claims.

I’ve said for the past couple years that Xactimate is nothing more than medical coding for construction.  I’ve run my “construction coding” company for nearly four years now.  And there are many companies in my space now.

So What’s Next?

I’m no fortune teller, but I don’t have to be.  The future is more “managed care” for the property restoration industry.  Programs will become less and less profitable, and more restrictive.  Carriers will soon literally own their own stable of contractors, and the independent firms (both contracting and adjusting) will have to become creative in order to survive.

Just look at the Sedgwick – Vericlaim – First Choice conglomerate.  When has there ever been a completely vertically integrated risk management, claims management and vendor management company? Ever?  Please someone correct me if I’m wrong.

Sedgwick isn’t the last.  I fully expect someone like Home Depot or State Farm to put together their own property monstrousity.  Ever heard of Code Red?  How hard would that be to integrate into State Farm’s “Premier Service Program”?

These are all things out of our control as contractors and vendors.  Big companies will do what they want.  So what do I recommend?

I say double down on your local market.  Concentrate on doing the best work you possibly can and choose your clients carefully.

And if you don’t enjoy your work, stop it.  Find something better to do with the rest of your life.  Life is too short to be frustrated all the time.

Sometimes the Grass IS Greener

I saw an old friend at the Symposium.  She was talking with her former claims manager.  Both of them had recently left their employer – her to pursue a different business, him to work for a different carrier.  Both of them were happier than I’d seen them in over twenty years. Literally.

We all make choices in life about where we work.  Some of us compromise more than others.  I don’t believe anyone should compromise happiness in exchange for perceived stability and “benefits.”  Are you happy in your work?  If not, why?

You don’t get bonus points for staying in a crappy situation longer than anyone else.  You just get more crap.

Take a look at my resume and you’ll see that I’m living proof of the saying, “If you’re not living a life of your own choosing, you’re living someone else’s.”  I’ve been fired, layed off, cut back, overworked and underpaid by more businesses than I like to say.  But ever since I made the decision that I was going to be in charge, I’ve been happier.

There are thousands of ways to “make a living”.  We get to choose it.

Do you work in a company culture that you can’t succeed at?  Time to change companies, because you can’t change the culture.





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Do you do construction estimates as well?

ScopingXM8Absolutely we do construction estimates in Xactimate. 

Our largest estimate to date is a $3.5million apartment building that suffered major water damage.  The project required the use of as-built architectural plans as the basis for our Xactimate sketch.

Of course, most projects fall into the more manageable $15,000 to $35,000 range.  Through the use of Scope Notes sheets and sharing of pictures via Google Drive, we put together a complete Xactimate estimate according to your needs and specifications.

And it all comes with your letterhead and estimator’s name attached.  In the end, the files are all yours (including any ESX files generated).

Why You Should ALWAYS Bill Your Client FIRST

Why You Should ALWAYS Bill Your Client FIRST

Bill Your Client

It sounds simple, elementary even.  What business expects to get paid without billing their client?

Restoration guys, that’s who.

I had a conversation with a client of mine yesterday regarding a couple outstanding mitigation invoices.  He asked if I could help him with the insurance adjusters in order to get paid.

One loss was from New Year’s eve!  Seeing as it is now mid-way through June, this might be a problem.

Apparently, the adjuster has so far completely ignored my client’s estimate (more on this in a moment) and has written his own “mitigation” items into one bigger estimate for the entire claim.  This was a large loss and I think the adjuster was thinking that if he lumped everything together, that his insured would just take this big check and walk away.

At this point, the “mitigation” items in the adjuster’s estimate are $11,000 less than my client’s “estimate.”  Ouch.  This might be a problem, no?

So I asked him, “How long ago did you bill your client?  How long have they been sitting on your bill?”

His answer told me everything I needed to know.  He had never billed his client.  At this point, six months after services had been rendered, my client was still treating his BILL like it was a negotiable document.

There is no such thing as a mitigation ESTIMATE

When you perform emergency services, you’re providing a needed service.  There is no bidding process.  There is a need and you’re fulfilling it – usually on a Friday afternoon, right before a big holiday weekend.

As such, there should be very little negotiation when it comes time to collect for those services.  Your work authorization should state your fees clearly, and your documentation process should provide ample transparency and audit opportunity.

An emergency services contract is essentially a Time and Material agreement.  You agree to provide a set of services according to an agreed upon fee schedule.  It’s that simple.

Just because you develop your INVOICE using the Xactimate “estimating” program, does NOT mean that your INVOICE is an ESTIMATE.  It’s not.  So stop treating it like one.

Costs have been incurred

The problem is that we allow adjusters to widdle our BILLs down because we don’t lock them in with our actual clients.  If we don’t invoice our clients, they don’t “incur” the costs of mitigating their loss.  And since their insurance policy states that they will be reimbursed for reasonable “costs incurred”, their insurance adjuster is under no obligation repay them (or to pay US).

That means that until our clients have been billed for the services we provided, the adjuster can mess with us as much as he/she wants.  We’re allowing a negotiation to occur which should be a transaction.

The longer you go, the harder it gets

What most restoration folks don’t understand is the incredibly complicated machinations that adjusters go through on every claim.  It’s actually fairly cumbersome.  And adjusters are relentlessly bombarded with new restrictions and guidelines to follow.

One of the things that adjusters must do is set and adjust the reserves.  The reserve is an amount of cash, usually a percentage of the total anticipated claim costs, which the insurance company must remove from their general funds (or whatever they call it) and set aside (in “reserve”) to pay the claim.

The reserve number is important because it is one of the ways in which carriers are graded by state and federal regulators.  If audits show that a particular carrier is routinely setting aside too little money to pay claims (setting reserves too low), that carrier can receive sanctions. Or worse.

On the other hand, company cash flow can be negatively impacted if reserves are consistently set too high.  This pulls real dollars out of the company for the reserve account.  This means less money for things like investment and capital expenditures.  It also telegraphs to investors the relative health of the company.

Whether it’s too high, or too low, the insurance company is loath to change it once it’s been set.  Change is an indication of a problem.

The adjuster is responsible for suggesting a proper reserve amount early on in the claims process, usually within the first couple days.  That means that those of us who are able to get clear, defensible estimates to the adjusters quickly, are the ones more likely to get what they want.

With good information about what the total claim will be, backed up by a contractor’s estimate, the adjuster is able to establish a reserve with confidence that he won’t have to adjust it later.

When we start talking about claims that are months old, things get sticky.  Past 60 days, the claim has likely already been paid.  Often it is closed.  If you didn’t get your mitigation invoice in before the adjuster pays it out, you’re likely putting the adjuster in the embarrassing position of having to re-open a claim and adjust the reserves.

The more time that passes before you bill your client, the less likely it is to be paid in full, or on time.

They’re free to ignore you

“But I sent my “estimate” to the adjuster two months ago,” you might be saying.  OK. You sent it to him.  But you didn’t send it to your client?

What you effectively did was tell him that he was in charge.  By sending the mitigation bill to the adjuster, you are asking him for permission. (More on that here)  Never ask for permission.

When you send anything to an adjuster without sending to your client, the adjuster is free to ignore you.  You are much better off sending invoices and bids to your client – you know, the person on the insurance policy – and requesting that they send it to their adjuster.

It means a lot more coming from them than it does from you.

Don’t fear the sticker shock

I asked my client why they hadn’t sent the mitigation invoice to the client yet.

“They’d freak out,” he responded, “We’re talking about $22,000 here.”

Yes, that’s a lot of money (to most people who don’t fly around in private jets).  And what we do is expensive.  And dirty. And profoundly unrewarding sometimes.  That’s why we charge what we do.

If you’re afraid to bill your client, because you think they’ll freak out, maybe you should take another look at your billing.  If you are invoicing according to set procedures and standard industry pricing, what is there to hide from?

Believe me, I understand.  I’ve had my share of jaw-dropping moments after hitting “print” and seeing the final totals of mitigation bills.  It’s easy to rack up big numbers when you’re renting out dehumidifiers at a $10,000-a-day clip.  And that’s “OK”.  Your reaction proves that you’re still living among the rest of us common folk.

I remember the largest mitigation invoice I ever created.  I didn’t use Xactimate.  I had three crews of forty-five working around the clock in a large warehouse for seven days.  I had riding extraction machines and temporary facilities set up.

We were basically pushing water around for a week until a temporary roof could be installed to keep the rain and snow from coming in.  My bill was $745,000.

I looked at boss at the time with a “are we really going to bill for this” look on my face.  He walked through the spreadsheets with me one more time and said, “Yep, send it off.”

We were paid in fourteen days.  I was stunned.  And the check came from our client.  They then turned and started the process with their insurance company.  I didn’t talk to an adjuster once.

Properly set expectations

What I learned, after making a little over $100,000 a day for my company, is that the most important step in the mitigation (and claims) process is setting the groundwork.  When we educate our clients on the process, and clearly communicate our intentions and provide transparency, they become our allies.

My company had a clear schedule of fees.  Our contract was straightforward and simple.  “This is what we’re going to charge.  And this is when we expect to get paid.”  There was no room for back pedaling or horse-trading.  My client new on day four that the meter was running at a very high rate.

They, in turn, were able to do their own internal calculations and decide whether to continue with our services or pull the plug.  Once I learned that closing this facility would cost the company close to a million dollars a day, I understood their decision to keep us on till the roof was fixed.

And since I had shown a complete open-book policy throughout the claim, they didn’t have to spend weeks auditing my invoice.  They knew the total before I even billed them. (It also didn’t hurt that this was a distribution warehouse for one of the largest car manufacturers in the world.)

Start from a position of strength

For all the reasons above and more, you need to promptly bill your client for the services you’ve rendered.  This puts you in a position of strength and moral authority.

It’s tough to argue with a detailed mitigation estimate. (and if you want help with that you should check this out).  It is what it is.  I like to say that Xactimate writes itself.  I’m just putting in what I see, or what was actually done.

When you bill promptly, you are simply following through on your promise to your client.  You promised to help them with their problem in exchange for a fee.  Shying away from that fee, or prematurely negotiating your bill is a sure sign that you believe you’re charging too much.

And if you’re charging too much, why?  Stop it.

But if your fee is fair, by all means, please send it to your client as soon as you can.


Who Controls Your Xactimate Estimates?

Who Controls Your Xactimate Estimates?

Does the IRS do your taxes?

No? Of course not.

Then why do we feel compelled to let the insurance company settle our claims?

I’ve talked about this a lot before, so I’ll try not to repeat myself here.  I just wanted to put something out that was on my mind.

Xactimate is a Settlement Tool

Just like the federal form 1080EZ, an Xactimate estimate is a tool to quantify a loss.  That’s it.  And it’s a tool that is available to everyone, if you know what you’re doing.

That’s why I created Claims Delegates; to help EVERYONE who wants to take control of their claim.  Writing your own “estimate” using Xactimate puts you squarely in the driver’s seat.  And isn’t that where you want to be anyway?

Let’s get started, shall we?


Your Xactimate estimate in 24hrs!

Xactimate is NOT a Sales Tool

Xactimate is NOT a Sales Tool

Insurance claims do not require multiple bids. 

If you find yourself in a situation with multiple bid/estimates, run away

No one wins when you sell based on price.  A “client” who is getting more than one Xactimate estimate from more than one restoration contractor, is not a client you want.

That same “client” will take your Xactimate estimate apart at the end of the project.  I call them the “shoppers.”  These folks look at your Xactimate estimate as an a-la-carte shopping list.  They start taking out things like Final Cleaning and Painting by saying, “We can handle that,” or “my brother is a contractor.”

These people are not your clients.  You will not make the proper margins on any project with them. Don’t get sucked in.  You’ve got better things to do with your time (and money).

If you’re discussing color, you’ve already lost the sale.

People don’t want to buy a certain color car.  They buy a vehicle that matches their needs.  A good salesman is adept at discovering those needs and meeting them.

The same is true with ANY sales, including fire and water damage repairs.  A good salesman or project manager will figure out what the clients’ needs are, and find a way to meet them.

I’ve been selling services in the insurance repair industry for close to twenty years.  In every [successful] sales situation, the thing I’m selling is me and my company.  For more advanced techniques, you should probably check out Ivan Turner’s work at ShowMe Marketing Solutions.

What I’m NOT selling is an estimate. 

I refuse to compete on price.  When someone asks me what my “price” is for a given project, they’re showing me that they don’t understand the insurance claim process.  Right then and there I have to make a judgement call about how much time and effort this project is worth to me and my company.

If the project is promising, and I feel that the client is willing to listen, I will take the time to educate them on the insurance claim process.  I will explain to them why they don’t want, and absolutely shouldn’t get, multiple bids.  I’ll walk them through the steps of a “successful” claim and tell them what to expect along the way.

An Xactimate estimate is a claim settlement tool; nothing more.  The creation of an Xactimate estimate represents your best effort to quantify the severity of the loss.  We write repair estimates in Xactimate as a courtesy to the INSURANCE COMPANY, not the home or business owner.

Writing Xactimate estimates takes tremendous time and skill.  When you offer to write estimates for free, you are de-valuing your own time and steeply discounting your skill.  And it actually makes the client and adjuster value you and your company LESS.  Don’t discount yourself.

If you can keep a clear distinction in your own mind between the Xactimate estimate (settlement tool) and the actual REPAIR estimate, you’ll be light-years ahead of your competition.  And you’ll get to spend your time on more productive activities.

Good luck out there.  And when you’re ready, let Claims Delegates take the data-entry of Xactimate off your plate.  How much more could you get done today if you didn’t have to sit in front of a computer typing out estimates?  You’ve already don’t the hard part of scoping and walking the job, let Claims Delegates handle the busy work.

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