A preferred insurance company network or third-party administrator (TPA) is not friends with the property policyholder. As can be seen from yesterday’s post, Policyholders, restoration contractors and public adjusters should be concerned about managed repairs and third-party administrators working in preferred contractor networksKevin Jones book, The Insurance Gods: How the Insurance and Restoration Industry Has Betrayed the Consumer, is a must read for those who want to understand how TPAs work against the interests of policyholders.
Jones also wrote a post for policyholders warning them of the TPA scam, It’s just not as simple as most people think it is. Jones explains that when a third party (TPA) becomes involved in the adjustment by being the administrator of the reorganization, the policyholder no longer has a direct relationship with the insurance company that contractually promised to pay for the damage:
What you do not know is that your agent is the one who cares about your best interests. And if you get the right adjuster, so is he or she. But the carrier, the one who actually pays the bill, does not care about your best, they are worried about their bottom dollars. So they hire a TPA to handle their claims. TPA has absolutely no skin in the game for you, as they are only there to objectively handle the claim. The reinsurer is in a bad position because they now have two contracts in play ̵1; one with you and one as a supplier with TPA (or the insurer depending on who they have a contract with.
All this puts you, the homeowner, in lock. You now have an agreement through your insurance with the insurance company. You also now have a contract with the restorer to dry, repair and clean your home. Now you have a TPA involved in your claim, and what you do not know is that TPA only works for the insurer and not for you. And the restoration company is in an arc, because they have two contracts! They have one at TPA who guarantees them a certain amount of work, and they have one with you who has authorized them to perform the work. You are about to embark on a journey that will disappoint you when you find out how everything really works, and how you, the homeowner, the policyholder, are the ones who are ultimately left out of the circle.
Kevin Jones’ follow-up post, It’s just not as simple as people think it is – part 2shows that when a TPA becomes involved, the relationship is no longer just the policyholder to the insurer, but this:
Jones writes to policyholders:
The restorer left the impression that things are being handled. You see, just like you, they’re in a bad place. Either you or their franchise headquarters have agreements in place with the insurer or TPA (or both) that limit what they can do and what they can say to you. They are often very directly told by their head office not to do anything to jeopardize the relationship with the insurer or TPA.
The restorer leaves the room, and you go several days without hearing anything. TPA determines if your insurance has the right coverage to ensure that your claim meets these criteria. Meanwhile, your home is sitting …
Finally, the restorer comes back to you and states that after discussions with the insurer and TPA (discussions you were not familiar with) it has been determined that the category of water for your home has been downgraded to a category 2 from a 3. What you do not know is that this changes everything. The cost of the job just dropped significantly. Remember that Category 3 water means that everything porous must be removed. This would mean affected carpet, pad, affected sheet metal, affected insulation. One could argue that other components such as affected baseboard, chair rail, cornices, cabinets, bookshelves, wooden floors are also removed. The second factor that affects these items is how long they may have been waiting for a decision. Now that it’s downgraded from a Cat 3 to a Cat 2, you’re in a pinch. Items that should be removed, discarded and replaced have now been saved.
You start to question this decision but are told that everything is fine …
Later this week, the National Association of Public Insurance Adjusters (NAPIA) will appoint Clay Morrison as its chairman. Many may not know that Morrison was an entrepreneur in the State Farms Preferred Vendor program before becoming a public adjuster. Restaurant contractors who provide high quality workmanship are policyholders’ friends but many insurance companies refuse to pay for quality noted a brief version of Clay Morrison’s experience of that program and the similar struggle that many restoration contractors face when struggling with TPAs and insurance companies:
Quality restoration contractors who fight against these adaptation methods are heroes for all of us. To demand fair pricing, which enables quality and stand up to the adjusters of the insurance industry is admirable. It is much easier to accept lower prices and provide cheap and inferior workmanship.
A post about how State Farm tried to influence and get “okay” construction and pricing can be found in, Membership in professional organizations helps a small public adaptation company to achieve a great result. Clay Morrison was a building contractor preferred by State Farm. State Farm’s claims manager demanded that Morrison provide unethical pricing, which would only result in cheap construction. Instead of agreeing to keep the State Farm business, Clay Morrison took the opportunity in his moment of truth and refused. He lost State Farm’s business, but he was a champion for all policyholders, his family and himself.
Similar battles are fought every day by those in the insurance restaurant industry. The entrepreneurs who follow the rules and refuse to just be “okay” should be congratulated.
The insurance industry always talks about the benefits of why these programs are so good for the policyholder. They are trying to put on lipstick and dress up the insurance industry’s latest version of managed repair. As we all know, a pig dressed up and with lipstick is still a pig.
You can put wings on a pig, but you do not turn it into an eagle.