Monday, October 17, 2016

The state of the Disaster Restoration Industry

In September, I hosted a group of top restoration professionals from around North America at our annual Business Development Summit.  During this event we had an open forum where we discussed the top issues for restorers today.  The conversation kept returning to the conflict between restorers and the insurance industry.  I suspect a conversation may be happening in the halls of some insurance companies about how the greedy contractors are taking advantage of their insurance benefactors.  As I reflect back on our dialog I see a parallel with the current political diatribe happening right now between supporters of Hilary Clinton and Donald Trump. Many individuals are digging into their positions and looking for confirmation bias to support their political positions.  A negative culture results from a failure to communicate and cooperate.  I don’t see how there can be any winners given the strong opinions on each side.  I don’t think that I can influence our national attitudes, on the other hand, I am much more hopeful on my ability to influence the industry where I work.  It is my wish  that the industry relationships do not become Balkanized; rather, a dialog occurs with understanding and respect as a result.

This month to offer an opinion on the “Future Trends “theme of the 2016 final issue of C&R, I am writing in the restoration corner, which I feel comes with a big responsibility.  For many years when Cleaning and Restoration showed up at our office, I was like a kid that opened the Sunday paper in anticipation of the comics, as I flipped to this space to see what wisdom Martin King was sharing with the readers.  I feel compelled to write this article as if ‘Marty’ were to be commenting on the current state of the industry.  He was a pioneer in developing the professionalism of the industry and left it much better than he found it.  Today we are at a crossroads where leadership is required and the industry is looking for individuals and companies who will pick up the banner for our trade professionalism and take the industry to the next level.  Marty wrote several times and spoke often of the challenges with vendor programs and cautioned restorers to develop and maintain a strong retail brand that would allow the restorers to have a healthy arm’s length relationship with the insurance community.  Vendor and third party administration referral programs have confused and compromised this “healthy arm’s length business relationship” between the contractor and the property owner. These programs generally dictate obvious compromises to both the communications and cooperation with the contractor’s customer: the property owner.. Contractors are often at the mercy of the insurance companies as restorers line up to serve the insurance company’s needs.  I am not going to comment on insurance company intentions, only the impending results.

It is important to review the promise of the programs and TPA’s as they originally rolled out into the local markets.  A value proposition was given to contractors that they would not have to continue to market their service after they were selected.  As a matter of fact, restorers were penalized for continuing to market their services to these companies resulting in their reduced overhead expenses.  The terms of the programs were outlined clearly and the scope determined pricing, as we were all using the same pricing database and that the insurance company could quickly settle and pay the claim due to the administrative efficiencies created through the TPA  

For many insurers, TPA’s became the preferred manner of settling everyday claims. The programs and relationships evolved into a product that was very different from what was originally presented.  The claims departments started to challenge the scope of work based on a casual familiarity of restoration work, a basic understanding of our industry standards as well as participating in training in controlled environments.  For the contractor, program referrals end up requiring a dramatically inflated level of administrative responsibility that often results in a greater overhead burden in order to support the claims.  The program guidelines do not allow the contractor to differentiate priorities based on job peril, size, logistics or complexity as all program initiated jobs required equal urgency, documentation and communication.   The dominant preferred estimating platform offers pricing feedback through the upload process, yet, this process assures that the program pricelists are frequently affirmed because many programs do not allow adjustments to the pricing on these jobs. Many conclude that this results in a price fixing strategy that limits the contractor’s ability to adjust their reasonable and customary pricing for their services.  I am aware of companies that grew substantially through reliance on program work, and now, as a result of the recent changing program stipulations, are taking steps to reduce their dependence on them. 

It is not my intention to comment on whether program work is good or bad, since I think that it is neither; rather it is both.  It is essential that each company think through the process and have a proactive and long-term strategy that allow them to retain control of their business, the client, the jobsite risks and responsibilities and ultimately their business direction.  In the spirit of Marty’s vision for the industry and hoping for a professional response, Marty would encourage you to be a steward of your business and your industry.  Stewardship is defined as the responsibility of overseeing and protecting something considered worth caring for and preserving.  As an advisor to hundreds of restoration professionals it has been my recommendation to create a sustainable model where no company or source is responsible for more than twenty percent of your business.  This will allow you to maintain control in the relationship and manage your business from a position of strength. 
You may feel that the insurance claim industry will be driven largely by the policies and responses of the insurance industry and there is little we can do to influence its direction.  That is likely to be true, however, you should take comfort in knowing that you are fully in control of your business and your own professional standing. If you wish to maintain control of your business then it starts with your business strategy and relationship with your insurance clients.

We need to work to define our industry as professionals serving those with damage needing restored.  As professional restorers, we should be bound by the long-standing underlying tenet of the Certified Restorer code, which is, “Quality Work, Fair Dealings and Ethical Practices to benefit the restorer, insurer and general public.”   The motto of the Restoration Industry Association and the predecessor organizations is to “Make it better - we promise!.”  I think that if we start with virtuous cycle – one where all parties benefit – then we have the foundation for true change. 

Recently the Property Insurance Restoration Conference (PIRC) had their inaugural meeting where they started a dialog with the insurance community.  Our support of such communications and resources  can  accomplish the betterment of our industry as we start talking with each other rather than at or about each other.  I encourage you to learn more and support the PIRC in their mission to improve the communication and understanding between the restoration and insurance industries.

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