Everywhere I go, companies continue to want to talk about where they get their work from. They for sure do not like being controlled or told what to do regarding their future work. It appears that this feeling is prominent with all parties when it comes to doing loss for a policyholder - everyone wants it done their way.
At a recent convention, a JD Powers associate explained the different parts of a loss and what a policyholder says and feels regarding their loss experience. It was explained that on a scale of 1-10, if you did not receive a score of at least a 9, it was not good enough for the policyholder. As a result, with a score below a 9, the policyholder would begin to shop around for a different insurance provider. It was explained that it was cheaper for an insurance company to keep their existing policyholders than it was to try to find a new policyholder to replace one that leaves to go to another company. It was also explained how important it is for all in the chain of custody of the job to treat the policyholder with the level of service that they expect and want to be treated. Most policyholders do not know what their policy really covers until they experience a loss. When some of them do experience a loss, they seem to feel that that have been paying into a savings account for a long time and believe they are entitled to getting all of their premium back, with interest!
Insurance companies have begun to use Third Party Administrator’s, which I will refer to as “TPA’s” for the duration of this column. In order for TPA’s to be hired by the insurance companies, it appears that the TPA is promising that they will be able to control the contractor for two reasons. One reason is that they have metrics to judge the needed proper performance of the contractor. The second reason is that they say they have more than enough contractors to do their work. So if the contractor in the program is not meeting the agreed upon metrics, they can be replaced with another contractor in their program.
The current TPA programs constantly point out that this has been successfully done on the auto repair side of their business and that it is just a matter of time before the same thing will happen on the property side. The major difference seems to be that there are approximately 350,000 versions of vehicles that have been documented down to the last screw. The repair work is usually done in a single location, so that a specific model of a car is the same as all versions of the car. The same cannot be said of all of the buildings that have been built in the USA. Even when I talk with production builders, they agree that “things happen” and as hard as they try for uniformity, houses will and do vary. This leads to many discussions as to how the repairs to a loss can or need to be restored. The work is also generally done on location and leads to different work conditions as opposed to the work that is being done at a fixed location.
So, all of this being said, I would like to make a suggestion to you as a contractor, and that is that you not allow more than 25% of your work to come from any one source. So, if you are doing all program work, you would need to be on at least four programs to give you the volume of work that you have budgeted for. You also know that the TPA’s cannot guarantee that they will be able to give you a specific amount of work for the year. They are in the same boat as the contractors as to knowing how many losses their insurance company will even have, much less who they will give them to. Both sides know that “stuff happens” and that the workflow can be interrupted for a variety of reasons.
A second suggestion is that you do not get all of your work from programs. You need to be actively soliciting work on your own, so as to have a variety of sources that you receive work from. A lot of contractors have yet to figure out two critical facts. One, from the start of your business development efforts until you start a job, what is the amount of time that it takes to generate the different types of jobs that you do and that you like to do? Does it take a week, a month or a year? Two, when are your slow periods, when do your slow times start and when do they stop? I guarantee you that your memory is a terrible place to get answers for these two questions. The only possible way to do this is to keep track of all of your leads, bids and sales every day and all of the time. I would implore you to be able to know where, when, how and from whom your leads are coming from. Once you know this information - and only then - can you make intelligent decisions that will keep your company viable and profitable.
Wishing you good profits which will assist you in having a good life!