Working with a TPA
Third Party Administrators (TPAs) have the potential to be part of a high performing business mix for restorers. The idea of assignments being doled out from the insurance company during slow patches, with low referral fees and little headache is appealing. However, the amount of effort and technical skill required to perform TPA work has increased over the last 10 years. So how can individual businesses turn the effort and technical skill needed for these assignments into a competitive advantage with profitable results? Let’s look at what we know about the work provided through these services.
When working with TPAs, it’s important to recognize that you have outsourced two different sales and marketing responsibilities. The first is your promise to the insurance company. There are many pages to an agreement with TPAs, but the core promise is that your operation will take the work given, perform to acceptable standards, and deal fairly with all parties. The second promise is to the individual homeowners. Contractors are often portrayed as being their best option to reduce the number of hurdles in a bad situation.
All your salespeople said, “We can sell it!” But can you make it work? Maybe.
You applied, were accepted, your friendly TPA turned on the tap, and everybody is happy as you anticipate the inflow of jobs that will be coming soon. After about three weeks, you begin to wonder where the work is that was promised in the agreement. After all, aren’t TPAs like magical unicorns that provide work with exceptional profit and little to no effort?
This is true for some restoration contractors. They fall into a bit of luck and immediately receive substantial amounts of work. If this has been your experience, consider yourself fortunate. Then be sure to review the mix of business you’ve received from all sources to confirm the value to your operation.
For the rest of us, what you may have instead is additional burden on your operation until the number of assignments you receive reaches a break-even point. This could be a six month to three-year process, depending on the market you service.
TPA programs require work to find, maintain, and nurture significant points of contact. This means resources from your sales team must be utilized at the onset to work with adjusters, program administrators, internal customers, and homeowners. The process is similar to when your business started: you must build a reputation one person at a time in this new arena. Keep in mind that the insurance company does not know you, your team, or your work product, so the process may be slow. It is critical to keep your salespeople focused on the long-term goal.
Program work creates a burden on front office staff, estimators, and project managers. Most offices attempt to streamline the process for program assignments and continuously find themselves shifting gears between “normal” daily work and the new line of business. Under this flip-flopping model, additional strain is placed on the office until there are dedicated resources for TPA uploads, paperwork, communication, and new estimating practices.
The added administrative duties begin immediately in the form of phone calls, emails, and program updates. This is a sunk cost that eats away at net profit until the break-even point is reached. Personnel assigned to these tasks must present the skills of exceptional employees as they deal with situations outside of the normal. As an ideal list, these skills should include; negotiating, high-level decision making, excellent communication etiquette, and superb multi-tasking. In many operations, these skills are not inherent and must be developed by management. Now an additional burden is felt as the attention of your most skilled employees is required. This further strengthens your team, but at a significant cost.
Further challenges are felt when considering the role that estimators play in the success of a program. The assignments provided represent a broad range of insurance losses and, in most instances, these are outside of ideal assignments. Estimators may be called to several $4,000 patch and paint projects and then to a $60,000 kitchen fire. There is no mechanism available to limit the type and size of job received. Again, the skills required to manage these losses is that of your best employees. Further, margins from this type of work may be lower and affect compensation packages. Is your operation able to track, update, and appropriately compensate estimators for their work on these projects? Without financial incentive, most estimators lose interest and end up providing a lower quality product. This action further increases the administrative burden and likely frustrates front office staff with increased phone calls, emails, and requests for updates. As an owner or manager, it is imperative to coach and encourage your staff until the break-even point is reached.
The largest portion of a project and greatest opportunity to lose profitability is after a project manager takes over. Who receives the check? When are documents signed? Are there specialty documents? How are issues handled? Can you sell additional services? Are change orders allowed? Who approves overruns in selection material costs? What role does the company play with the adjuster? This list is exhausting, but not exhaustive.
These requests are not outside of what is normal for a project. In daily work, restorers assist with these tasks to a point they are comfortable with, inform the homeowner of the process, and expect that the homeowner will follow through. Here, we must remember what was promised in the initial outsourced sale—that you are the homeowner’s best option to eliminate hurdles in a bad situation. This is the biggest promise, a singular statement and refrain that everyone in the process will hold your company to: get rid of the hurdles.
To fulfill this promise we must have open communication between project managers, office staff, and management on a regular, complaint-free basis. If a team new to program work does not communicate regularly, a homeowner’s pain points quickly become the restorer’s pain points. There are often moments where restorers can recognize the issues but ignore them instead. Most often, your project manager receives indications of pain early and handles the issue according to your internal process, which states “This is not our issue. Please reach out to the appropriate party and let us know when it is resolved.” They’ve done the right thing according to your process, but in the interim, the homeowner reflects on what they were sold. After failing to receive resolution, they contact the adjuster. The expectation then becomes for your company to invest even more time and resources to get rid of the hurdle.
At the end of the day, working with TPAs will improve your operation. Your team will become intentional about their actions, communicate openly with all parties involved, develop additional skills, and streamline processes in expectation of volume. Keep these benefits in mind as you push toward the break-even point. Once there, it may be decided that TPA work is not for your company or market. But realize that the true value in this process is from the discipline developed and education received. Stay the course, find the value, and then make an informed decision. Even if that decision is to abandon the program, you will be left with a stronger, better trained staff.