Managed Repair – Don’t be a sucker
Like lemmings over a cliff, Florida’s property insurers are trending towards a preference for the managed repair of covered property damage. Some of the major insurers in the Florida homeowners’ market using managed repair include: Heritage Property & Casualty Insurance Company; People’s Trust Insurance Company; and Florida Peninsula Insurance Company. Indeed, even Citizen’s Property Insurance Corporation recently decided to make the jump.
See Finalist for Citizens Managed Repair Program purchased by global claims management firm, Hurtibise, Ron, http://www.sun-sentinel.com/business/fl-managed-repair-company-acquired-20160106-story.html.
Look out below Florida policyholders.
So, what is managed repair? Essentially, the insurance company takes control of all repairs to be made on covered losses. The insurer hires the contractor, requires the homeowner to coordinate and cooperate with that contractor, and pays the contractor (sometimes directly – sometimes indirectly). The homeowners lose the right to control the rebuild or repairs to their own homes. Is anyone else starting to smell that lemming? It’s called a “right to repair” and has existed in Florida’s homeowners’ policies for a long time and was even selectively exercised. Now, however, some of Florida’s property insurers are invoking this “right” on a whole new level – controlling nearly all insured repairs under every company issued homeowners policy.
Indeed, managed repair programs are now expressly marketed by many insurers as “beneficial” for homeowners. For example, Heritage advertises its “platinum preferred” program as an added benefit to policyholders:
“Heritage has carefully selected the best contractors to ensure the repairs are completed to your satisfaction. All of our contractors are state licensed and offer an extended three-year warranty on labor and materials, which is more than the industry standard of one year.
Heritage also advertises its “[v]ertically integrated end-to-end claims resolution” touting an “[i]n-house water mitigation company” and “[i]n-house restoration contractor – fire, mold, roofing etc.”
Florida Peninsula has a whole video about how their managed repair program through Contractor Connection “saves [the homeowner] time and money” using “only the best contractors that can meet [Florida Peninsula’s] strict requirements”; and how the homeowner doesn’t “have to spend [his/her] time explaining to them what needs to be done.” People’s Trust has coined the phrase “It’s Simply a Better Way” to describe its managed repair program through its “affiliated general contractor, the Rapid Response Team.”
Anyone else getting the anti-competitive vibe from all of this “in-house” dealing.
But, apart from those contractors with the misfortune of not being a “preferred” “in-house” or “affiliated” – is this “right to repair” trend actually helping anyone? Absolutely! It is helping the insurers to at least initially reduce costs; and in many cases making sure the only ones the insurers pay to rebuild or make repairs on covered losses are its own shareholders through its “in-house” and “affiliated” companies. In a 2014 presentation by Contractor Connection and Florida Peninsula called – WAIT FOR IT – “Finding Financial Payback in Claims”, it touts:
- reducing the “[A]verage gross loss” by “6.33%”;
- reducing the time to reach an “agreed price” by “45%”; and
- producing net savings to the insurer of almost “$1,000,000.00 on less than 1,100 claims.
Wow! Well, I guess when you only have to “agree” with your “preferred” contractor it takes less time, but is anyone else wondering what is driving the reduced “average gross loss” – diminished scopes, cut-rate margins, lower quality materials are just a few that come to mind. And those lucky homeowners who thought insurers were supposed to “pay claims” not get “Financial Payback” on claims are cut-out of the process entirely so they need not worry – Right? Well rest assured the contractor won’t “take the [homeowner’s] time” and indeed is unlikely to listen to the homeowner at all.
So at cliff’s bottom, for Florida’s property insurers, it seems that being a trending lemming on “right to repair” may be a profitable choice – especially for those paying their “in-house” and “affiliated” repair companies to do the work. But, for homeowners this trend is fraught with cliffhangers.
“Do Not Drink the Kool-Aid” we will look at real life cliffhangers facing homeowners trapped with a “right to repair” insurer and contractor; and even why these trendy Florida insurers, at the end of the day, may just reap a bunch of dead lemmings.