Third Party Administrators – (TPA’s) specifically in the disaster restoration industry, MAY BE KILLING YOUR BUSINESS FUTURE!
The following is my opinion of what “they” are doing to the disaster restoration and recovery industry. This will be controversial and may upset some people, others will agree with me completely, and some won’t know what to think. If you are not familiar with TPA’s, I think that’s a good thing. (Some people refer to them as Programs or program work.)
First, TPA’s don’t work for you, and rarely do they work with you. My belief is their primary interest, aside from making money at your expense, is to accommodate, appease, and essentially “be in bed with” the insurance carriers – giving them what they want – which is to pay as little as possible on the claim.
Second, they are about making money – they are a business – you are their source of income and profit. You, as a restoration contractor, agree to take less, often much less, (smaller invoice – less profit) so they can be the hero for the insurance company. The less the carrier has to pay you, the more the TPA can make, either directly or indirectly.
Third, by TPA’s controlling which restoration contractor gets the job, the contractor automatically tends to give the TPA exactly what they want because the contractor becomes like a drug addict, always wanting more, and knowing they won’t get more jobs if they don’t give in to whatever the TPA demands.
When a contractor kowtows to the TPA, he is no longer in control of his destiny and the sales. Just so we are clear on what I’m saying; kowtow means: bow, kneel, genuflect, grovel, and give obeisance. If you don’t do this, you won’t get much (or any) work from the TPA.
Several other factors also come into play as well; the TPA has very little incentive to ensure the policyholder fully and completely gets what they are entitled to, according to the policy. The insurance carrier, more than ever, just wants to know how hard the TPA can squeeze the contractor to reduce the claim, which obviously does little for the vulnerable policyholder.
Program work takes away the contractor’s ability to truly “work for the policyholder,” since they ultimately have to appease the program administrator. It also means the contractor becomes so dependent on TPA-referred jobs that they have little incentive to market themselves properly, i.e. hire and teach quality salespeople to promote their company and its’ special uniqueness (differentiation).
When you are dependent on program work, it usually means you send marketers out every day doing worthless “Stop Drop and Roll” marketing – mostly spinning their wheels, calling on insurance agents that can’t or won’t refer their policyholders except to call the claims 800 number.
And yes, there is even more bad news in my opinion. As restoration contractors get more dependent on the “fix” of the phone ringing with these types of jobs, they become less motivated to improve their sales efforts, so the cycle expands and they try to get on more and more Programs. It makes me think of the classic line “what we lose in profit, we make up for in volume!”
Once contractors are in bed with multiple TPA’s they now have to follow different rules: each Program has different requirements: different documentation, different response times, different equipment, some even specify equipment types. Most have strict rules on how quickly the invoice is submitted after completion, and most of all, demand you accept their arbitrarily established LOW, line item pricing – much lower even, than the familiar “estimating program” they demand you use for the structure of the invoice.
The more TPA’s there are (and there are many) the more insurance carriers are in control of your business, and the less profit you are going to enjoy. Remember what competition often does??? It continually brings down the price you can charge. It also means you are truly not working for the client on their loss, but your allegiance must be to the TPA – or you won’t get any more of their “wonderful” referrals! If they continue to grow more powerful, you could easily see air movers (as an example) with a line item price of five dollars!
Certainly, having expressed my personal opinion, and likely upsetting many people, those that don’t agree with me might say “they’re not good at marketing or sales, so this saves me the effort,” or “if I don’t take these jobs and accept their demands, someone else will, and that can hurt me!” That is, however, a poor reason to be in business, and poorer for your business future!
Call me if you would like to know more about my opinion, and I’ll be happy to share the names of others that think similarly.