Breaking into the Insurance Channel

Mike Lees, CEO, of the TradePRO Group develops service provider networks for the insurance industry. In 2010, a client requested Lees to build a flooring network and after months of research and investigation, the Certified Flooring Replacement Network began its journey to become a leader in flooring replacement services for the Insurance Industry. His goal is to provide the best flooring restoration, repair and replacement services in the nation through its network of independent Flooring Retailers. The Certified Flooring Replacement Network (CFRN) has entered into Service Level Agreements with national and regional insurance companies to provide flooring replacement for their policyholders when they incur damage.  The main goal of CFRN is to simplify the claims process for everyone involved. CFRN works with the policy holder, insurance company and the local retailer to achieve a high quality experience. CFRN receives claim referrals from claims adjusters and connects the policy holders and flooring retailers together for a smooth and seamless process. The goal is to get agreed repair estimates for the benefit of all parties and ultimately to get the customers new floor repaired or installed as quickly and efficiently as possible. CFRN has over 400 flooring stores in their network. Building a team of professionals to support high growth is an essential component of any strategic business initiative. TradePro added industry veteran Mike Adams to the team in 2013.  Adams came on board as COO and oversees the strategic operations for TradePro. Adams has over 30 years of insurance claims industry experience and leadership and held a variety key management positions such as National Claims Programs Manager and Director of Claims Operations where he oversaw vendor contracts with a combined spend of $300 million.

“We believe that they deserve the best and we are not content to only meet their needs, we are committed to exceeding them. Our certified experts and claims professionals have an extraordinary breadth and depth of experience. We are not just a service provider network, we help our customers and flooring partners for a long term partnership.” says Lees. CFRN has a close rate of over 70%.

Lees saw flooring replacement was underserved in the market place and a very good fit with TradePro’s overall business model. Insurance companies who write homeowners policies rate floor coverings as their number two spend in property repair payments. The overall insurance industry spend for flooring is around 5 billion annually.

To understand the insurance business you must understand the way claims are reported. This process has changed so much in the last 20 years. Many insurance companies want to take the agents out of the property claims process because agents are salesman/women and not adjusters. Typically large call centers exist with call center representatives that collect the basic information validate the policy is in force but cannot commit that the claim will be covered.

Here is an overview of the typical claims process. Policyholders report claims to agents or directly to insurance company. Customer service agents collect basic claim information but typically cannot commit coverage. Adjusters (in-office or field) are assigned claims. The adjuster determines if claim is covered.  The adjuster may then ask the policyholder to get repair estimates or a field adjuster will inspect and write an estimate.

Insurance companies then have to value the claims.  XACTIMATE is a very popular estimating software program that is utilized in the industry today. The estimating software is designed to develop repair estimates and can be used to completely rebuild a home. The home interior tool includes a room-by-room feature and allows you to enter all the material components to be removed, repaired, restored and replaced. It utilizes incremental unit cost items that are priced to include the individual labor and or material cost per square foot or lineal foot. The software allows the inclusion of overhead and profit calculations for subcontract trades. Other methods used are independent laboratory analysis for LKQ (like, kind and quality), scoping and estimating the areas to be restored.

After the damage has been assessed the policyholders are given options for completing repairs. Policyholders can perform the work themselves, utilize the preferred vendor recommended by the insurance company, obtain referrals from their agent or adjuster, or search on their own.

Payments get issued a few different ways. Once the repair estimate is completed, payment for the Actual Cash Value (ACV) of the repairs is issued, less the deductible. Once the repairs are completed, the insured can apply for the balance of the cost of repairs. Alternatively, the policyholder can accept the ACV and not complete the repairs. Or, payments may be issued directly to a contractor with appropriate payment request documents. Lien holders may be named as co-payee.

Insurance policies provide language that policy holders have a duty to mitigate their damages. Mitigation efforts save insurance companies and their customers billions of dollars. Water mitigation can decrease the amount of structural damage repairs needed to bring a structure back to pre-loss condition. Insurance policies provide language which allows them to restore back to pre-loss condition unless replacement is equal too or less than restoration. Insurance companies have the right to replace with like kind & quality materials. Like kind and quality testing for hardwood replacement can be difficult.  Some insurance companies have guidelines specifically restricting the arbitrary replacement of hard wood floors. Hardwood flooring can be a contentious area for consumers who are not privy to structural drying techniques that can prevent the necessity of replacement. Sanding and refinishing can be very effective depending on a variety of factors.

The most common issues that arise over restoring versus replacing have to do with unrealistic policyholder expectations, lack of adjuster knowledge, and continuous runs.  Policyholder expectations can be the biggest issue to manage. Issues arise when customers may have paid more than the current cost to install the same or LKQ product. Or when not every one is on the same page, when a contractor told the customer everything must be replaced and the adjuster believes sand and refinish is all that needs to done. Or sometimes customer believes the insurance policy is an annuity and wants new floors throughout the home.

Preferred Vendor Programs are becoming more and more popular. They provide companies with tremendous benefits. Many national vendor programs provide high-level customer service. They offer consistent pricing, improved cycle time, and reduced indemnity payments.

One of the biggest advantages to having a preferred vendor program is the central dispatch it provides, which accesses service providers in every state with one-call solutions. It also offers centralized billing, consistency and uniformity of process and one single point of contact.

Vendor credentialing is a critical management function and a variety of forms and qualifications must be completed before they can officially handle any jobs. All employees with a vendor have to have background checks, Federal Violent Crime Control Act Law compliance, and general liability insurance. All insurance companies require background checks on individuals that will be working in the home. Primarily for violent crimes and dishonesty claims.

Most insurance companies want to see specific and tangible financial benefits and may ask for a volume discount. Insurance companies look to third party networks to hold the policyholders hand through the entire process.

Insurance companies require third party networks to enforce Service Level Agreements.  SLA’s outlining the performance standards for all participating contractors. SLA’s contain specific guidelines such as time frames to contact the policyholder, inspections and completed estimates. SLA’s are the foundation of any national contract or program with insurance companies. Performance standards are negotiated and then enforced through monthly reporting. Monthly reports provide data on claim cycle times, average claim costs and customer satisfaction results

There are several typical industry guidelines.  One hour to contact the insured from assignment, eight business hours or less for on site inspection, estimate submitted within 24 hours from inspection. Photos of damaged areas are required.

Standardized forms like direction to pay, product selection form, customer satisfaction, and installation warranty.

There are several ways local contractors get insurance work. They develop relationships at a local level by working as a sub-contractor, calling on agents, calling on adjusters, join third party networks, and joining franchise groups. Your personal insurance agent may be a good source for referrals. Adjusters typically want to work with a general contractor so they don’t have to deal with tradesman directly.

Third party networks have grown significantly in the last 10 years.

They require annual fees for credentialing and commissions on completed and paid work. They will provide value to the contractors by obtaining adjuster agreement for the scope of work to be performed and the total cost of repairs. Claims professionals like third party networks because they can deal with one person that helps them negotiate with contractors and provide dispute resolution. Insurance companies like third party networks because they provide risk avoidance as well.

Some final points, being part of a network leverages national marketing, provides an advocate to assist local providers with disputes and opens a steady and consistent channel of new business.

Mike Lees is President & CEO at TradePRO, a national specialty trade provider of flooring and hvac networks.