For many roofing contractors, dealing with insurance companies can be a hassle
Whether it is comparing estimates or negotiating price, it is no secret that insurance companies and roofing contractors often disagree.
This is why some contractors only do retail work that doesn’t involve insurance companies.
While avoiding insurance companies can help contractors avoid stress, there is often more money in doing insurance jobs because contractors can supplement the job to cover expenses that otherwise might not exist on a retail job.
Many people debate if this practice of charging insurance companies more money is ethical, but according to attorney John Houghtaling, roofers should have no qualms about charging more money to do insurance work.
“Not only is it ethical to charge one market differently than another market, you must if you want to stay in business,”
“The reason is to understand the risks that you take as a contractor.”
Houghtaling says retail jobs are less expensive because there are less factors to be taken into account when determining a final price.
“A homeowner is calling you. You don’t have a commission. You don’t have remote staging. It’s in your neighborhood,”
Houghtaling says of retail jobs.
“If the homeowner is ready to pay you and they have cash, you have no risk. You’re dealing with the decision-maker. You could sign a contract and the risk is less. You’re going to get paid quicker and it can be cheaper for you to do that particular job.”
Still, when severe weather ravages neighborhoods, local companies are called upon to help homeowners fix their roofs, many of whom will eventually file a claim with their insurance company.
As mentioned, there is the potential for roofers to earn more money on insurance jobs, but dealing with insurance carriers complicates matters.
“You don’t know if they [insurance companies] are going to pay your price. You don’t know if they’re going to pay you on time. They’re very likely going to delay you. They are likely to make you have four or five different inspections to be able to prove certain things. That costs time. It costs money. It’s a risk of not getting paid,”
In the financial world, banks are very diligent about who they loan money to, and in cases where the risk is higher, banks will often charge more interest on a loan.
Houghtaling says that roofing contractors should be equally as diligent when prospecting insurance jobs. He also reiterates that this is another reason why contractors can charge more to do insurance work.
“When contractors are looking at this, they are doing certain things subconsciously. They are subconsciously banking on the fact that dealing with an insurance company may be more of a risk of not getting paid,”
“Therefore, I think it’s necessary to charge a market one thing versus another.”
In 2020, many contractors were asking themselves this question, particularly in Lake Charles, Louisiana.
Lake Charles has been devastated by a hurricane and also the COVID-19 pandemic.
These factors should have been considered by the insurance carriers, but Houghtaling mentions that despite the tragedies beset upon homeowners, many insurance companies continue to prioritize profits over the well-being of their clients.
“What the carriers do, which is unethical, is they pretend the markets are the same [in reference to market changes resulting from hurricanes and COVID-19]. They pretend the costs are the same, so what the carriers are doing sometimes is they’re bringing in a competition to the contractor,”
“They can cut out the commission and when the insurance company brings in the contractor, they guarantee that contractor the money, whereas the other contractor is not guaranteed that money. It’s not fair. It’s not the same market. It’s not the same risk.”
Fortunately, Houghtaling says that there are steps contractors can take in order to mitigate their risk when they work with insurance companies.
“What the contractors need to do is they have to get better at explaining [to homeowners] their own risk and why it is more expensive,”
“For homeowners, there is a certain alignment of interest, and there is a certain conflict of interest. It is really good for roofing companies to explain the business to homeowners upfront.”
Part of this explanation includes contractors emphasizing to homeowners the importance of properly repairing their roof, and that any shortcuts taken could result in bigger and more expensive repairs in the future.
“The home is the largest asset they [homeowners] have. Most of their net worth is tied up in the asset of the home. Homeowners often will try to pocket insurance money or fix the roof cheaply, and in the end, it’s worse off,”
“If you don’t fix things well, in the long run it catches up to you.”
In Houghtaling’s experience, when contractors properly explain the value of a quality roof repair, homeowners follow their lead and don’t try to circumvent the process.
“Most people will pay for quality. They understand the difference of doing things on time and doing things well,”
For the homeowners who are less agreeable, Houghtaling offers a motto that has served many contractors well in the past:
You have three choices:
- You can do it on time.
- You can do it with quality.
- You can do it cheaply.
But you can only pick two of the three.
“You have to explain the importance of the roofing system to a building. If you actually look at the building, the most important function of a building is keeping out the weather. It’s keeping out water in particular,”
“If you don’t do your roofing system well, you don’t realize that this catches up to you, and water is like a cancer when it gets inside your building.”
If you’re a homeowner who is still not sold on the idea of partnering with your contractor during the insurance claims process, consider this:
“The most important thing is to explain to the customer what you are doing, and the importance of the roofing system. The second thing is to explain that you have an alignment of interest when it comes to the insurance company,”
“The insurance company has a conflict of interest. They don’t want you to fix it well. They don’t want to do it on time either.”
There are a number of reasons why insurance companies are difficult to deal with, many of which have been routinely highlighted on the Roofing Insights platform.
Yet, what most homeowners want whenever their roof is damaged is the peace of mind knowing that a quality contractor can help them, and that their insurance company will pay for the majority of the cost.
To ensure that this happens, it is imperative that homeowners and contractors unite toward a common goal.
Not doing so will only further complicate matters and leave both homeowners and contractors alike bewildered and searching for answers.
“If you decide that you want to play into the games of the insurance company and try to save them money, that plays into the insurance company’s hands,”
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