We discussed and defined neighboritis in this post, in hopes to create awareness for a condition that should be alarming to all independent adjusting companies and adjusters alike.
Neighboritis occurs when a roofing salesman convinces one property owner in a neighborhood that their home was damaged by hail and then gives that property owner an incentive to spread the word to others in the area. Often times the damages are not caused by hail or the hail had no effect on the condition of the subject structure components. In some cases roofing sales people have been known to intentionally inflict mechanical damage the to roof while conducting a review of the roof condition.
The effect on adjusting companies and independent adjusters occurs in the following parts:
- Generally, insurance professionals are paid on a flat rate to conduct surveys and adjustments of structural roof related insurance files or claims. This occurs on a rising agreed fee schedule that motivates the surveyor or adjuster to seek out all damages. The more damages found, the more likely that the reporting party will be able to bill a higher amount because the monetary value will climb to the next level on the fee schedule.
- The insurance professionals who do not recommend replacement (deny a claim) of a roof for lack of damages are not immediately trusted by their clients and asked to re-visit the same property based on a contractor/salesman claiming that damages do exist. Often times the reporting party is not allowed to request additional billing and is asked to re-visit on the principal that damages may have been overlook. The reporting party wishes to service their client well and therefore provides an exemplary service by re-opening the file at no little or no cost, all in hopes to keep business from their client.
- In the time lapsed between the initial survey and re-opening of the file, more than one roofer has likely set foot on the roof, or neighboritis has occurred; generally. Perhaps a neighbor has had a roof replaced or a sales person had an opportunity to create mechanical damages.
- The insurer fails to take a interest in hiring a forensic engineer primarily due to the cost of such a service.
- The costs associated with creating supplement reports and re-opening files is never accounted for in the fee schedule.
This pattern, no matter how far a claim might be over-indemnified, has become the standard for all roofing claim scenarios. More often than not, we are finding patters where insurers actually had a roofing sales person on their roof but that they did not admit it when initially asked or even in person. The foregoing conditions are a direct result of neighboritis and insurers, along with the general public should be made aware of these facts.
Insurance carriers and third party administrators rely on independent adjusting companies in their growth stages, particularly if they wish to abstain from growing beyond a certain percentage of the market share (e.g, to not compete with large competitors). Small adjusting companies provide a personalized level of service that small and start up property insurers require to maintain retention rates. Carriers that discourage additional time and expense billing to affirm or deny previous findings are posing a risk to themselves in the future because small adjusting companies cannot consume the lost time spent on these issues and this results in a direct loss for the reporting/adjusting party. In order for those adjusting and reporting companies to grow into sustainable businesses they must spend that time elsewhere (marketing, etc), or convert it into billable time; even if only breaking even.
An easy and responsible solution would be for insurance carriers to set a new billing standard for handling the re-opening of files which were initially denied. First, these carriers would have to trust that independent adjusting companies would have no interest in falsely denying claims just to obtain additional billing. One way to help support this would be to only allow additional billing at the actual cost rate (no profit) of providing a second survey, rather than at a normal T&E rate which is more profitable. It keeps the adjuster paid for his time which allows insurers to require a different adjuster from the same company attend the re-inspection. These ideas help keep small adjusting companies in business and prevents the larger ones from taking too much of the market share; all at a minimal expense to the insurer.