Approved Insurance Vendors versus Independent Contractor

When you have a need for repairs to your home, you do not really have time to do a thorough search to get a few estimates and spend a couple of weeks reviewing them. So when the insurance company recommends someone, it carries some weight.

Since many insurance companies have "approved vendors” that they will offer to you as a solution to getting your repairs done, it is important for you to understand what the agreements that an approved vendor has to make in order to be “approved”.

Approval = Agreement

Insurance companies have no interest in being a General Contractor and accepting that liability—but they DO want to control costs.

With that you would think that Insurance Carriers would want the most technically qualified contractors available. And though this is touched upon in many of the approval sequences that I have seen, it is not the most important point that is made.

The key points that the carries want from contractors are:

1. That they (the insurance company) can declare the size and specifics of the scope of work. They do not want a contractor coming in and overriding them using his expertise to really analyze the property.

2. Only the adjuster can name the quality of the products such as cabinets, lighting and flooring.

3. That some approved price list is what controls the pricing of that scope.

They have such statements in their agreements with approved contractors as, “The property owner may not be shown any scope of work until we the insurance carrier approves it” or “The contractor may not discuss directly with the insured the scope or any specific recommendations until the carrier has approved a scope and may not discuss any changes of that approved scope without first contacting the adjuster and gaining their permission first.”

These kinds of agreements create a conflict of interest.

With this kind of agreement in place, you have to ask yourself “Whose contractor are they really? Mine or the insurance carrier's?”

Another way to look at this is what is the easiest way for a contractor to become unapproved? By not following one of those rules listed above.

Who has the most to gain from these kinds of agreements? The insurance carrier.

They can create the appearance of unity between them and the contractor. This is artificially created prior to the contractor ever stepping on to your property, the adjuster could easily undervalue your kitchen cabinets, for instance, and the contractor would not be able to mention this to you. If you add in the lack of expertise that the adjusters have in pricing and general construction you could easily end up after a fire with substantially lower quality home and be none the wiser as the person you hired to protect your interest, the contractor, feels obligated to not say anything.