Keeping your integrity as one of the many insurance adjusters working for the insurer’s interests is much better than making extra bucks that’s risky
One of the main qualities that insurance adjusters or an independent claims adjuster needs to have is to be trustworthy. Ethics play a major role in any business, and especially when it comes to insurance claims. Fraud in this industry can sometimes be written off as a “victimless” crime which is not necessarily true, as other insureds are footing the bill for the insurance companies’ losses. If an adjuster is committing fraud or trying to scam the system and earn extra money, he is hurting everyone who uses that insurance company. At the same time, if an adjuster is accused of making deals with contractors, he can be fined, fired, and/or sent to jail. This article will discuss what a back-door contractor is, what restoration company deals look like, and what these type of relationships mean for insurance companies.
A back-door contractor is a person that always gets the bids from an insurance adjuster either because they are familiar with each other, or by means of a business ‘deal’. There is a gray line here, because insurance adjusters will usually have their favorite vendors and feel comfortable with certain contractors who they do regular business with but, technically, insurance adjusters cross the line when they bid the work out to theses back-door contractors. Sometimes, they bid the work higher than usual because they know the insurance company will pay for it – these contractors may even give the adjuster a cut of the profit for hiring them on to do the job. For some, this is looked at as a ‘kickback’ and, for many, it’s considered unethical. Ethical practices would demand that an insurance adjuster receive bids from contractors and only choose the best qualified to do the job, then paying the contractor only for the work that has been done.
Let’s use Joe Adjuster as our example case. Joe regularly works on claims for hail damage. He works in the Oklahoma area and he always bids his work out to three companies for the best estimate. He met Ed, the owner of XYZ Roofing, at a bar one night and they got to talking. Ed said he would pay Joe $1,000 for each roofing job Joe sent his way – an off-handed comment, but one that Joe took seriously. So, Joe began submitting estimates from two companies and XYZ roofing, but always chose XYZ to do the work, receiving the money from Ed as an extra incentive.
You may be inclined to take a ‘kickback’ or ‘incentive’ like some insurance adjusters would, but in the end if you get caught doing back-door deals, you could get suspended, fined and/or fired
Similar deals can be made in home restoration. The homeowner may assign their rights to insurance money over to a restoration company, meaning that the restoration company performs work on behalf of the insured. The restoration company then submits their claim to the insurance agency for payment, but this is monitored closely, as there is a greater chance of padding the claim when a third-party appeals to an insurance company that is not their own. They may state that the homeowner had more expensive light fixtures and flooring then they actually had, allowing them to replace the fixtures with something comparable, but with extra money left on the table to put in their pockets.
Another example of this shows XYZ Restoration Company working at Mrs. Smith’s house after a fire. They record that she had solid oak floors, chandeliers, and cherry cabinets. In reality, Mrs. Smith had laminate floors, standard light fixtures, and laminate cabinets. Mrs. Smith does not know what XYZ Restoration has valued her repairs at because they submitted their claim directly to her insurance company. XYZ states that the restoration costs $32,000 when, in reality, it will only cost them $10,000 to restore the house. Mrs. Smith gets her home restored, and is none the wiser, but XYZ Company stands to gain $22,000 for lying in their claim. Since it was a fire, and pictures would not be the best evidence, the restoration company may make a lot of money off of the deal.
Getting caught in a myriad of unethical work practices will bring the authorities on your back and that’s not good for business. Insurance adjusters should be trustworthy individuals as people rely on them a lot.
Insurance adjusters need to be aware of the unethical nature of these behaviors, to avoid being liable for committing fraud. Adjusters also need to do their due diligence when looking at restoration estimates and claims, as these restoration companies may be looking for deals, and may look for an adjuster who will let them get away with fraud to make a few dollars. This type of behavior costs insurance companies millions of dollars each year. When the adjuster is in on the crime, it makes it almost impossible for a computer system or fraud team to detect. The only buffer between these types of crimes is to empower and educate adjusters to make the right decisions on every claim that is filed. When adjusters are fairly compensated and empowered, they will more than likely do the right thing. If you notice unlawful or unethical practices happening, try and report the behavior as soon as possible. Doing the right thing makes insurance more affordable, so people can get the protection from risk that they truly need.