Responding to natural disasters on a mega scale. The capability to proactively mobilize resources from all over the U.S. to areas in need is amazing. The ability to deliver reliable and predictable outcomes for the customers of insurance companies that have claims on a nationwide basis is impressive. Voluntarily embracing training and standards of performance reflects well on the increasing professionalism in the restoration business.  

The “restoration business” needs a voice in the insurance claims ecosystem (See below for what that is). Without a unified voice, the profitability of the restorers becomes inadvertently challenged. The economics of insurance works against the individual restoration firm, and even franchise organizations, by default. Insurance companies and policyholders benefit from the work restorers do. Both of these stakeholders in the insurance ecosystem want and need high-quality restoration services, and both are willing to pay for good quality work through insurance proceeds. But without a unified voice on what it costs to perform good, quality restoration, restorers are getting squeezed on profit margins at every turn, but not on purpose.  

I would like to see fewer restorers buying junk insurance policies sold by usually well-intentioned but uniformed insurance agents trying to make their sales goals. In one real-world example, 94% of insurance certificates I reviewed showed insurance that met an insurance specification in the contract that was, in fact, not present in the policies the insurance agent sold to the restorer. The same insurance agent that sold the policy issued the certificate of insurance. Depending on the perspective of the beholder, issuing bogus insurance certificates verges on fraud, or if the glass is half-full, it is just selling junk insurance. From either perspective, the contractor is holding the short end of the stick. The indemnity agreement the contractor signed has no connection to the collectability of insurance. The contractor must pay claims out of pocket if they are not covered by insurance. Insurance that does not meet insurance specification is junk in my book.

The profitability of restoration firms is being challenged by the insurance mechanism. In the insurance ecosystem of insurance buyers, policyholders and restorers, the system automatically rewards insurance companies who can cut down on claims costs. Since claims costs equal restoration costs in property insurance policies, the profit incentive for insurance companies to lower costs naturally squeezes the profit margins of restorers. The good news in the ecosystem is insurance companies benefit from happy customers who renew their policies with the company after a loss. Insurance carriers want happy customers after a loss. Therefore, insurance companies, in the long run, benefit from restorers making a reasonable profit to do a good job for a policyholder. Today there is no reliable feedback loop in the restoration business on what restorers need to be paid in order to make a reasonable profit margin.