August 26, 2020

I handled their claims, but when are they going to pay me?

It is not uncommon for adjusting firms to handle claims for their carrier clients and not receive payment for 60 to 90 days after the work is completed. Despite the adjuster and the adjusting firm meeting or exceeding the carrier’s service level expectations, they do not get paid in a timely matter by the carrier. Since Hurricane Irma in September 2017, there are millions of dollars today still unpaid to adjusting firms for services rendered. This was last hurricane season and we are about to embark on another season. Despite this scene, carriers still rely on those same adjusters and adjusting firms to respond promptly to the events we are sure to face again this year.

Surprisingly, this has been the accepted business practice for many years. Carriers have not taken on the challenge of figuring out how to expedite payments to their claims business partners. As a result, independent adjusting companies are constantly faced with cash flow management issues throughout the year. This is compounded in times of volume, such as a significant weather event that requires a proportional demand for resources to inspect and handle the increased claim volume.

This scenario will continue for years to come. This next hurricane season will have the same outcome as the previous seasons with delay in payments to those service providers who rally and take on the risks and the expenses to champion their carrier clients in the face of policyholders. Some insurers have taken on the responsibility to invest and improve their relationships with their claims service providers, but the adoption is very slow and still frustrating to independent adjusters. Some insurers fail to invest in even the most fundamental industry tools to handle claims, let alone embrace a solution that will improve their ability to pay their providers more quickly. A number of these carriers are amongst the top twenty largest homeowners’ writers in the country. Growing up as a child in the 1970’s, I recall Wimpy from the Popeye cartoon asking for a burger now and paying later. After 79 years of the show on-air, I know of no episode when he did pay on time.

When carriers do finally pay, they are not charged any late fees or finance charges by the adjusting firms for fear of “rocking the boat” or “biting the hand that feeds me”. If a carrier is charged a late fee on payables from claim files, only the original cost of the service is payable under the claim. Under statutory accounting principles, finance charges or late fees on payables are not able to be paid from the claim file since those fees are not incurred as a result of the adjusting or the adjudication of the claim. Instead, those fees are paid out of the company’s account other than from claim monies. Take it from a claims executive who had to make that walk of shame to my controller’s office and explain why the check had to be issued for the thousands of dollars that was owed from overdue payments to our adjuster firms: I only had to experience that once before I embraced a solution that would prevent me from ever being late on paying my claims partners again.

According to the book, “Accounting for Dummies!”, actions that lower cash flow are an increase in accounts receivable while actions that raise cash flow are decreasing the accounts receivable. Genius. It makes sense that the first step is to decrease accounts receivable. This goes beyond the historical and current activity of service providers constantly trying to shake down their carrier clients for payments on the aging accounts receivable. If you are calling your carrier client about invoices of 60, 90 or greater days overdue, you are too late in the process to improve your cash flow. We know that carriers will not change quickly, so the onus is on the providers to keep the business healthy. How do we stop this once and for all? What is available that you can implement now and at a very low cost before the next hurricane season starts?

Automate for Scalability

Most invoices from adjusting firms are based on the amount of the damages estimate or the amount of work done to write the estimate. Embrace a technology solution that is already automated to pull estimate and claim information from the popular estimating tools used in the industry to automate the creation of the invoice. Manually inputting information on a spreadsheet or a website form is not “automation”. If you want to scale your operation, do not adopt or succumb to software or systems that require you to manually input data. You already know the stress on your back-office operations that occurs in creating and submitting invoices, collecting and processing payments. Imagine how much more could your operation handle if the invoice was created as soon as the estimate was completed, and the carrier accepted the work? The ability to invoice more quickly helps reduce the backlog of aging accounts receivable.

Automate for Accuracy

One of the chief reasons for carrier delay in payment is that staff must verify the work was completed and the invoice reflects the amount appropriate for the work completed. Automating the invoice by comparing the claim and damage estimate information against the respective carrier field schedule will guarantee that most of the invoices created are accurate. This allows the carrier to process payment faster since their necessary review of your invoices is minimal. By enabling the carrier to pay more quickly, this reduces the backlog of aging accounts receivable.

Automate for Liquidity

Some carriers are challenged to make payments even if they receive accurate invoices immediately. These challenges are caused by systems or processes that prevent them from scaling their operation when volume demands it. Carriers borrowing employees from their underwriting department to help make phone calls and review your service invoices is not the optimal solution for your business. By adopting software that validates the work through industry estimating tools, provides governance and accuracy over the amounts charged, and garners the data of each transaction, you can receive funding overnight from third party financers who should also be integrated with that same solution. By ensuring payment of your receivables by next business day, this reduces backlog of aging accounts receivable.

Be cautious of software that does not automate the creation of the invoice, validation of the work performed, or does not guarantee the accuracy of the invoice because of manual input. Be wary of solutions that take more than a couple weeks to get up and running and make sure that whatever solution you adopt has a history of successful integrations with your financial software and claims management system to add further efficiency to your operation.

Our Invision™ and VIP Pay products, which provide all these aspects you need to make your business healthy, including overnight financing of all your invoices, which we later collect from the carrier. Our solutions not only enable Wimpy to pay, but also enable Wimpy to pay quicker. With our first named event of the year that made landfall days before the start of hurricane season, my best of wishes to all my fellow claims professionals for another year. It is not too late to avoid the calamities of the prior years – and we are here to help change the Wimpy ways.

August 26, 2020

Hurricane Preparedness: we bet your CAT plan doesn’t have this.

During this time of the year, over the past decades as a consumer and claims professional, I’ve experienced frequent reminders that hurricanes are a reality and we should prepare ourselves to potentially be impacted. Consumers are not alone in the preparation. Insurers also spend this time of the year preparing themselves fiscally with their reinsurers for the treaties they believe will be needed if their policyholders are impacted. Insurers also ensure that they have finalized their CAT plan to include resources, tools, actions and business continuity for when and if the time comes.

As a C-Suite claims executive, I was asked every year by reinsurers and investors the classic question: “What are you doing to ensure you have adequate resources in the event of a CAT?” My answer was not about Letters of Guarantee with my adjusting firms and service providers, nor was it about the technical expertise and experience of my claims staff, nor that we use drones. Instead, my answer was: “I pay my adjusting firms and contractors timely, especially in times of volume.”

Why is that important? If I paid an adjuster or service provider the contracted amount and paid it within a week or two after the estimate was completed in a time of volume, it garnered a high level of commitment from my adjusting firms and contractors. This differentiated my company from other carriers and, as a result, I found myself always able to obtain the resources I needed, and never having to be victimized of price hike in the middle of an event because I could not pay on time. I operated in the same sentiment as the words of the president: “if your business is not a brand, it is a commodity.” I knew that if I did not differentiate myself from other carriers trying to compete for resources, I would struggle as they did.

The situation has not changed in the industry. Scalability is amongst the utmost of challenges for carrier claim organizations as well as claims service providers. Even today there are carriers who do not subscribe to basic industry tools that are essential in writing damage estimates and providing scalability in the assignment process. As both carriers and providers finalize their CAT plans, I suggest that this year and moving forward, you make sure that the following are included and addressed:

  • How will you provide scalability to your back-office operation? It’s simply not enough to say you will pull staff from the Underwriting department or use the “friends and family plan” to come in on weekends and help process invoices and payments. Instead, look to automation. There is software out there that is easy to access and is already integrated with common estimating platforms that you use today. This automation should also be able to be integrated with accounts of record software that is commonly used. Imagine invoices created, submitted and guaranteed accurate within minutes of when the work is completed.
  • How will carriers pay invoices in a timely manner, so service providers can pay their own workers as well as the overhead costs they incur from a volume event? Again, look to automation. Claims providers and carriers have access to software that can automate this process on both ends – especially useful in times of volume.
  • What about data? Imagine having such automation that collects claim, damage and expense information. Benchmarking reports, ROI analysis and other trends can be easily identified to add better business intelligence regarding the carrier and provider relationship.

Wouldn’t you prefer to pay and be paid as soon as the work is completed? Take the opportunity in this CAT season as a carrier and a provider to stop being a commodity, and start being a brand.


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