History of Roofing Supplements
I’m going to tell you a quick story about how roofing supplements quickly evolved…
Back in ’95, we kept up with insurance pricing by comparing our approved scopes with the scopes the other salespeople in your office had gotten approved.
It was like a game…a profitable game…the best kind of game!
If somebody got a higher number on a scope than the “High Score” you had saved on your master spreadsheet, you went back to your insurance company and asked them to pay what the other company was paying.
When labor & material costs are going up fast in a hot market, you need quick price increases to stay profitable.
If the adjuster asked for “proof,” you faxed in a copy of the other approved scope showing the higher priced line items.
Likewise, when you were able to get additional work approved that wasn’t a standard line item on scopes (e.g. landscape protection), you would add that unusual line item to your next estimate and ask the insurance company for that line item on all future estimates.
Xactimate wasn’t the industry standard at the time.
A lot of field adjusters were still using printed-out price sheets. There were quite a few who would hand-write their estimates. Every insurance company, seemingly every adjuster, had a different price guide. There was no centralized computer database for pricing.
Pricing was more fractured and more profitable before Xactimate gained enough traction to consolidate pricing and slow down price increases.
I didn’t realize it at the time, but we were in the early days, the good ‘ole days, of supplementing for roofing.
Things were about to get a lot more difficult.
Think Like an Insurance Company
SLOW THINGS DOWN…WAY DOWN…WAY, WAY DOWN 🚧🚧🚧
If I owned an insurance company, I would want to make it more difficult to get price increases approved.
I would slow down the approval process and create more barriers between my company and the contractors.
I would not allow my adjusters to get yelled at, insulted, and intimidated without fighting back.
I would also sponsor legislation and fund regulation to protect my insurance company from paying out more of my profits to “greedy” contractors.
I would make it as easy as possible to pay your premiums and more difficult, and time consuming, to get paid on claims.
And that’s exactly what happened, isn’t it?
Cash Flow Problems
We both know cash flow is a huge issue for most contractors, especially during the front-end of the roofing season.
Slowing down cash flow, patiently dealing with the headache of getting a supplement approved, isn’t always an option when you’ve got payroll coming up again on Friday.
You need your money to move fast, not slow. Money loves speed!
It’s frustrating, isn’t it?
You know taking the time to work on a supplement and following-up until it’s approved could add thousands of dollars, maybe tens of thousands of dollars, to your job, but it’s a headache and you need to take your profits now because you need the cash flow.
Outsource Roofing Supplements
Many contractors solve part of this problem by hiring 3rd party supplement companies to deal with the headache, but it is expensive.
If you’ve been buying supplements, you know standard pricing is anywhere from 10%, 15%, up to 20% or more of the approved increase. Some companies charge even more.
So, if they get an extra $10k approved, and charge 15%, you pay $1,500 for them dealing with the headache, staying on top of the process, and finally getting the extra money approved.
Not a Perfect Option
I’ve heard from folks who’ve tried these 3rd party services. Some of you have called me personally to tell me about your experience.
Honestly, not everybody has been happy. Some were extremely pleased, but a few of you were justifiably upset.
I get it. Seriously. I do.
I would be mad, too, especially if I was promised one thing and got another. Outsourcing your supplements is not a perfect option, not by any means. It’s maddening to try and communicate with somebody who won’t call you back.
You feel like you’re out of control and losing all your profits because you’re paying for a supplement service that isn’t giving you the results you want.
Supplement Claims for Yourself
This year, you’re going to take matters into your own hands!
You’re going to do the supplements yourself, even though they’re a royal pain, or you’ll train somebody in your office to deal with the headache for you.
For what you’ve been paying out in supplement fees, you could hire someone to work for you full-time, couldn’t you?
As long as you’re a solid leader and a good manager, this might be the best idea for you.
P.S. Since the day I wrote this article, we’ve seen a steady increase in roofing companies bringing their supplements in-house. There are solid options for outsourcing, but learning how to use Xactimate and doing the roofing supplements in-house is the biggest bang for your buck for most companies.
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