The Plumbing Industry, it seems, have a few unethical companies who are receiving ‘referral fees’ from some restoration companies. Below are comments from a respected restoration company who is also a ‘Qualified’ member of the UPHCA sharing their insights.
Plumber referral fees are now possibly up to $1500 with certain restoration companies that give referral fees. The average mitigation job is approximately $3000 and these restoration companies are putting their referral fee amounts into the estimate for clients. These restoration companies are “fluffing” their estimates to cover the cost of the referral fees they are giving out. This can be costly to homeowners and insurance companies. The homeowners and insurance companies end up paying for the “fluff”, causing a snowball effect for anyone involved in the insurance industry, including the homeowners.
There have been several instances where the homeowners could have avoided putting in a claim with the true cost of the services under their deductible, but the “fluff” in the estimate pushed that homeowner to have to put in a claim, due to them not being able to cover the full amount of the mitigation and/or repair costs. There are also instances where a homeowner has a high deductible or there is no insurance coverage on the type of damage that occurred. Even on these type of claims, the referral monies are still hidden in the estimate. Homeowners have to pay out-of-pocket for the services in these cases, which could very well cause a hardship for the homeowner. Homeowners could also have issues with renewal of their home insurance policy, because there may have been claims put in that didn’t necessarily have to be a claim. There have been many claims that could have cost less than the homeowners’ deductible, but due to the referral fees, the cost of the mitigation or repairs became more than their deductible. This causes the problem of the homeowner having possible issues on renewing their insurance due to the amount of claims being put in under that insured’s home.
Insurance companies also incur these costs, because mitigation can be an emergency service. Adjusters (especially remote) don’t have the time or oversight to be able to protect homeowners or their respective insurance carriers from the restoration companies “fluff” due to the nature of emergency claims.
Overall, homeowners and insurance companies are the affected people that have to suffer the consequences of referral fees. Everyone else suffers too, in which these practices can make insurance companies increase premiums for all insureds.