To TPA or Not to TPA | Full Disclosure vol. 2

Third Party Administrators (TPAs) – so what do you think? Love them? Hate them? Somewhere in-between? No matter your personal / professional thoughts about these organizations – and program type work in general – this model is not going away anytime soon. In this month’s article, my intent is not to advocate either way – businesses must decide for themselves if they wish to participate in these programs – and they can only make those decisions if they are informed.

I think it is safe to say there is not a restoration company out there who would not prefer to work directly with insurance companies and their staff on daily claims – without the middleman. These direct relationships are becoming harder to find, and more difficult to maintain as carriers migrate to these programs. Why is this happening? What makes these programs attractive to carriers? Some of you may not agree, but in my opinion, we did this to ourselves.

Let’s look at this from solely a business perspective. Insurance companies are for profit businesses, and they are in the business of mitigating risk. Part of mitigating that risk is protecting themselves from the “bad actors” who service claims for their insured – and that includes Restoration Contractors. Yes – I said it – there are “bad actors” in our industry – like it or not. We are generally unregulated, we have published industry standards, but these standards are not mandatory for all, we have standardized estimating platforms but are not obligated to use them in many cases. Invoices for the same scope can and do vary wildly, and when the carrier or insured pushes back on what they perceive to be a hyper-inflated invoice, we become litigious. We’re a hot mess. To combat these issues, many carriers formed their own preferred vendor programs. They hired staff to locate, credential, and manage reputable contractors of various trades to service their insured. Enter the TPA.

So, Mr. Carrier, what if I told you I could relieve you of this responsibility and save you a ton of money? I will locate, credential, and manage all these contractors. I will receive and dispatch your claims, both daily and during natural disasters, and I will review their estimates / invoices to ensure they follow your guidelines. I can even handle payments to them. Did I mention this comes at very little cost to you? That’s because I retain an agreed upon percentage of their invoice as a network referral fee. 

Love them or hate them – from a business model perspective – it’s brilliant. Our latest industry benchmarking survey indicated approximately 40% of you participate in these programs, and approximately 20% of your volume comes by way of program work. I predict both percentages, at least in the next few years, will continue to increase. I believe it will become increasingly more difficult to service insurance claims outside of these programs.

I stated I was not going to advocate for or against TPAs. What I do want to do is dispel one of the common comments I hear against these relationships. I’ve heard so many contractors stating they refuse to participate in these programs because they feel the insurance carriers or TPAs dictate how they must perform their services – primarily regarding water damage mitigation. That notion is incorrect. Earlier I stated carriers are in the business of mitigating risk. The minute a carrier representative instructs you to deviate from the IICRC/ANSI published industry standards (legally defensible documents by the way), they assume the risk. Carriers and TPAs are not in the business of dictating how services are performed – but they will dictate how you can bill for these services, and I believe some confuse the two.

To end this month’s discussion, I’ll share my biggest frustration with these programs. If they were designed to insulate the carriers from the “bad actors” – primarily focused on saving money – why do they continue to put the squeeze on those program participants? I continuously see more restrictive carrier guidelines published on a regular basis. You can’t charge for a full-face respirator because it is “a tool of the trade”. You can’t charge after hours line items even though you arrived and performed the services after hours. This list goes on, and will continue to be more restrictive until somehow, collectively, those contractors participating in these programs gain influence.

Until next month, 

Nasty 7 out.

Scott Walden

Scott Walden holds an IICRC Master designation in Water Damage Restoration. After a 23-year career as an Army Engineer, Scott joined the restoration industry in 2013 and has grown increasingly passionate about the scientific aspects of the industry and technical training as he and his team are directly responsible for ensuring their organic offices and franchises are technically proficient. Scott will also lead the way in the operation of the VetCor Training Academy scheduled to be fully operational in early 2021. You can reach Scott at

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