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Gale
USA
231 Posts |
 Posted - 01/24/2004 : 01:57:20
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Does any adjuster know the history of when and why the O&P concept started?
I kind of thought of it as a consulting/management fee for finding temp help on the behalf of another and seeing that the temp help perform to expected standards.
Could one with the correct knowledge/contacts, cell phone and pickup truck agree to manage the construction of a home that required $250K payment to subcontractors for a turn-key deal and expect a payment of $50K for his services bringing the total cost of the new home to $300K?
If only one trade is involved is a General Contractor usually hired? Vale National teaches as a general rule no O&P is due unless three or more trades are involved in a repair job. |
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Cecil
USA
35 Posts |
Posted - 01/24/2004 : 08:03:37
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Application of OH&P is applicable or not applicable on a per claim basis according to circumstances. Universal application or vice versa is not appropriate. I occasionally think (that's a subject for debate) that if you owe X number of $ on a claim that is it, but it's just not that simple. That's why we have adjusters and it's called an adjustment.
If a claim requires a entity (GC) to manage it, then he is entitled to make a reasonable and customary profit and have his overhead covered.
If the widow woman, or anyone else for that matter who is not knowlegeable or doesn't have time or desire to handle a complex claim and he has to hire someone to do it for him, then that person (usually the GC) is entitled to OH&P.
This all got started a long time ago. A person looked at the job to be done, made a list of materials and the cost, how many hours each trade would require and it's cost. Then you figured the other costs, gas to the job, IE delivery etc. Then laws to comply with, permits, codes etc and then time to coordinate, supervise, inspect and maybe to redo something or make someone redo something or maybe not. Then clean up and haul off, ad nauseum infinitum. Of course there is the job of handling the "insured", dealing with the cub adjuster (that's a joke) etc.
When it was all done, he has to make a profit and cover his -----.
Now when I look at the adjuster ranks, I see a lot of ex-contractors. Is this because they (the contractor) were making excessive profits or because of other factors. Probably a combination of many factors. Too many to go into here.
The point is, we pay OH&P on many claims with a big smile. Because it's due. But on the other hand, many times it is just not neccessary. A blanket rule doesn't need to be applied.
Now when someone starts messing around with reducing my fee bills and starts claiming I am making too much on each hail claim, etc ( you have all been there) the hair starts standing up on my neck and back. I am just like a bear with cubs. So the contractor is with OH&P.
Remember, we have a lot of expenses out there. We finance a lot of claim operations, we have a lot of down time, no insurance and so on.
Sometimes we wait a long time to get paid. Sometimes fee bills are reduced and we get no say. Sometimes no pay.
The contractors plight is the same but in a different way. We need to remember that the shrewed adjuster and contractor just might get his way.
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CCarr
Canada
1200 Posts |
Posted - 01/24/2004 : 09:02:43
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I can't add anything relative to the history of the issue, or to the comments of Cecil. However, as we thrash and pound out issues relative to the claims niche in our world here in CADO, so do contractors in their own playground.
Contractors have a very good website, that has a familiar layout to our own, and that deals with similar issues within their own world. With it, I am a bit surprised that some have infiltrated our sandbox from time to time.
Have a look at http://www.contractorcity.com
They have extensive forums, and the O&P issue may be addressed in them, from their perspective. |
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katadj
USA
315 Posts |
Posted - 01/24/2004 : 09:56:55
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The concept, (use) of the 10/10 OH&P exists only within the insurance community. It may be 10 on 10 (21%) or 10 and 10, (20%).
This number, in no way, reflects the actual overhead and profit of any contractor. The normal and actual overhead of a construction company will run from a low of 18% to well above 25%, the norm falling into the 19-23% range.
This does not include any profit for the company, but covers only their operating cost expenses.
These would normally include their office utilities, (telephone, gas, electric), insurances, including WC, GL, Equipment, office & storage space rent, license expenses, staff salary, burdens, vehicles, bookkeeping, and all the other necessary and required expenses for a construction company.
These percentages are also applicable to almost any legitimate business functioning in this country.
These numbers are only to keep the doors open to do work.
There are a great many of contractors that fail within the first five (5) years in business, mostly due to improper costing of projects, underbidding, poor management, etc. The Fed has presented figures that state the failure rate can exceed NINETY PERCENT (90%)
In order for a business, of any kind, to stay in business, it is necessary that they make a profit of some nature. There are some that can survive on a few points and others that require substantially more.
With over a half century in the building and insurance adjusting industries, there is no doubt in my mind that a true General Contractor earns every penny.
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Edited by - katadj on 01/24/2004 09:58:00 |
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Gale
USA
231 Posts |
Posted - 01/24/2004 : 19:59:50
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| Dave, your figures are interesting. Bill Loveland with Xactimate stated this week that 10&10 just did not cover the contractors real cost so the true cost must be worked into an estimate in some other way. We do have one carrier that pays 15&10 in some locations because they have accepted the fact 10&10 is low. Some of this under payment can be recovered in adding a +/-50% burden onto labor cost and make sure they do not actually run that high. The better carriers do seem to be concerned that the better GC's stay in business. |
Edited by - Gale on 01/24/2004 20:01:13 |
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Reconstruction Man
124 Posts |
Posted - 01/24/2004 : 22:02:31
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Your O&P and O+P insights are well rounded.
"Unclear" O&P estimating values paint an unclear investment return picture..."Clear" O + P subtotals allows one to "see" the actual investment return...to set aside.
All said, Profit is "theory" until all business costs are paid.
However, we anticipate the principles behind the IntegriClaim "analytics" data collection process will prove what low-high G.C., remodeler, rebuilders "real time" operating costs are across the nation.
IF the data integrity remains pure...and public...insurers should quickly agree on OP values, and other premium value issues...
That same data, properly mined and acknowledged, may also help adjusters, or their associates, track whether insurers can pay appropriate adjusting fee values...day rates or otherwise. That same data may also prove claim vendors are not necessarily needed...
Tighten your seatbelts... |
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JimF
USA
1014 Posts |
Posted - 01/24/2004 : 23:06:00
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| With all due respects, what does IntegriClaim (data) have to do with anything? |
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Reconstruction Man
124 Posts |
Posted - 01/24/2004 : 23:10:26
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JimF,
Do you use IntegriClaim? |
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JimF
USA
1014 Posts |
Posted - 01/24/2004 : 23:29:15
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No, I don't.
And I would venture that neither a majority of property adjusters nor property insurers in America do either.
That is why I asked the question. |
Edited by - JimF on 01/24/2004 23:31:26 |
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Reconstruction Man
124 Posts |
Posted - 01/24/2004 : 23:59:23
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| Allstate, GAB Robbins, Cunningham Lindsey, Brush Country are using it here. |
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Reconstruction Man
124 Posts |
Posted - 01/25/2004 : 00:03:49
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| Allstate broke out using it nationwide July 2003. |
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JimF
USA
1014 Posts |
Posted - 01/25/2004 : 00:10:43
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| And your point is? |
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Reconstruction Man
124 Posts |
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Reconstruction Man
124 Posts |
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JimF
USA
1014 Posts |
Posted - 01/25/2004 : 00:29:24
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Again, I fail to see your point.
Of course, insurance carriers like most other business enterprises, use computers and historical business data to define trends in markets, costs, expensing, etc. What else is new? And what's wrong with that?
One of the most innovative and contemporary uses of data mining by insurance carriers is to identify and then segregate inept, incompetent, and fraudulent insurance adjusters and contractors from the insurance claims process. I'm sure you would join me in applauding such uses, which clearly benefit business and society by helping to contain premium costs.
I doubt the entire number of IntegriClaim users in the whole United States even would equal 20% of the licensed number of adjusters in Texas, which the last time I checked was around 39,000 adjusters.
So again, I fail to see your point, or your suggested indictment of this industry as a whole.
Methinks you're grasping for straws while failing to understand the underlying concepts and methodology of the insurance underwriting, actuarial, and rate making processes. |
Edited by - JimF on 01/25/2004 00:39:47 |
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Reconstruction Man
124 Posts |
Posted - 01/25/2004 : 00:48:07
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Jim,
With such precise construction component verification, that cycles back around as reliable
[quarterly] construction and pricing touchstones, premiums should be able to go justifiably up..or down. One MS/B study has approximately 70% of home underinsured by 35%.
Since the premiums will, supposedly, be much more accurately established, based on zip code based completed reconstruction projects, [assuming the projects were accomplished by sustainable construction business models], then all roofing, electrical, painting, etc. contractors can afford to carry WC and Liability, etc.
Those premium supported low-risk business models will cause estimate values to go up, a potential financial plus for adjusters. The management of the data is so multi-faceted and automated, it seems that individual adjusters using the program would cut out many processes that adjusting vendors perform...another potential plus for adjusters...and insurers.
What do you think? |
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O&P History Question
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