Restoration: Debunking Industry Myths

The restoration industry operates under countless unwritten rules that contractors often follow to their own detriment. I didn't realize how many these rules actually were until I broke one and witnessed the fallout. Let's examine and dispel some of the most damaging myths in our industry.

Industry Myths vs. Reality

Myth: Overhead and Profit is Built Into Xactimate Pricing

The Truth: This is false. Verisk's own White Paper on the subject explicitly states:

"When the Verisk team performs market research on unit prices, those surveyed are specifically asked to not include expenses that would be included in general overhead or profit markup percentages."

Source: Verisk Overhead and Profit White Paper

This means you have a legitimate right to charge overhead and profit on top of line-item pricing.

Myth: Overhead and Profit Isn't Warranted on Certain Work

The Truth: In many states, it is illegal to deny a general contractor overhead and profit, regardless of trade complexity. When carriers deny O/P based on "simplicity," they're essentially saying that certain professions don't deserve to cover their operating expenses or support their families. This reasoning is both arbitrary and, in many jurisdictions, unlawful.

Myth: You Must Use Carrier-Preferred Vendors

The Truth: Policyholders have the legal right to choose their own contractor. Insurance companies cannot require the use of preferred vendors. This practice, known as "steering," is prohibited in most states and violates consumer protection laws.

Myth: You Must Use Xactimate

The Truth: While Xactimate is widely used, there is no legal requirement to use it. You can provide estimates in any format that accurately reflects the scope of work and pricing. Some contractors successfully use alternative estimating software or even detailed spreadsheets.

Myth: You Can't Negotiate Pricing

The Truth: Everything is negotiable. If Xactimate pricing doesn't reflect your actual costs or local market conditions, you have every right to negotiate. Document your reasoning with local market data, specialized equipment costs, or unique project requirements.

Myth: You Must Provide Itemized Estimates

The Truth: While transparency is important, you're not legally required to break down every single line item to the carrier's satisfaction. Your contract is with the property owner, not the insurance company. Provide sufficient detail to justify your pricing, but don't feel obligated to reveal proprietary pricing strategies.

Myth: You Must Accept Carrier Payment Terms

The Truth: Payment terms should be negotiated with your client (the property owner), not dictated by the insurance company. If a carrier's payment schedule doesn't work for your business, negotiate different terms or require the property owner to pay you directly and seek reimbursement from their insurer.

Breaking Free from Industry Myths

The restoration industry has evolved significantly, but many contractors still operate under outdated assumptions. By questioning these unwritten rules and understanding your legal rights, you can:

• Improve your profit margins
• Provide better service to clients
• Build a more sustainable business
• Reduce conflicts with insurance carriers
• Establish yourself as a professional, not a commodity

Taking Action

Start by educating yourself on your state's specific laws regarding contractor rights, insurance claims, and consumer protection. Join industry associations that advocate for contractor rights. Network with other restoration professionals who have successfully challenged these myths.

Remember: these "unwritten rules" persist because contractors accept them without question. By understanding your rights and standing firm on fair business practices, you contribute to positive change across the entire restoration industry.