How to spot inflated repair quotes
In the current climate of rising fuel, insurance, material and labour costs, businesses across the economy are under increasing cost pressure.
Insurance builders are no exception. For claims teams on the front line of quote analysis, however, this creates an additional challenge: distinguishing legitimate increases in repair costs from quotes that are simply higher than the market norm.
As building costs continue to fluctuate, it is becoming increasingly difficult for claims teams to identify quotes that may be inflated or out of step with prevailing market rates.
Identifying inflated repair costs
Traditionally, identifying inflated repair costs has relied heavily on human expertise, supported by published cost data that may be outdated or lack relevance to the specific claim, region or repair.
Unless claims staff have specialist knowledge of current building market rates, they may need to rely on internal technical experts, adding time to the claims lifecycle, or external loss adjusters, adding cost.
Delegated authority adds another layer of complexity. When builders have the authority to self-approve repair costs, how do insurers independently validate those costs?
The answer, in many cases, is that they don't.
There is also the challenge of disputed costs. When a quote is questioned, further liaison with the builder is often required to understand, negotiate and resolve the difference – consuming additional time and resources.
Ultimately, insurers can find themselves relying on average claim costs, which can be analysed by loss value, region, peril and other factors. But by the time an inflated cost becomes visible in the data, the money may already have been spent.
And once a repair has been approved and completed, recovering that additional cost is rarely an option.
Beware the flow-on effect
It only takes one builder increasing their pricing to influence an insurer's overall average repair cost – particularly when there is limited visibility of what the broader market is charging.
This raises some fundamental questions:
You may have contracted rates, but how can you contract for every aspect of every repair that may be required?
You may have agreed hourly rates, but how do you know whether the number of hours quoted is reasonable?
How do you know contracted rates are actually being applied?
And how do you know whether those contracted rates are still competitive with the broader market – or whether they are now too high or too low?
Insurers can tender, increase or reduce their builder panels and introduce specialist panels, yet repair costs can continue to rise.
The missing piece is often independent, current market intelligence that allows insurers to understand what a repair should reasonably cost before approving it.
Innovation is part of the solution
Technology and AI are changing the way insurers can approach quote validation.
QuoteCheck is helping clients reduce repair costs by up to 11% by using AI to analyse and benchmark repair quotes against live, regionalised building cost data.
Importantly, the objective isn't to simply drive builder costs down. Australia's building industry needs profitable, sustainable builders. The aim is to ensure that pricing is fair, transparent and aligned with actual market conditions.
In fact, many builders see value in the process because it identifies high-performing builders and rewards them based on their performance, rather than simply comparing one builder against another.
For some insurers, QuoteCheck is used primarily to validate that builders are applying their contracted rates correctly. A quote may contain only a handful of lines that fall outside the agreed rates, but identifying those discrepancies can make a meaningful difference to the overall claim cost.
Other insurers use the data to help establish appropriate panel rates. Others allow the market to determine the price by comparing quotes openly against current benchmarks.
How it works
QuoteCheck is designed to complement existing claims processes rather than disrupt them.
Every quote can be checked – including those submitted under delegated authority – allowing potential cost adjustments to be identified before the money is spent.
The platform uses a robust, defensible database of live building rates by region. Unlike a static rate card, the database reflects changes in the market within defined parameters, providing a more accurate picture of what repairs should reasonably cost.
And because quotes are analysed in minutes, the process has minimal impact on the claims lifecycle, customers or claims teams.
Where an adjustment is required, builders receive immediate feedback and a clear benchmark to work towards, reducing the need for lengthy back-and-forth discussions.
The economics are compelling too. With QuoteCheck costing so little to implement and operate, clients are achieving returns of more than $8 for every dollar spent – making quote validation not just a cost-control measure, but a positive financial proposition.
With no lengthy or costly IT implementation, start-up costs are low and the platform is simple to integrate into existing claims practices.
Moving from hindsight to prevention
The fundamental challenge with repair cost leakage is timing.
Analysing average claim costs can tell an insurer that costs are rising. It doesn't necessarily tell them why, or – more importantly – give them the opportunity to intervene before the money is spent.
QuoteCheck shifts the focus from analysing cost after the event to validating cost before approval.
That is why insurers are already using QuoteCheck, while others are exploring how the technology could fit into their claims operations. Major loss adjusting businesses are also recognising the potential value, with discussions underway around how the technology could support their own operations and the services they provide to clients.
When every dollar matters, knowing whether a repair quote is fair shouldn't have to rely on guesswork.
Want to see what QuoteCheck could deliver for your claims operation? Get in touch for a free demonstration.