The Managed Repair Program from the Inside: How DRP Scoring Works

After a loss, many policyholders receive a call from their insurance company with a recommendation. The carrier has a contractor already lined up — someone who knows the process, can start quickly, and will make the whole experience easier. The contractor is part of the carrier's "managed repair program" or "direct repair program," and the carrier presents the referral as a convenience. Some policyholders accept without asking any questions, grateful that someone is taking charge during a stressful time.

What the policyholder is rarely told is that this contractor has agreed to a set of terms that go far beyond licensing and quality standards. The contractor has agreed to pricing constraints, process requirements, and performance benchmarks — all of which are designed around the carrier's financial objectives. The contractor is scored on metrics that directly reward keeping claim costs low, minimizing supplemental estimates, and closing files quickly. These scores determine whether the contractor continues to receive referrals — referrals that may represent the majority of the contractor's revenue.

Understanding how these programs actually work — not how they are marketed, but how they are structured — is essential for any policyholder deciding whether to accept a carrier's contractor recommendation. It is equally essential for attorneys evaluating whether a repair was performed to the standard the policy requires.

What a Direct Repair Program Is

A Direct Repair Program (DRP) — also called a managed repair program, preferred vendor program, or contractor referral network — is an arrangement between an insurance carrier and a group of pre-approved contractors. The carrier maintains a network of contractors who have agreed to work within the carrier's pricing structure, processes, and performance expectations. In exchange, the carrier provides these contractors with a steady stream of referrals from its claims operation.

The concept is straightforward on its face. The carrier vets contractors for licensing, insurance, and workmanship. The contractor agrees to follow the carrier's protocols and pricing guidelines. When a policyholder files a claim, the carrier recommends a contractor from its approved list. The policyholder agrees, the contractor performs the work, and the carrier pays the contractor directly or reimburses the policyholder based on the contractor's invoice — which was prepared according to the carrier's pricing terms.

Carriers present DRP programs as a benefit to policyholders. The marketing typically emphasizes convenience, speed, and quality assurance. The carrier has already vetted the contractor, the carrier will guarantee the work, and the policyholder does not have to go through the process of finding a contractor, obtaining bids, and coordinating with the adjuster. For a policyholder who has just experienced a fire, a water loss, or storm damage, this pitch can be compelling.

But a DRP is not a quality assurance program. It is a cost containment program with quality assurance features bolted on. Understanding the difference requires looking at the mechanics — how contractors enter the program, how they are evaluated, and what happens when their performance does not meet the carrier's expectations.

How Contractors Get Into a DRP

Becoming a DRP contractor is not simply a matter of being a good contractor. The application process typically involves several layers of vetting, each of which serves the carrier's interests in different ways.

Licensing and Insurance Requirements

The contractor must hold appropriate state contractor's licenses. In California, this means a valid CSLB license in the relevant classification — typically a B (General Building), C-33 (Painting and Decorating), C-36 (Plumbing), or other specialty licenses depending on the type of work the DRP covers. The contractor must carry general liability insurance, workers' compensation insurance, and often an additional umbrella policy. The carrier will typically require the contractor to name the carrier as an additional insured on their general liability policy.

Background Checks and Financial Review

Carriers conduct background checks on the contractor's principals. They review the contractor's financial stability, looking for liens, judgments, and bankruptcy history. Some carriers require audited financial statements. The carrier wants to ensure the contractor can complete jobs without financial distress causing delays or abandonment.

Agreement to Pricing Terms

This is where the arrangement departs from a simple vetting process. The contractor agrees to the carrier's pricing structure. In many DRP programs, this means using the carrier's estimating platform — typically Xactimate — with the carrier's pricing database rather than the contractor's own pricing. The carrier sets the unit prices, the overhead and profit allowances, and the rules for what line items can and cannot be included.

In practice, this often means the DRP contractor agrees to work at rates that are lower than what the contractor would charge on the open market. The contractor accepts below-market pricing in exchange for the volume of referrals the carrier provides. This is not inherently improper — volume discounting exists in many industries. But it creates a dynamic that matters enormously when the question is whether the policyholder's property is being restored to its pre-loss condition, as the policy requires.

Performance Benchmarks

Before being admitted to the program, the contractor agrees to meet specific performance benchmarks. These are not merely aspirational goals. They are measurable metrics that the carrier tracks continuously and uses to determine whether the contractor remains in the program. The benchmarks typically include cycle time, customer satisfaction scores, supplement ratios, average claim cost, quality complaints, and compliance with the carrier's processes.

It is these performance benchmarks — and the scoring system built around them — that reveal how DRP programs actually function on a day-to-day basis.

The DRP Scoring System

Carriers do not simply admit contractors to a DRP and then passively wait for complaints. They actively monitor and score every contractor in the program, often on a monthly or quarterly basis. The scoring system determines how many referrals the contractor receives, whether the contractor is placed on probation, and ultimately whether the contractor is removed from the program entirely.

The specific metrics and weightings vary by carrier, but the categories are remarkably consistent across the industry. Understanding each metric — and the behavior it incentivizes — is critical.

Cycle Time

Cycle time measures how quickly the contractor completes the repair and closes the claim file. It is typically measured from the date of assignment to the date the job is marked complete and the final invoice is submitted. Carriers set target cycle times based on the type of loss and the estimated severity. A water mitigation job might have a target cycle time of five to seven days. A fire restoration might have a target of sixty to ninety days.

Contractors who consistently close files within the target cycle time score well on this metric. Contractors whose jobs take longer than the target are scored lower. The scoring is often tiered — completing a job well under the target earns a higher score than completing it at the target, and exceeding the target reduces the score progressively.

From the carrier's perspective, faster cycle times mean faster claim closures, lower additional living expense payments, and reduced administrative overhead. From the policyholder's perspective, faster is not always better. Some repairs require time to be done properly. Moisture readings need to stabilize before walls are closed. Structural engineers may need to evaluate framing before it is covered with drywall. Custom materials may need to be ordered. A contractor who is being scored on speed has a financial incentive to prioritize pace over thoroughness — and the policyholder may never know the difference until problems emerge months or years later.

Customer Satisfaction Scores

Carriers survey policyholders after the repair is complete and use the results to score the contractor. This is the one metric that appears to align with the policyholder's interests, and in some ways it does. A contractor who is rude, unresponsive, or does visibly poor work will receive low satisfaction scores.

But customer satisfaction surveys in this context have significant limitations. The policyholder is evaluating the contractor's courtesy, communication, and the visible quality of the finished product. The policyholder is almost never in a position to evaluate whether the scope of work was complete — whether all the damage was actually repaired, whether hidden damage was addressed, whether materials matched the pre-loss condition of the property. A policyholder whose kitchen was repainted after a fire may give the contractor high marks for professionalism and clean work, never knowing that the contractor did not address smoke contamination in the wall cavities because the carrier's scope did not include it and the contractor did not push back.

Satisfaction scores also tend to be gathered shortly after the job is complete, before latent defects have had time to manifest. A roof repair that looks fine at the completion walkthrough may leak six months later. A water damage restoration that appears dry may develop mold within a year. The satisfaction survey does not capture these outcomes.

Supplement Ratio

This is one of the most consequential metrics in the DRP scoring system. The supplement ratio measures how frequently the contractor submits supplemental estimates — requests for additional payment beyond the original scope and estimate — relative to the total number of jobs the contractor handles.

A contractor who submits supplements on 80 percent of jobs will have a high supplement ratio. A contractor who submits supplements on 20 percent of jobs will have a low supplement ratio. In the DRP scoring system, a lower supplement ratio is better. The contractor who submits fewer supplements scores higher.

On its face, this might seem like a reasonable quality metric. Perhaps a contractor who submits supplements frequently is doing a poor job of initial assessment, or is padding estimates after the fact. But consider what a supplement actually represents. A supplement is a request for additional funds to address damage that was not apparent during the initial inspection. Hidden damage is not an anomaly in property insurance claims — it is the norm. Water damage behind walls, fire damage above ceilings, structural deterioration beneath flooring, mold growth inside wall cavities — this damage is discovered during the repair process, not before it.

A contractor who opens a wall after a water loss and discovers saturated insulation, damaged electrical wiring, and corroded plumbing is supposed to report that damage and request a supplement to address it. That is what a conscientious contractor does. That is what a contractor working in the policyholder's interest would do. But in the DRP scoring system, that contractor is penalized. Every supplement submission increases the supplement ratio and lowers the contractor's score.

The contractor who opens the same wall, sees the same damage, and closes the wall without reporting it — that contractor has a lower supplement ratio. That contractor scores higher. That contractor receives more referrals.

It is worth pausing on this point. The scoring system does not distinguish between a supplement that reflects legitimate hidden damage and a supplement that reflects poor initial estimating. It treats all supplements as negative. The structural incentive is clear: the contractor who finds less damage — or at least reports less damage — is rewarded. The contractor who finds and reports all the damage is penalized.

Average Claim Cost

Carriers track the average cost of claims handled by each DRP contractor and compare it to benchmarks — typically the average cost across all DRP contractors handling similar types of losses in the same geographic area. A contractor whose average claim cost is below the benchmark scores well. A contractor whose average claim cost is above the benchmark scores poorly.

This metric rewards the contractor whose repairs cost the carrier less money. It does not distinguish between a contractor whose repairs cost less because the contractor is efficient and a contractor whose repairs cost less because the contractor is cutting corners, using inferior materials, or ignoring damage. The metric measures cost, not quality. The metric measures what the carrier pays, not what the policyholder receives.

Consider two contractors handling identical water losses in similar homes. Contractor A performs a thorough assessment, identifies all affected areas including secondary damage, uses commercial-grade drying equipment for the appropriate duration, removes and replaces all affected materials, and restores the property to its pre-loss condition. The claim costs $45,000. Contractor B performs a surface-level assessment, dries only the obviously wet areas, patches rather than replaces affected drywall, and closes the job. The claim costs $28,000.

In the DRP scoring system, Contractor B has a lower average claim cost. Contractor B scores higher on this metric. Contractor B gets more referrals. The scoring system does not ask whether the policyholder's home was actually restored to pre-loss condition. It asks what the carrier paid.

Quality Complaints

DRP programs track complaints filed by policyholders about the quality of repairs. This metric, like customer satisfaction, appears to serve the policyholder's interest. And to some extent it does — a contractor who receives a high volume of complaints will eventually face consequences.

But quality complaints in this context are reactive, not proactive. They capture problems that the policyholder noticed, reported, and escalated. They do not capture problems the policyholder never discovered. The policyholder who does not realize that their contractor failed to address smoke damage in the HVAC system, or left moisture in a wall cavity, or used materials that do not match the pre-loss condition of the home, will not file a complaint. The absence of a complaint is not evidence of quality — it may simply be evidence that the policyholder does not know what to look for.

Compliance with Carrier Processes

DRP contractors are scored on how well they follow the carrier's administrative processes — submitting documentation on time, using the carrier's estimating platform correctly, communicating through the carrier's preferred channels, and following the carrier's protocols for each phase of the repair. This is primarily an administrative metric, but it reinforces the fundamental dynamic of the relationship: the contractor works within the carrier's system, follows the carrier's rules, and is scored by the carrier on how well they comply.

The Perverse Incentives These Metrics Create

Each of the DRP scoring metrics, taken individually, might appear reasonable. Carriers want contractors who work efficiently, keep customers happy, provide accurate initial estimates, control costs, deliver quality work, and follow processes. Those sound like the hallmarks of a well-run program.

But when these metrics are combined into a scoring system that determines the contractor's livelihood, the aggregate effect is a set of incentives that systematically favor the carrier's financial interests over the policyholder's contractual rights. The contractor who scores highest in the DRP system is not necessarily the contractor who does the best work. The contractor who scores highest is the one who costs the carrier the least money while generating the fewest complaints.

Consider the contractor who approaches every job with the goal of restoring the property to its pre-loss condition, as the policy requires. That contractor will find hidden damage and submit supplements — raising their supplement ratio. That contractor will use appropriate materials and proper techniques — raising their average claim cost. That contractor will take the time needed to do the job right — increasing their cycle time. On the DRP scorecard, this contractor is underperforming on three of the most heavily weighted metrics.

Now consider the contractor who approaches every job with the goal of completing it as quickly and cheaply as possible while keeping the policyholder satisfied enough to avoid a complaint. That contractor does not look too hard for hidden damage. That contractor accepts the carrier's initial scope without pushback. That contractor closes jobs fast. On the DRP scorecard, this contractor is a top performer. This contractor gets more referrals. This contractor stays in the program.

The scoring system does not require contractors to cut corners. It does not instruct contractors to ignore damage. But it creates a structural incentive to do both. The contractor who wants to remain in the program and continue receiving referrals — referrals that may represent 60, 70, or 80 percent of their revenue — understands what the metrics reward and what they penalize. The scoring system communicates the carrier's priorities without the carrier ever having to say them explicitly.

The Volume-for-Discount Tradeoff

The financial model underlying every DRP is a volume-for-discount exchange. The contractor accepts lower per-job pricing in exchange for a higher volume of jobs. This is the same model that operates in many industries — wholesale pricing in exchange for bulk purchasing. But in the construction and restoration industry, this tradeoff has consequences that directly affect the quality of the finished product.

A contractor working on the open market bids each job at a price that allows for appropriate materials, skilled labor, adequate supervision, and a reasonable profit margin. If the contractor bids too high, they lose the job to a competitor. If they bid too low, they cannot deliver quality work at the price they quoted. The market establishes a pricing equilibrium.

A DRP contractor operates outside this market equilibrium. The contractor has already agreed to the carrier's pricing, which is typically 10 to 30 percent below what the same contractor would charge on the open market. The contractor makes up the difference on volume. But "making it up on volume" means something specific: it means the contractor must handle more jobs with the same overhead, which means less time per job, less supervision per project, and more pressure to use lower-cost labor and materials.

This is not a theoretical concern. It is the basic arithmetic of running a construction business at below-market rates. If a contractor's normal profit margin on a $50,000 job is 15 percent ($7,500), and the DRP pricing reduces the job to $40,000, the profit margin drops to $2,500 unless the contractor finds ways to reduce costs. Those cost reductions come from somewhere — less experienced labor, fewer supervision hours, faster timelines, or less thorough work.

The policyholder whose property is being repaired by a DRP contractor is receiving work priced at a discount that was negotiated between the carrier and the contractor without the policyholder's input. The policyholder did not ask for a discount. The policyholder's policy entitles them to have their property restored to its pre-loss condition. Whether that can be accomplished at the DRP's discounted pricing is a question the scoring system is not designed to answer.

Who the DRP Contractor Actually Works For

This is the question at the heart of every DRP arrangement, and it is a question that policyholders rarely think to ask. Legally, the policyholder is the contractor's client. The policyholder signs the contract. The contractor owes a duty to the policyholder to perform the work in a workmanlike manner. In California, the contractor is bound by Business and Professions Code § 7159 and its related provisions regarding home improvement contracts.

But economically, the carrier is the contractor's most important business relationship. The carrier provides the referrals. The carrier sets the pricing. The carrier scores the contractor's performance. The carrier decides whether the contractor stays in the program. If the contractor loses the DRP, the contractor loses a significant portion of their revenue overnight.

When the contractor discovers hidden damage during a repair and must decide whether to submit a supplement, the contractor faces a choice between two clients with conflicting interests. The policyholder's interest is in having all the damage repaired. The carrier's interest is in keeping the claim cost low. Submitting the supplement serves the policyholder but penalizes the contractor on the carrier's scorecard. Not submitting the supplement serves the carrier but leaves the policyholder with unrepaired damage.

A contractor who consistently chooses the policyholder's interest over the carrier's interest will see their scores decline. Their referral volume will decrease. They may be placed on probation. They may be removed from the program entirely. The contractor knows this. The carrier knows the contractor knows this. The dynamic is understood by everyone involved — except, typically, the policyholder.

For a deeper analysis of this structural conflict, see The Carrier's Preferred Contractor: Who They Really Work For.

The Warranty Angle

One of the primary marketing points of DRP programs is the warranty or guarantee on the work. Carriers promote this as a benefit to the policyholder — if anything goes wrong with the repairs, the carrier will make sure it gets fixed. Some carriers offer three-year warranties, some offer five-year warranties, and some offer warranties for the "life of the home." The warranty is presented as a form of accountability, proof that the carrier stands behind the quality of its DRP contractors.

But a warranty is only as valuable as the willingness and ability of the party offering it to honor it. When a policyholder attempts to invoke a DRP warranty, the process typically involves contacting the carrier, who then contacts the contractor, who then evaluates whether the complaint falls within the scope of the warranty. The contractor who performed the original work is the one evaluating whether their own work was defective. If the contractor determines the issue is not covered by the warranty — perhaps characterizing it as normal wear and tear, homeowner maintenance, or a new and separate event — the policyholder has little recourse through the warranty process.

The carrier, for its part, has no direct financial stake in enforcing the warranty. The carrier is not paying for the warranty repairs — the contractor is. The carrier is acting as a facilitator, directing the policyholder back to the contractor. If the contractor refuses to honor the warranty or disputes the policyholder's characterization of the problem, the carrier is not in a position of financial loss. The carrier can sympathize with the policyholder without spending money to resolve the issue.

There is also a practical limitation on DRP warranties that is rarely disclosed at the time of referral. DRP contractors go in and out of the program. They merge, close, change ownership, or simply cease operations. If the contractor who performed the original work is no longer in business or no longer part of the DRP program when the policyholder needs warranty service, the warranty may be effectively worthless. The carrier will point to the fact that the warranty was provided by the contractor, not by the carrier, and that the carrier cannot be held responsible for a third party's obligations.

Carrier Influence Over the Scope of Repairs

In a DRP arrangement, the scope of repairs is not determined by the contractor's professional assessment of what needs to be done. It is determined by the carrier's adjuster, often before the contractor even visits the property. The adjuster inspects the loss, writes an estimate, and defines the scope. The DRP contractor receives the assignment with the scope already established. The contractor's job is to execute that scope, not to independently evaluate whether the scope is complete.

This is a fundamental departure from how construction and restoration work should function. In a normal contractor-client relationship, the contractor inspects the property, identifies all the work that needs to be done, prepares an estimate, and presents it to the client for approval. The contractor's professional judgment drives the scope. The client relies on the contractor's expertise.

In a DRP arrangement, the carrier drives the scope. The contractor follows it. If the carrier's adjuster missed damage — which happens frequently, particularly with hidden damage that requires destructive testing to identify — the DRP contractor is in the awkward position of having discovered damage that is not on the scope. The contractor can submit a supplement, but doing so hurts their supplement ratio score. The contractor can flag the issue informally, but if the adjuster pushes back, the contractor must decide whether to push harder — and risk their standing in the program — or accept the adjuster's position and move on.

The policyholder, meanwhile, has no visibility into this dynamic. The policyholder does not know what the original scope included. The policyholder does not know what the contractor found during repairs. The policyholder does not know whether the contractor submitted a supplement, whether the supplement was approved or denied, or whether the contractor decided not to submit a supplement at all. The policyholder sees the finished product and assumes it represents a complete repair. Whether it actually does is a question the policyholder is not equipped to answer without independent expertise.

When a carrier exerts this level of control over a contractor's work in ways that harm the policyholder, the legal implications can extend beyond the claims process. See Tortious Interference in Insurance Claims for more on how carrier conduct toward third parties can give rise to independent causes of action.

When DRP Contractors Acknowledge the Problem

It is not uncommon for DRP contractors — particularly those who have left a DRP program or who are speaking candidly about their experience — to acknowledge the structural problems these programs create. Some have publicly described the pressure to keep costs down, the penalty for submitting supplements, and the difficulty of serving two masters with conflicting interests. These admissions are significant because they come from inside the system, from participants who experienced the incentive structure firsthand.

For documented examples of contractors describing these dynamics, see When the Carrier's Own Contractor Admits Failure.

Your Right to Opt Out

This may be the single most important thing a policyholder can know about DRP programs: you are never required to use the carrier's contractor. In California, the law is clear on this point. You have the right to choose your own contractor, and the carrier cannot require you to use its preferred vendor as a condition of paying the claim.

California Insurance Code § 2071 establishes the standard fire insurance policy form, which requires the insurer to pay the amount necessary to repair or replace the damaged property. It does not require the insured to use a specific contractor. The California Code of Regulations, Title 10, § 2695.9(b) is even more explicit — it provides that the insurer may not require the claimant to have repairs made by a specific contractor.

Despite these protections, carriers sometimes create the impression that using the DRP contractor is required, or that choosing a different contractor will create problems. A policyholder may be told that the claim will take longer if they use their own contractor, that the carrier cannot guarantee the work if a non-DRP contractor performs it, or that the carrier will only pay based on its own estimate rather than the contractor's invoice. These statements may be technically accurate in some respects, but they are designed to steer the policyholder toward the DRP contractor.

The carrier's obligation under the policy is to pay the reasonable cost of repairing the damage, regardless of which contractor performs the work. If the carrier's estimate is lower than what it actually costs to restore the property to its pre-loss condition using a qualified independent contractor, the carrier's estimate is the problem — not the policyholder's choice of contractor.

For more on the myth that you need to obtain multiple bids before the carrier will pay your claim, see The Three Bids Myth.

Choosing Your Own Contractor

If you decline the DRP contractor, you will need to find your own. This can feel daunting, especially in the aftermath of a loss, but it places you in the position of having a contractor who works for you — not for the carrier that is paying the claim. Your contractor's financial incentives are aligned with yours: they want to do the job right because you are the one who will hire them again, refer them to neighbors, or leave them a review. They are not being scored on how cheaply they can complete the work.

For a detailed guide on selecting an independent contractor for an insurance claim repair, see Choosing Your Contractor.

When dealing with emergency situations immediately after a loss, the choice of vendor is equally important. Emergency mitigation contractors who arrive through the carrier's referral network may be subject to the same DRP dynamics described above. See Emergency Mitigation Vendors for more on how to handle the critical first days of a loss.

What to Ask Before Accepting a DRP Contractor

If you are considering accepting the carrier's recommended contractor, or if you want to evaluate whether a DRP contractor has already performed work on your property, the following questions can help you assess the situation.

• Is the contractor part of the carrier's DRP or managed repair program? The carrier may use different names for the program, but the question is whether this contractor has a referral agreement with the carrier. If the answer is yes, every dynamic described in this article applies.
• Who prepared the scope of work?If the carrier's adjuster prepared the scope and the contractor is simply executing it, the scope reflects the carrier's assessment of the damage, not the contractor's independent professional judgment. Ask whether the contractor has independently inspected the property and whether they agree that the carrier's scope is complete.
• What happens if the contractor discovers hidden damage during repairs? The answer should be that the contractor will document the damage, notify you and the carrier, and submit a supplement. If the contractor is evasive about this or suggests that supplements are unlikely, that may indicate the contractor is incentivized to minimize supplemental claims.
• Has the contractor agreed to pricing terms with the carrier? If so, the contractor is working at rates the carrier has dictated, not rates the contractor has independently determined are sufficient to restore your property to its pre-loss condition.
• What warranty is being offered, and who stands behind it? Is the warranty backed by the carrier, the contractor, or both? What happens if the contractor goes out of business? What recourse do you have if the contractor disputes whether a problem falls within the warranty?
• Am I required to use this contractor?The answer is always no. If the carrier suggests otherwise — directly or indirectly — that is a red flag. California law protects your right to choose your own contractor.
• Can I get an independent assessment of the damage? You have the right to retain your own contractor, public adjuster, or other expert to evaluate the damage and prepare a competing estimate. The carrier may not refuse to consider this estimate or penalize you for obtaining one.
• Will the carrier pay based on the actual cost of repairs, or only based on the DRP pricing? If the carrier insists on paying only what the DRP contractor would have charged, this is worth challenging. Your policy obligates the carrier to pay the reasonable cost of restoring your property, not the discounted rate the carrier negotiated with its preferred vendor.

The Broader Pattern

DRP programs are not isolated practices. They are part of a broader pattern in which carriers seek to control every aspect of the claims process — who inspects the damage, who estimates the cost, who performs the repairs, and what scope of work is considered sufficient. Each point of control is a point at which the carrier can influence the outcome in its favor.

When the carrier selects the contractor, sets the pricing, defines the scope, and scores the contractor's performance based on cost and speed metrics, the carrier has effectively positioned itself as the decision-maker on all the variables that determine what the policyholder receives. The policyholder, who is paying premiums for the right to have their property restored after a loss, becomes a passive participant in a process controlled by the entity that benefits from paying less.

Understanding this structure does not mean that every DRP repair is deficient or that every DRP contractor is acting in bad faith. Many DRP contractors do good work despite the incentive structure they operate within. But the system itself is not designed to produce the best outcome for the policyholder. It is designed to produce the most cost-effective outcome for the carrier. When those two objectives align, the DRP works fine. When they diverge — when restoring the property properly costs more than the carrier wants to pay — the scoring system tells the contractor exactly which master to serve.

For Attorneys: Evaluating DRP-Related Claims

When representing a policyholder whose property was repaired by a DRP contractor, the DRP scoring system and its incentive structure can be powerful evidence in bad faith and breach of contract litigation. Several areas of inquiry are particularly productive.

Discovery of Scoring Metrics

In discovery, request the carrier's DRP program documentation, including the contractor agreement, the scorecard criteria and weightings, and the specific contractor's scores for the period covering the policyholder's claim. Request the contractor's supplement ratio, average claim cost, and cycle time metrics, and compare them to program benchmarks. If the contractor's scores were declining before the policyholder's claim, that context may illuminate the contractor's motivation to keep costs down on the subject claim.

Supplement History

Request the contractor's supplement submission history and any communications between the contractor and the carrier regarding supplements on the subject claim. Did the contractor discover damage that was not on the original scope? Did the contractor submit a supplement? If so, was it approved, reduced, or denied? If the contractor did not submit a supplement despite discovering additional damage, this is evidence that the DRP incentive structure influenced the contractor's behavior to the policyholder's detriment.

Scope Control

Examine who controlled the scope of work. If the carrier's adjuster defined the scope and the DRP contractor simply executed it, the carrier is responsible for any deficiencies in that scope. If the contractor identified deficiencies in the scope but was discouraged from submitting supplements, the carrier's DRP structure is a proximate cause of the policyholder's incomplete repairs.

Pricing Below Market

If the carrier uses the DRP contractor's pricing to justify its estimate, challenge whether those prices reflect the reasonable cost of repairs or whether they reflect the discounted rates the carrier negotiated as part of the DRP arrangement. Retain an independent contractor or estimator to provide a competing estimate at market rates. The difference between the DRP pricing and the market pricing is the spread the carrier is extracting from the policyholder's claim through its volume purchasing arrangement.

Deposition Testimony

DRP contractors can be powerful witnesses when deposed. Many will acknowledge the scoring system when confronted with their own program agreement. Questions about how referral volume correlates with scores, what happens when a contractor's supplement ratio rises, and whether the contractor has ever declined to submit a supplement due to concerns about their scorecard can produce testimony that is devastating to the carrier's position that the DRP serves the policyholder's interest.

The Bottom Line

Direct Repair Programs are marketed as a convenience and a quality assurance measure. In practice, they are a cost containment mechanism that allows the carrier to influence every aspect of the repair process — who does the work, how much it costs, how long it takes, and how thoroughly it is done — while maintaining the appearance of arm's length between the carrier and the contractor.

The scoring system is the engine of this influence. By measuring and rewarding contractors based on metrics that align with the carrier's financial interests — low supplement ratios, low average claim costs, fast cycle times — the carrier creates an incentive structure that rewards contractors for minimizing claims, not for restoring properties. The contractor who finds all the damage, reports it honestly, and insists on adequate payment is penalized. The contractor who goes along, keeps costs down, and closes files quickly is rewarded.

You have the right to opt out. California law protects your right to choose your own contractor. Exercise it. Your contractor should work for you, be paid a fair price for their work, and have no financial incentive to minimize the scope of your repairs. That is not what a DRP is designed to deliver.

Related Resources

• The Carrier's Preferred Contractor: Who They Really Work For
• Choosing Your Contractor
• Tortious Interference in Insurance Claims
• When the Carrier's Own Contractor Admits Failure
• The Three Bids Myth
• Emergency Mitigation Vendors
• Scope of Loss

Legal References

• California Insurance Code § 2071 — Standard fire insurance policy form. Link
• California Code of Regulations, Title 10, § 2695.9 — Fair Claims Settlement Practices Regulations, including provision that the insurer may not require the claimant to have repairs made by a specific contractor. Link
• California Insurance Code § 790.03 — Unfair and deceptive practices in the business of insurance. Link
• California Business and Professions Code § 7159 — Home improvement contracts. Link
• California Code of Regulations, Title 10, § 2695.7 — Standards for prompt, fair, and equitable settlements. Link