As soon as I saw the news on TV that evening in June, 2012, showing the effects of the powerful hailstorm that pummeled cars, homes, and businesses in the Dallas area, I knew what was coming next — roofing contractors handing out cards and putting up yard signs. The record-breaking hailstorm caused an estimated $2 billion in property damage, and roofers were soon competing for business.
Some signs and ads offered “Get Your Roof for Free,” “No Deductible,” or “Deductible Waived.” The offers to pay or waive deductibles – called deductible assistance programs — were so widespread that consumers and roofing contractors alike could have assumed there were no questions about the offers. But, due to serious concerns, BBB Dallas cautions consumers in considering deductible assistance programs.
BBB looked into deductible assistance programs when both roofing contractors and homeowners asked Dallas BBB the offers after that summer hailstorm. According to industry sources and regulators, what seems like such a good deal might in fact be a bad idea.
Don’t be surprised if you’re confused by deductible assistance programs – they are “frequently convoluted enough to confuse even savvy consumers,” BBB found. Two common approaches are:
- Fraudulent quote. A roofer charges the customer one amount, for example, $8,500, and the customer submits a fake receipt to his insurance company for a higher amount, perhaps $10,000. The insurance company is over-charged, and the customer could end up in hot water for insurance fraud.
- Advertising reimbursement. A roofer bills the consumer for the full replacement value of the roof at the maximum amount that the insurer will pay. The roofer then uses a “change order” to reduce the final price to the consumer in an amount equal to the deductible. In return, the consumer agrees to advertise for the roofer by displaying a sign in the front yard. In short, the insurer foots the deductible costs.
You can read BBB’s study, “Roofing Deductible Assistance Programs: Diagram of a Scheme,” at http://tinyurl.com/DeductibleAssistancePrograms.
“These programs walk along a very fuzzy line of insurance fraud, and neither roofer nor consumer would want to be held liable for such serious allegations,” BBB in Dallas says.
Keep in mind that laws and regulations vary from state to state. In Texas, there’s a fine line and consumers may have a hard time determining whether they are participating in insurance fraud.
Texas law prohibits advertising or offering goods or services and offering to pay a deductible, or a rebate equal to all of part of the deductible. On the other hand, a 1990 opinion by the Texas Attorney General held that waiving the deductible was technically not the same as paying the deductible. The opinion found that even if waiving the deductible may be technically OK, it was still in the spirit – and had the same result as – the prohibited practice.
In Missouri, a new law prohibits roofers from offering to pay a homeowner’s insurance deductible as an incentive for the homeowner to hire the contractor.
If homeowners save deductibles and roofers gain customers, who loses out? Ultimately, both consumers and roofing contractors lose. Insurance companies pay out more in claims and raise premiums to cover those payouts. Roofing contractors that don’t offer deductible assistance programs lose business to roofers that do make the questionable offers.