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veloped
and this maximum is being approached, we simply call the client, who
then decides whether this proposed follow up is warranted, or
whether the matter should be dropped at that point pending a review
of the report. This is usually the most cost effective method
for insurance company clients, since it restricts the cost, without
requiring that a maximum be charged.
Flat Rate Services:
We do realize, however, that
for some reason, many insurance administrators prefer flat rate
programs on claims-related work and may even require all assignments
be handled in this manner. Our experience has taught us that flat
rate work generally costs the client more in the long run, and often
produces less than the desired results. For instance an
ethical investigator conducting four witness interviews in the same
out-of-town area for four separate clients might normally finish up
all four assignments in eight to nine hours, with some luck.
The time and expense charges would then be prorated (again, assuming
an ethical investigation service) between the four cases, with each
client paying for about two hours service and 25% of the
mileage. Handling the same situation as four flat rate
assignments would result in each client paying the full amount of
the flat rate service. Since the availability of prorating and
other variables cannot be safely considered by an investigative
service quoting an all inclusive flat rate, flat rates for most
insurance work tend to be conservatively priced. In the
situation above, here are the economics assuming the investigator
finished up in an eight hour work day:
Flat
Rate: Witness Interview: $200
Total time paid by
clients = $800
Total expense paid by clients = -0-
Total billed to each client $200
Hourly Rate: Witness
Interview $50, Plus Expense
Total time paid by
clients = $400
Total expense paid by clients = $40
Total billed to each client = $110
Even taking into account that expenses are included
in the flat rate, the service charging the flat rate would bill $360
more that day than a service charging by the hour. All things
being equal, the service handling all work as flat rates would bill
an additional $1,800 per week, per investigator; or an additional
$90,000 per year. (It should be noted that a less ethical
investigator working on an hourly basis might charge each
client 5 hours, or more, plus $40 expense--in effect charging each
client for the travel time and expense which was only incurred
once.)
One Valid Reason for
Flat Rates:
Flat rates do have a valid
application in cases where the insurance company (or more often, a
self-funded risk) assigns a high volume of routine work--such as
workers' comp retiree updates--and the majority of the cases will be
conducted within a relatively small geographical area.
However, for most insurance companies, they are not cost efficient.
The Best Flat RateSM:
In an effort to handle this
issue in a manner that can prove more cost effective to clients who
are restricted to flat rate assignments by company policy, we tried
to be a little creative and developed what we simply call The
Best Flat RateSM.
Here's how it works. We provide a schedule of flat rate prices
for services. Like other investigative firms that offer flat
rates, our charges for the service will not exceed this rate.
If, however, we could have conducted the same service less
expensively if it had been handled on an hourly basis, the client is
billed the lower of the two op |
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