Are you a private investigator who wants to work insurance fraud cases or worker’s compensation claims (aka “SIU” or Special Investigations Unit) cases?
If you own a small PI firm, you probably haven’t had any luck being hired directly by insurance companies. You’re struggling to compete with the big national investigations firms. Maybe you’ve considered subcontracting or becoming a vendor for the big PI companies, as a back door into these kinds of cases.
Let me encourage you to think again.
My firm subcontracted for larger PI companies for several years. Now, we rarely do. I’ll get to why in a moment. But first, an overview of how these big firms work, and what it’s like working for them:
As I’m sure you’ve noticed, the “worldwide” or “nationwide” private investigations companies that handle insurance investigations are making life hard for small regional PI firms. They are killing us, which is why so many sole practitioners opt to give up on direct marketing to insurance companies and subcontract to bigger firms.
There are several problems with this. First, some of these big firms (Hub Enterprises in Lafayette, LA, and Lemieux and Associates in CT, to name a couple) will not hire subcontractors at all. These companies demand control over their product, and they actually comply with their client’s requests that they NOT sub out their cases.
Others want to hire you as a direct employee (either part- or full-time) and will pay you accordingly, which is much less than you would make as a subcontractor. And becoming an employee limits your freedom to say no to punishing caseloads, impossible deadlines, or constant travel.
However, there are some midsize and large firms that hire investigators as subcontractors. For years, I worked myself to death for these companies, chasing overdue invoices and scrambling to fulfill “rush” assignments. The stress and exhaustion took a toll on my health. I had to learn to make adjustments.
In outlining the hard lessons I learned in those years, I hope I can save you some of the frustration I endured.
What You Can Expect as an Insurance Fraud Subcontractor
The pay is low…
I receive calls regularly from other PIs who think they want to get into insurance investigations. When I tell them the rates and the pay schedules, they often change their minds quickly and go back to domestic work and process service. You don’t make $65 – $85 an hour plus mileage on most insurance / worker’s compensation surveillance cases.
Many of those PI companies will also micromanage your cases. They’ll break you off at the 4- and 6-hour marks, while billing their client for 8 hours. And on insurance surveillance assignments, many clients will only pay daily rates, all-inclusive, with no additional charges for mileage or report time. These are not domestic cases, domestic clients, or attorneys. They will not pay late fees. They do not care.
And before you ask, you cannot get paid up front in this industry. You do not get a retainer. You turn in your invoice and you wait.
…and the pay is late.
If you read the fine print of your sub-contractor agreement, you’ll most likely see language like this regarding payments: “Payment will be issued within 45 days upon completion of the case….” That usually means when they close THEIR case, not when you complete your efforts and submit your bill. They are not concerned about your payment terms.
Those states that have PI licensure and PI boards (and Mississippi still has neither) are not concerned about your late payments or how you are treated by these companies. Most of these companies are in a different state than you are, which is why you got the work in the first place.
I now have 20 investigators in 5 states across the Southeast. My investigators expect to be paid within two weeks. But when I was primarily a sub-contractor, I usually received payment after 45-60 days, and I still tried to pay my people on time. Whenever I could, I paid them out of my own pocket (and eyed my accounts uneasily while my invoices went unpaid). But I still lost several PI clients over the years because of these companies’ slow payments to us.
I used to spend lots of time, energy and anguish sending out late notices and calling clients about money owed to us.
It is a common problem: The large PI firms pay their bills and their own investigators first. The “subs” are way down on their list of priorities, regardless of the payment terms printed on your invoice.
My worst experience was with a large investigations company based out of Florida. We did a lot of work for them, and our video percentage with that company was at almost 100%. When I complained that we had several thousand dollars out at 85+ days past due, each department blamed the others for the delay. I finally emailed the company president and vice-president. They immediately pulled all of their cases from us and never used us again. We received payment at 92 days past due, and they paid none of our late fees.
That particular company could not believe that a lowly subcontractor was questioning their top brass about their past due payments. This is a prime example of the mentality of these companies. They want you to keep quiet, work the cases ASAP, and turn in your stuff immediately, and they will pay you when they are good and ready.
It was quite amusing, and (I must admit) a bit satisfying, when the next day I received calls from multiple PI companies begging us to cover those cases. The other firms (my competition) were just going to sub out those Florida cases to us and take a little off the top for themselves.
My response to them? “Negative.”
To this day, I still receive requests from other firms to cover that Florida company’s cases. I didn’t do it then, and I won’t do it now.
But they still want their work product NOW.
It gets worse. Many of these cases are last-minute RUSH assignments. These companies will call you on Friday and beg you to work a case that weekend. You scramble to get it covered, obtain damaging claimant video, document a drug deal or two, uncover outside employment, etc … and then they still will not pay you for 50-90 days.
And no, you cannot hold the video and your case report. Most PI companies now require an update the day the case is worked, and reports and video must be turned in within 24 hours upon completion of the case. You will find those requirements in your “vendor/subcontractor agreement.”
One company I worked for would even fine their vendors/subs if everything was not turned in on time. I received an email recently from a client requesting a RUSH case worked “that weekend.” This company still owed us money from the last RUSH assignment, and they were at 45+ days past due. All you can do is tell them, “Ahmmmm, no,” and that you cannot do any more work for them until you receive payment for all outstanding invoices.
Of course, if you do that, they probably won’t call you back. They’ll just move on to the next starving sub who is unfamiliar with the industry and the payment terms.
“Management companies” will pass the buck.
Finally, let us not forget about the “management companies.” These companies claim to provide nationwide “turn-key” SIU services for insurance carriers and third-party administrators. Many of these companies have NO field investigators, only case managers. All of their investigators are subs/1099s from companies like yours and mine.
Going through a management-company middleman compounds the problem of slow payment. When you complain about overdue invoices, they simply tell you that they don’t pay the bill, they simply manage the case. They will forward your report and invoice to their client, who then pays you (eventually).
But they won’t let you contact their client directly about a past due invoice, as per your agreement with them. So you just have to wait, and there’s little you can do about it.
The insurance companies may not even know the work has been subbed out.
Many insurance companies instruct the big PI firms they hire NOT to sub out work to 1099 guys like you and me. But those “worldwide” PI firms can’t cover every location, so they tell their clients that you work for them directly. I once subbed for a client who told me, “This particular client forbids us from using subcontractors, so we need you to complete an application. Just in case we are asked we will have it on file….”
The more the case is subcontracted out, the less quality control the insurance company, the PI firm, or you (if you sub it out) will have over that case. Try getting your report and video in on time when the case has been subcontracted out three or more times. And those same PI clients will hire you to sub and will then tell you to make sure YOU don’t subcontract the case out to someone else!
I have struggled to market directly to these insurance companies, but it isn’t easy. Many do not understand that most of those “national” PI companies they hire don’t have investigators everywhere, especially in rural areas of Mississippi and Alabama.
Again and again, I have sought work from these companies by explaining to them that I have worked their cases as a subcontractor for years. I told one company that I was, in fact, working one of their SIU cases as a sub-contractor that very week. They ended the call and advised me, via email, that they were not adding to their vendor list.
It is the head-in-the-sand mentality, a “secret” within the industry that is not really a secret, at least not to us PIs.
And as for the sub-contractor agreement? Read the fine print.
The sub-contractor agreement will almost always include a non-compete clause. The big PI firms want to prevent you from marketing to “their” clients, who essentially end up being everyone’s clients. I have a subcontractor agreement for my company that all my investigators must sign, but I do not include a non-compete clause. We all have to make a living.
Signing away the right to work for certain clients can do your company great harm in the long term.
And, by the way, for those “right to carry” folks, I do not know any of those companies that will allow you to carry firearms on insurance investigations, despite your location and whether you have a permit (as I do) to carry a weapon, and/or whether the weapon is kept in your vehicle. For many, this may be a major deciding factor, or even a deal-breaker.
I’m not saying that you shouldn’t seek work as a subcontractor for the big insurance firms. But if you do choose to subcontract as an insurance fraud investigator, you should know as much as possible about how these companies do business and how you can protect your own small firm’s bottom line.
In the next installment, I’ll talk about best practices for subcontractors who want to work insurance cases.
Richard A. Brooks has specialized in insurance fraud investigations in the Southeast for almost 15 years. In 2006, he founded Richard Brooks Investigations, a Jackson, MS firm with satellite offices near Mobile, AL and Ft. Lauderdale, FL. He is the immediate past president of the Mississippi Professional Investigators Association, the state director for the Mississippi Chapter of the Association of Christian Investigators, and a member of many other international, national and state PI associations. Before becoming a PI, Brooks was an active duty military and civilian law enforcement officer for approximately 10 years. He has also testified as an expert in general police procedures.