If you’ve ever filed a home or auto insurance claim, your insurance company may have provided you with a mechanic or contractor that they recommend for the work. In most cases, you don’t have to use this vendor, so why is your carrier recommending them at all? In this case, your insurer is likely promoting a preferred vendor — a win-win business relationship where the vendor gets a steady stream of customers and the carrier usually gets discounted work and expedited claim timelines.

Even though you aren’t required to use a preferred vendor in most cases, this isn’t always clear to policyholders, and issues can arise when these vendors put the insurance company’s needs above the policyholder’s or when the quality of their work falls short.

As an insurance adjuster, I have concerns about how preferred vendor programs operate in practice. I think policyholders deserve to understand the system they’re entering into when they accept one. However, this article represents my personal opinion, not a professional conclusion. As an expert witness, I base my opinions on the policy language, facts of loss and documentation — not my personal feelings. If a policy requires the use of a preferred vendor and the insured agrees to that contract, I will acknowledge that obligation in my analysis.

What are preferred vendor programs?

A preferred vendor program is an arrangement between an insurance company and certain contractors or service providers. In exchange for a steady stream of referrals, these vendors agree to follow insurer guidelines, work within pre-approved pricing and meet documentation and timeliness standards.

From the carrier’s perspective, these programs help control costs — which in turn can help stabilize premiums. Vendors benefit from a reliable flow of clients and reduced marketing expenses. For policyholders, especially those navigating a stressful loss, the convenience of a ready-to-go contractor may be welcome.

How preferred vendor programs evolved

The history of preferred vendor programs mirrors that of preferred provider organizations (PPOs) in health insurance, which began taking hold in the 1980s. PPOs allow insurers and self-funded employers to negotiate discounted rates with doctors and hospitals in exchange for channeling patient volume.

This managed-care model proved effective at controlling costs and standardizing service, and over time, insurers in other lines of business began to take notice. In the property and casualty space, carriers adopted similar principles: build a network of pre-approved contractors, establish pricing agreements, and streamline the claims process by referring policyholders to vendors in the network.

The original motivation was primarily cost control. Claims are one of the largest expenses insurers face, and anything that reduces variability — in scope, pricing or repair quality — helps manage that expense.

Where anti-steering laws come into play

I first encountered the preferred vendor programs while handling auto claims. Many states prohibit insurers from requiring policyholders to use a specific repair shop — a practice known as “steering.” These laws were put in place to protect consumer choice and reduce insurer influence over repairs.

When I was a newer adjuster with just a few years under my belt, this created challenges. In fact, I remember one claim where the insured was rear-ended while making a right-hand turn. They were unsure where to take their vehicle and asked for a recommendation. I felt bad saying no — especially when I had shops in mind that I knew and trusted. But I couldn’t tell them that.

My team leader explained why we couldn’t steer. If I recommended a shop and the work was substandard, the carrier — and possibly I — could be held responsible. To stay compliant, I was instructed to provide a neutral list of three or more shops, with no favorites and no guarantees.

It kept us compliant, but it didn’t always feel helpful.

For many insurers, preferred vendor programs became a way to bridge that gap. These programs allowed carriers to work with trusted repair facilities — ones that agreed to pre-approved pricing and specific quality standards — without explicitly requiring the policyholder to use them. The customer still had the final say, but there was a vetted option available, and it came with logistical perks like faster estimates, streamlined supplements and sometimes even repair warranties.

Over time, these programs expanded beyond vehicles and into property claims — but that’s where the model gets more complex.

Where things get complicated: Homeowners claims

Preferred vendor programs in auto claims are relatively straightforward — the insured drops off the vehicle and picks it up when repairs are done. Things get murkier with homeowners insurance — especially if the same vendor performs both emergency remediation and permanent repairs.

As an adjuster, I understood the value of quick action. But as an expert witness today, I see how these transitions — especially when not clearly communicated — can complicate the claims process in hindsight.

The vendor handoff

Let’s say a pipe bursts on the second floor of your home. Water damages the bathroom, seeps into the hallway and pours down into the living room ceiling. It’s 9 p.m. when you call your carrier. The first priority for both you and the carrier is stabilization — stopping the damage from spreading, removing the water and preventing mold.

The customer service representative you speak with when you initially report the loss dispatched the carrier’s vendor, RapidRestore (a fictional vendor for this example). They show up within hours to remove water, tear out soaked drywall and set up dehumidifiers and fans. As the policyholder, you have not hired them — you’re in crisis mode. From your perspective, it feels like the insurance company sent help. And in a way, we did.

The next step is where it can get confusing. RapidRestore may also offer to handle the reconstruction — repairing walls, replacing flooring and painting. It’s a separate phase that requires your explicit approval as the homeowner because the work has moved from emergency to repair.

Many homeowners don’t realize the line has shifted.

Even as an adjuster, I struggled with how to explain the distinction. There’s no formal handoff moment. No one pauses the process to say: “From here on out, you’re hiring this contractor yourself.”

That’s where the confusion happens. And it matters — because now, the RapidRestore transitions from emergency responder to general contractor. If something goes wrong, the warranty or responsibility structure shifts from the insurer to the policyholder.

As an expert witness, I’ve reviewed many letters from carriers trying to clarify this arrangement. They typically say:

• The vendor is your choice, not the insurer’s.
• You are hiring the vendor, not the carrier.
• The carrier has no financial relationship with the vendor.
• The insurer will pay the vendor directly — but only for covered repairs.

That last point often causes confusion. Many policyholders assume all damage from a loss is automatically covered. But if the contractor performs work the policy doesn’t cover — even unintentionally — the bill may become the homeowner’s responsibility.

To add to the complexity, you’re often asked to sign multiple documents on the spot: work authorizations, contracts, payment assignments. Fans are whirring. Drywall is coming down. It’s a lot to process.

These disclosures are meant to protect consumers. And in many cases, they do. But even with the best intentions, gray areas remain. When a vendor arrives with equipment and paperwork — and the carrier appears to be coordinating it all — the relationship can feel far less optional than it is.

It’s not that anyone is trying to mislead the homeowner. But in the middle of a high-stress situation, the line between carrier assistance and consumer responsibility can be easy to miss — and preferred vendor programs can make that line even harder to see.

The concerns I can’t ignore

In my career, I’ve seen several issues arise in preferred vendor situations. Here are the ones I think are worth examining more closely:

Delayed totals in auto claims

I’ve worked claims where a preferred vendor initially deemed a vehicle repairable — only for multiple supplements to follow. A month into the repair process, the vehicle was declared a total loss. By then, the insured had been in a rental car for weeks, and costs had ballooned. Had the total loss been identified earlier, the claim might have resolved more efficiently and the insured could have moved on. This raises red flags about the quality of the vendor.

More loyalty to the carrier than the policyholder

Preferred vendor programs also raise questions about who the vendor is ultimately working for. From the policyholder’s perspective, it may feel like the contractor is there to advocate for them — but vendors in these programs typically have long-standing relationships with insurers, not with individual insureds.

In my experience, most contractors do the right thing. But I’ve also seen cases where a vendor’s priority seemed to be getting the job done within the carrier’s pricing guidelines, even if that meant cutting corners or overlooking less obvious damage. This could include using lower-quality materials that are easier to source or not doing a thorough inspection for mold outside of the areas directly affected by a burst pipe.

That doesn’t necessarily mean something is amiss — it’s a reflection of the vendor’s role in a system designed for efficiency. Still, it can create a subtle conflict of interest: the vendor’s success may depend on keeping both parties happy, even when their goals don’t always match.

Confusion over warranty responsibility

There’s long been an assumption — by policyholders and even newer adjusters — that if the insurer recommends a vendor, it must guarantee the quality of the repairs. Early in my career, I was explicitly warned not to make vendor recommendations for that very reason. I was told I could be personally liable if the contractor did substandard work.

But in recent years, I’ve reviewed policies that say something entirely different. Today, some carriers include language stating that if a vendor performs poor workmanship, and the vendor was recommended by the carrier, the insurer will pay to fix it.

From an expert witness standpoint, I find this shift surprising. It suggests that insurers are now accepting a form of limited warranty liability for the vendors they recommend, at least under certain conditions.

That changes the game. This evolution in policy language reflects a broader trend: insurers trying to reduce friction in the claims process by keeping control over repairs — even if it means absorbing more risk. However, it might mean, as in the case of my auto claim, the carriers are paying more on the front end, which increases loss adjustment expenses.

As long as the language about warranty duration and responsibility is clear, there shouldn’t be an issue, but you may run into problems in situations where responsibility isn’t clear and poor quality work is being performed.

Policyholder experience takes a back seat

Even when repairs are technically correct, the process can leave insureds feeling sidelined. The relationship between the vendor and the carrier is tightly coordinated — but the homeowner may not fully understand their rights or role. That’s especially true when communication moves quickly and documentation is handled between the contractor and the adjuster without looping in the policyholder.

What policyholders can do

If your insurer offers a preferred vendor, here are a few things you can do to stay informed and in control:

1. Ask whether the vendor is optional: You have the right to know if the contractor or service provider is part of a preferred program — and whether you’re free to choose someone else. Most states require this disclosure, but it never hurts to ask directly.
2. Read what you’re asked to sign: Preferred vendors typically present contracts or work authorizations before starting repairs. Don’t assume everything is covered just because the contractor came through your insurer. Ask for clarification on scope, exclusions and payment responsibilities before you sign anything.
3. Keep records and timelines: Whether you use the preferred vendor or hire your own, document key milestones: when work starts, what gets done and when it’s completed. If concerns arise later — about construction quality, billing or coverage — clear documentation can help support your case.

The bottom line

Preferred vendor programs aren’t inherently bad. They can provide value, especially for people who don’t know where to start after a loss. But they can also introduce complexity, confusion and — in some cases — unintended consequences for the very people insurance is meant to serve.

Policyholders should know that they have options. And insurers should take care to make those options clear, consistent and fair.