Automating Subrogation for Direct Impact on Insurers’ Bottom Line

Automating Subrogation for Direct Impact on Insurers' Bottom LineLoss and loss adjustment expenses are the largest cost component for property/casualty carriers. As such, anything carriers can do to reduce these costs has a significant impact on profitability.

Insurers may choose to subrogate claims, that is, seek recovery of expenses for claims in which their policyholders were not at fault. This may be accomplished by recouping medical costs and/or the cost of repairs from the adverse party’s insurer or in some cases by assuming salvage rights for repaired, recovered, or scrapped property or vehicles.

The Problem With Subrogation

Subrogation is still a highly manual process for many insurers, and with high claims workloads and varying levels of claims professional expertise, insurers do not pursue all the opportunities available to them.

The National Association of Subrogation Professionals estimates that the property/casualty insurance industry has US$15 billion in missed subrogation opportunities—15% of closed claims.

The main drivers of missed subrogation opportunities are a lack of timely investigation, unidentified third-party liability, and missing evidence.

Automated Solutions Can Help

An aging claims workforce with ensuing loss of experience, cost pressures, and a large volume of claims data are all reasons to adopt automated subrogation analytics solutions, leveraging artificial intelligence (AI) or related technologies, blockchain to provide an auditable but immutable record for multiple parties or to automate payments, and/or predictive analytics.

These solutions can rapidly review both structured and unstructured data to identify the most promising opportunities for subrogation recovery, as well as leverage business rules and digital processes to speed recoveries and the overall claims settlement process. They can also be used to predict liability risk for the third party’s insurer.

Subrogation-specific solution functionality may include one or more of the following:

  • Detection
  • Estimation
  • Recommendation of next best action
  • Subrogation professionals’ workflows
  • Recovery workflows
  • Total loss/salvage workflows

While some vendors focus on identification, sizing, and prioritization of subrogation opportunities, others offer end-to-end functionality. Even automation of identifying subrogation opportunities can result in significant increases to recovery, while ensuring consistency in processes and freeing up more experienced claims professionals’ time to focus on more complex claims.

Vendors may provide access to networks for arbitration and other steps in the subrogation process, and several have offerings that address other area of the claims life cycle, such as fraud detection.

What to Look for From Vendors

It’s worth noting that there is active consolidation in the subrogation analytics vendor space, the most recent example being CCC’s acquisition of Safekeep. Insurers should bear this in mind when selecting vendors, as well as features and functionality, robust and forward-thinking roadmaps, ongoing support for model updates, and insurance knowledge.

If you’d like to discuss our key findings in the property/casualty subrogation analytics space, please read our new report Property/Casualty Subrogation Analytics: Overview and Prominent Providers or contact Deb Zawisza ([email protected]) or me ([email protected]) to continue the conversation.

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