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How Subrogation Affects you Bottom Line

By Robert G. Feldman, Esq. in Insurance Professionals of the Main Line E-newsletter

 

We are living in an economic climate where front-line adjusters are receiving more claims resulting in a higher pending inventory. This is occurring while insurers are facing increased pressure, dwindling investment yields, weak demand, and severe underwriting losses.  The reality is that ongoing mergers, acquisitions, and downsizing have dramatically changed the face of the insurance business in America. According to the 2011 Deloitte Report "Driving Operational Excellence in Claims Management" up to 80% of each earned premium dollar is used for payouts and related expenses.



Facing these heightened challenges, it is essential for an insurance company to maximize its subrogation and recovery functions in order to positively impact the bottom line. This will not only make a huge impression on its shareholders and policy holders but will go a long way to distinguish the carrier in the marketplace. This is opportunity within an insurer's claims service function that should not be overlooked.



Consider this- if two insurance carriers both incur losses of one billion dollars, the carrier  that recovers 10% of the losses will have a competitive advantage over a carrier that only recovers 2% of its losses. This will not only substantively reduce the carrier's losses but will provide increased savings, lower premiums, and increase the potential for a gain in market share.



According to subrogation experts, missed subrogation opportunities can exist in 10-15% of all closed files, making this a $15 billion dollar industry. Missed subrogation opportunities overlook solid opportunities for recovery. The 2008 NASP Auto Benchmarking study indicates that 78% of auto subrogation claims are insured. These present a real opportunity for hard recovery, particularly if the claimant carrier is a member of Arbitration Forums.ential for a gain in market share.



Recovery can be maximized by outsourcing difficult claims, resulting in a competitive edge in the marketplace as well as a net back to increase the bottom line.

 

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