CFOs: Subrogation Equals Profit

Back in July 2009, INN reported on a survey that found auto insurers subrogation efforts to be lacking. Those insurers, the survey posited, are missing out on an opportunity to positively impact profits. Almost six months later, the same organization this time polled CFOs at property/casualty insurance companies only to find that their original supposition was proving correct—that CFOs who treat subrogation as a core activity report higher profit and satisfaction.

Praxis Consulting, a provider of specialized subrogation consultative services, commissioned The Ward Group to survey a diverse group of CFOs about their companies' subrogation activity, profitability, reporting and operations. When asked to rate the impact of subrogation recoveries on their company's net income, 67% of participants indicated subrogation recoveries had "some" or "significant" impact on their company profits.

Thirty-nine percent (39%) referred to subrogation as a core activity at their company, indicating that it plays a significant role in discussion and planning carried out by the senior management team, according to "Subrogation Operations: A Financial Point of View," a Praxis whitepaper in which the survey results are presented.

Those companies that considered subrogation a core activity—independent of whether handled internally or by an external subrogation services provider—felt it had a higher impact on company profit than those that did not.

Alternatively, the 17% of CFOs who indicated they felt they could more effectively utilize the headcount and expenses associated with subrogation elsewhere in their company also rated subrogation as having some or no strategic importance.

Aside from premiums and investment returns, subrogation is one of the few remaining ways insurance companies generate revenue, Praxis says.

To obtain the complete results, visit www.PraxisConsulting.com/CFO-Survey.

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