There is a longstanding industry shortcoming: Major insurance carriers often overlook subrogation opportunities as a potential means of offsetting losses, maximizing revenue and positively affecting customer retention. This is among the results of a recent study conducted by
"This marks the first time that anyone has undertaken a benchmarking study of New York and New Jersey PIP subrogation results," said Robert Ford, president and founder of Praxis. "The results have worked to solidify our notion that when the proper resources are allocated to subrogation, the practice can become a viable and self-sustaining new revenue stream, as well as the reverse."
The Ward Group, a consulting firm specializing in the insurance industry and provider of industry benchmarking and best practices services, asked a diverse group of 14 companies to provide responses to questions focusing on subrogation statistics, performance and practices for 2007 and 2008. The responses were collected between April and June 2009. The participating companies in this study represented approximately 48% of the total New York and New Jersey auto insurance market.
Of the participating companies, more than 92% have a dedicated internal subrogation unit, with just one participant relying on the primary staff adjuster to subrogate the claim. However, within these units, technological resources such as predictive analytics and expert systems were not as readily put to use as they are in other areas of the claims organization.
Additionally, 100% of the participating companies reported having their claims' inventory profiled by external vendors to identify missed subrogation opportunities, which is not surprising, notes Praxis, considering 71% of participants claim a lack of established referral guidelines or claims payment deadlines. Such factors further contribute to an increase in missed opportunities to subrogate. Referrals were typically (64% of the time) manually referred by the primary claims adjuster, whose primary responsibilities during the claims cycle are decidedly not subrogation but rather, determining coverage, investigating facts of loss, assessing liability, calculating damages, negotiating settlement, setting reserves and issuing payment.
The study additionally offers insight into subrogation litigation practices, state-specific arbitration, personnel and other expenses, recovery rates and uninsured collections.
