Going back to my days with responsibility for subrogation outcomes for a large global carrier, we had an established subrogation infrastructure that was a shared service across many of our domestic and global business lines. There were areas where they performed well, and areas of opportunities, which is where we focused our improvement efforts. This may sound familiar, as it is a common organizational structure, often seeing similar results.
What we identified was a direct correlation between claim complexity and recovery probability. The lower the complexity, the higher the recovery probability. By increasing the volume of lower complexity, higher yield claims internally, we saw an improvement in both productivity and dollars coming back in the door.
Our challenge was to create a world class, championship team that outperformed everyone in the industry! The realization was that we could not do this alone. We had some great team members, and some outstanding leaders. But we also had the limitations that come with any claims organization. To build out our team, we identified our three biggest areas of opportunity.
- A significant number of claims were being closed with a missed subrogation opportunity by front line adjusters. This was a situation in which we utilized SecondLook to evaluate claims for missed opportunities and the result was several million dollars in new recoveries.
- Complex coverage lines. Auto PIP and MedPay have some unique nuances that are often overlooked. Think of loss transfer in New York, out of state losses in New Jersey or multiple vehicle accidents involving motorcycles in Michigan. There are a significant number of claims closed with missed opportunities in just these two coverage lines. In a recent audit, SecondLook went behind both the front-line adjuster AND this carrier’s subro vendor and recovered over $2 million dollars that both had missed. Beyond PIP and MedPay, there are other coverages such as Property, Work Comp and Cargo where significant opportunities are frequently missed. By deploying a solution that can focus on these more complex areas, it frees up internal resources to focus on the highest recovery opportunities.
- Arbitration is a time-consuming task. As we were looking to improve our claims processes, we focused on a couple of different aspects of arbitration. We removed responsibility for response arbitrations from the front-line adjusters and leveraged a dedicated team which dramatically increased our results. When it came to applicant arbitrations, we focused on using our internal resources to go after the highest probability recoveries, and by leveraging a partner for more complex arbitrations, we were able to increase internal productivity, as well as overall results.
There is no straight forward answer to when or what to leverage with partners. In our situation we outlined the entire recovery process from FNOL through deductible refund. By identifying deltas in existing processes we were able to land on our success model. This is an exercise that every claims organization should go through from time to time. While we know that 15% of claims are closed with a missed subrogation opportunity, the reasons why will often vary and will require specifically designed solutions.
My personal experience was that having a business partner on the outside created more flexibility on the inside. While we never outsourced the bulk of our work, we did leverage our partners in such a way to consistently review closed files for missed subro, free up staff in the event of a CAT, provide overflow during times of rapid growth or staffing issues, and to get us better results in areas that we had identified as deficient, such as arbitration. It is easy to win subro here and there. It is hard to win consistently and at far better results than the industry. Creating the world class subro team takes time, collaboration, patience and vision. As Michael Jordan once said, “Talent wins games, but teamwork and intelligence win championships.”
Chris Tidball is an Executive Claims Consultant with SecondLook, a leading provider of subrogation services. He spent more than twenty years with multiple leading insurers as an adjuster, manager and executive. Chris is the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary, multiple fictional claims thrillers and the screenplay for the television series The Adjuster. He can be reached at ctidball@2ndlook.net