Subrogation is a concept that most insurance claim professionals are familiar with. Your company may have a subrogation division or even a specialist. Subrogation procedures are fairly uniform across all companies. Claims that are made due to partial or total negligence of a third-party are referred directly to the subrogation department, where subrogation efforts are concentrated.
Companies that achieve the highest recovery rates use a mixture of methods to recover as much money as possible. The best recovery process can vary depending on how many claims are coming in to a claims department. These are the methods that I have found to be the most efficient based on my experience. Let me break down the process by categorizing claim departments based on the number of new claims per calendar month. (Remember, we are only talking about automobile claims).
Small companies may submit 0 to 500 claims per month.
A subrogation specialist can be a great option for small businesses. If the monthly number of claims is less than 500, an expert can help you identify, manage, and collect all recovery claims. Each claim should be audited by a specialist to determine if it is possible to recover. To begin auditing or directing recovery efforts, the specialist must not wait for the claim payment to start. Before taking over the claim’s subrogation/recovery aspects, the recovery specialist must be able direct the front-line adjusters.
It is essential to work as a team when maximizing subrogation/contribution recovery. An experienced recovery professional can prevent obstacles from occurring by getting involved with subrogation as early as possible in the claims process. A major aspect of recovery that many insurance claim departments overlook is the active monitoring of recovery. Recovery can make a huge difference.
500 – 2000 new claims each month (medium companies).
This group of companies can benefit from having a specialist and an assistant. It can be profitable for the senior specialist to train the assistant in all administrative tasks related to managing a book or recovery business. Companies in this category may also find it beneficial to hire the services of a subrogation attorney.
It can be difficult to find a competent subrogation attorney and hire one. This is because it is not easy to find someone who will not neglect a company that does not send many assignments. There are many things to take into consideration when choosing a subrogation lawyer. Companies in this category will also benefit from a specialist recovery company that specializes in recovering from uninsured motorists. This type is difficult and takes a lot of time for an “inhouse” specialist. Skiptracing is essential to be able to work efficiently in this type of recovery. Although it is difficult to manage claims information with an eye toward skiptracing using an insurance company’s claim management system is common, a skilled specialty vendor will have a better way to maintain claims data that is targeted towards the location and contact of tortfeasors.
Once the recovery potential has been identified and the easy money collected, it is worthwhile to look for a vendor to assist with the “hard-dollar” recovery efforts. Vendors should be able communicate their activities in a way that coordinates well with the insurance company. They should also be able show their effectiveness in quickly resolving uninsured motorist claims. The vendor should not spend more than 90 days trying to recover uninsured motorists in “collection” mode. The vendor should be able, within 90 days, to refer the recovery claims back at the insurance company. If necessary, they can also suggest legal action. The vendor should then be able to assign the file or team to an attorney for immediate lawsuit. If they are really smart (and incorporated), they may also be able litigate the case themselves in small claims court if the total damage falls within the legal limits.
Here, time is everything! Subrogation recovery has the advantage that the at-fault party can have their driver’s license suspended for more than 90% of the time. This is a way to force settlement. Many people won’t pay a damage claim until there are real consequences, such as suspension of their driver license. It is a common myth that many uninsured motorists lack money. I have received money from lawyers, teachers, doctors, and other professionals who were uninsured but were involved in an accident. Maximizing recovery is possible by taking swift action and completing the appropriate collection efforts.
2000 claims or more (larger companies).
The same principles should be applied to companies in this category as for medium-sized businesses. The only difference is that there should be an increase in the number and division of staff within your company. A company that handles 2000 claims or more per month is likely handling claims in more jurisdictions than it should. Because the laws in each jurisdiction differ slightly and the claims tendencies vary in each, it is essential to have enough talent to effectively manage and negotiate recoveries in all jurisdictions.
Specialization in jurisdiction should also be considered when vendors are used for “hard dollar” recoveries. Vendors that claim to be able to recover hard-dollar claims nationwide simply don’t have what it takes. The “talent”, who is paid a handsome salary at an insurance company, doesn’t work for small salaries and commissions which lends itself to the wrong approach to recovery. If you work on commission, “hard dollar” recovery is not financially viable. Most vendors work on a contingent basis and the profits go to their owner, not to specialists trying to find “easy money” to make a living with the “not very lucrative” commission structure that is available.
While large companies may not use the proper “inhouse” methods, those who work for “nationwide” vendors have the opportunity to make a good living by catching the “easy” money missing from larger companies. If companies want to recover the maximum amount of recovery dollars, national vendors will not be a good choice. That is what should be done after “in-house” efforts.
Other strategies
Not only can you use specialist vendors and attorneys, but recovery procedures can also be used to audit other carriers’ recovery demands. Auditing can help reduce subrogation-related liability payments by up to 18%. It is even more lucrative to find a “hard-dollar” recovery vendor who can fulfill both the audit requirements and provide “hard-dollar” recovery services. These vendors are very rare. Due to the requirements of audit claims and the licensing needed for expertise, the combination of these services is not an option.
This capability allows vendors to provide actual recovery services at lower contingencies and perform subrogation audits at lower rates due to the blending services that have different profitability timelines. Subrogation audits can be billed per claim and generate immediate income for the vendor, whereas subrogation recovery is not immediately realized.
Both allow a vendor to work on “hard dollar” recovery assignments and still make some income from new demand assignments. Dual vendors are not required to pursue recovery claims in large quantities like traditional subrogation vendors. They usually only have a few clients they work exclusively for to ensure profitability and high returns. Insurance companies who are fortunate enough to be able to find one of these vendors will see that they get the most value for their money. The vendor and the insurance company both benefit from the relationship.
