Insurers Missing Boat On Subrogation Claims

NU Online News Service, July 23, 3:35 p.m. EDT

Insurers are failing to take advantage of subrogation opportunities in auto claims cases as a potential means of offsetting losses, maximizing revenue and positively affecting customer retention, a survey of carriers has found.

Praxis Consulting, a provider of specialized subrogation consulting services, sponsored a survey of 14 auto insurers in New York and New Jersey to examine automobile personal injury protection and medical payment subrogation issues.

The study, conducted by The Ward Group, asked the insurers a series of questions focusing on subrogation statistics, performance and practices for 2007 and 2008. The responses were collected between April and June of this year.

The companies participating in the study represent approximately 48 percent of the total auto insurance market in the two states, Praxis said.

In a statement, Robert Ford, president and founder of Muncie, Ind.-based Praxis, said this was the first time that anyone had undertaken a benchmarking study of the two markets' PIP subrogation results.

"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," he said.

In an interview with National Underwriter, Mr. Ford said the study was undertaken after a customer [insurer] wanted to know where it stood on subrogation PIP claims relative to its peers. Finding no data, Praxis commissioned the survey.

Subrogation provides enormous revenue potential for carriers, especially in the face of the economic meltdown, Mr. Ford noted, adding that this is despite the fact there are only a few instances where such recovery is possible.

He said the two markets were chosen, because of the $7 billion paid in no-fault PIP claims, about 40 percent comes from these two states alone.

The benchmark survey found that 92 percent of the participating companies have a dedicated internal subrogation unit. Within these units, however, 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.

The 30-page report found that all of the companies had their claims' inventory profiled by external vendors to identify missed subrogation opportunities. Praxis said this is not surprising, as 71 percent of the participants claim a lack of established referral guidelines or claims payment deadlines. These factors further contribute to an increase in missed opportunities to subrogate, the consulting firm said.

Mr. Ford said Praxis is planning to do a series of subrogation benchmark studies, including homeowners and auto physical damage and other topics.

The full report is available by contacting Gretel Going at gretel@channelvmedia.com.

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