The claim department rarely has an opportunity to add to an insurer's bottom line. However, uncollected third-party deductibles (TPDs) can offer an opportunity to significantly contribute to a company's profits.
By current estimates, the U.S. property and casualty industry generates between $500 million and $1 billion dollars in TPDs each year. While most TPDs originate on the sales and underwriting side, administering them falls to the claim function. Individually, TPDs may not warrant attention. Yet when combined as a whole, they have the potential to make a positive impact.
In Feb. 2007, Paragon conducted a study that compiled information from claim administrators, supervisors, and other financial executives at 60 leading insurance companies. According to the results, the mean value of TPDs is $4,604. Approximately 30 percent fall between $500 and $1,499, while another 29 percent range from $1,500 to $7,499. Only eight percent of TPDs are for amounts $499 or less, while 17 percent are valued at $10,000 or greater. These statistics prove the point that it is possible for even small volumes to quickly accumulate.
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