Over the last decade the insurance industry has begun torecognize that a successful subrogation program can greatlycontribute to a carrier's bottom line performance.

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Aside from revenue derived from non-growing premiums and poorlyperforming investments, subrogation recovery dollars have become animportant source of income for an insurer.

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Most claims professionals know that subrogation substitutes oneperson or thing for another, but few realize the tremendousfinancial value the subrogation process brings.

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Subrogation programs are often handled in-house, while othersare fully or partially outsourced. Each company needs to make adecision on which model will be the most cost effective andefficient for their organization.

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They must be diligent in developing a subrogation team with theknowledge, skills and eagerness to do the job well. And perhapsmost importantly, any individual associated with the identificationof subrogation potential, overseeing the investigation,participating in the negotiations and ultimate settlement ofsubrogation cases should be well informed and experienced.

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Not too long ago, subrogation adjuster roles were considered agateway to other insurance claims positions. This “entry-level”position was often given to recent high school graduates (collegedegree not mandatory), who were invited to join the claimsdepartment in the subrogation sector and learn the claims processfrom the tail end. These “newbie” employees in some instances hadnever even handled an auto collision claim, but developednegotiation skills and insurance knowledge out of their survivalinstincts.

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This model did not always develop the in-depth understanding ofnegligence and liability needed to handle the more complex workerscompensation, property, liability and fidelity claims. As themature insurance professional knows, complex claims require skillsthat need to be taught and developed over time, with frequentexposure to losses involving liability analysis, claim evaluations(both property damage and bodily injury), product failure, employeedishonesty and contractual obligations.

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Frequently, as the subrogation adjuster developed sharper skillsand more knowledge of the business, an interest in pursuing acareer as a liability, property or workers compensation adjusterdeveloped. This most likely happened due to a desire for moregrowth opportunities, the perception of a wider career pathaccompanied by stronger financial rewards, the desire to have morerecognition within the organization, or just a deep-rooted sense ofcuriosity and the satisfaction of accomplishment.

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It is widely believed that over the next decade the insuranceindustry will suffer the loss of a significant amount of itsknowledge base as more “baby boomers” move into retirement. Companies will be facing a recruitment crunch as they try tobackfill these vacancies as well as increase staff to supportstrategic growth initiatives. Several studies have predictedthe insurance industry faces severe challenges in attractingtalent: a poor reputation, a limited understanding amongstcareer seekers of insurance career opportunities, and a limitedpool of trained talent. With this in mind, insurance organizationsmay be reluctant to sacrifice the strengths of their claims team inthe development of a strong subrogation team.

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Accident investigator

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So what kind of individuals should we be looking for?Individuals should possess a natural curiosity and desire to “putthe pieces of the puzzle together.” They should have goodorganizational and investigative skills and the ability to performwith logic and order. Qualified candidates should be “hunters” andtenacious in their approach. They must have excellentcomprehension, communication and writing skills. Other desirablequalities include solid intuition, a creative mind and awillingness to drive success. In their job search, career seekersare searching for employers which offer interesting career choices.Insurance organizations must diligently promote awareness and avery positive image of the dynamic elements of a subrogation roleas well as its significance in the overall success of theorganization.

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Some carriers view subrogation as an element of the overallclaims handling process, believing the adjuster who workedthe claim from inception knows all the facts and parties involved(a birth to death philosophy). However, even the most qualified andseasoned claims adjuster may lack the expertise to identifysubrogation potential or miss the opportunity to recovermoney.

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Property adjusters are focused on coverage issues, the resultingdamages of a loss and the cost to repair, as well as the timelinessof getting the loss paid. Workers comp adjusters initially focus oncompensability issues then quickly move on to ensuring they areproperly reserved for the medical and indemnity loss. They mustanalyze and evaluate the loss severity and project the number ofweeks the claimant will not be able to return to work, and possiblybecome involved in the development of a return to workprogram.

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While it would seem logical that a claims handler would be mostfamiliar with the claim itself, the subrogation or lien recoveryworks best with a dedicated subrogation professional who has aliability background with demonstrated abilities in investigation,analyzing facts and exploring the root cause of a loss.

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Carriers may choose to partner with subrogation vendors tooutsource their subrogation program entirely or support an internalsubrogation department. Successful subrogation firms haveexperienced claims adjusters with the sole focus of recoveringmoney. Usually the vendor offers several alternatives for servicewhich may include full outsourcing or customized options.

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When selecting a subrogation vendor, the carrier should ensurethe vendor's staff includes adjusters with expertise in their lineof business. Vendors should have a verifiable record of success.Fees should be in alignment with the carrier's financialobjectives. Contingency-based fees allow the firm to receive apercentage of the settlement, which is a great motivation forpursuing recovery encourages the vendor to obtain the highestsettlement possible or compromise their fee.

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All subrogation vendors are not alike and it is important toestablish a rapport between the insurer and vendor. Whenoutsourcing some or all of their subrogation process, a carriershould ask about:

  1. The frequency of net recovery refund checks
  2. Transparency in claims handling
  3. Client accessibility to the recovery platform
  4. Handling applicant and respondent arbitrations
  5. Relationships with subrogation counsel across the country

There's an old saying about there being a cover for every pot.With subrogation, there is no blanket solution that is right forevery carrier. There is value in building and trusting an internalsubrogation staff, and there may also be value to outsourcing someor all of the inventory. The real value is in finding the rightpeople to handle subrogation because quality people will bringquality results.

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