If you have cracked the subrogation nut, your results show improved recoveries and decreased expenses.

To achieve this level of success, you are likely using a combination of advanced analytics and machine learning. You understand third-party carrier behaviors and have real-time decision support tools for settlement, arbitration and litigation.

In real time, your global delivery system and triage lands every file with the appropriate person immediately upon subrogation referral. Your sophisticated predictive models provide customized strategies for all recovery scenarios, by line of business and with a high degree of integration.

Related: Subrogation claims put insurers in the policyholder's shoes …

These companies have a clear and direct understanding of what is driving recovery. The key to success has been viewing subrogation as a strategic asset and a lever for managing indemnity while controlling expenses. The subrogation organization has become the launching pad for key talent throughout the organization.

Potential upside

If that is not your company, then you are like most in the industry where subrogation is neither a top priority, nor viewed as a strategic asset. As organizations look for opportunities to cut expenses, they often miss the potential upside subrogation can bring. Even those who have already achieved subrogation nirvana can take steps to further optimize this strategic asset.

Carriers across the industry are using a variety of levers to achieve success. That said, continued investment in subrogation is difficult, even for the largest carriers. Expensive modifications to legacy platforms, maintenance of external vendor networks, and constantly changing reporting requirements all drive needs that most carriers struggle to satisfy.

For carriers directing their investment dollars to other areas, outsourcing is an attractive alternative. Vendors who create scale across multiple organizations can also invest differently in the process through technology, analytics and various sourcing models.

Successfully subrogating a claim begins with a thorough inspection of the damage and retaining key evidence. (Photo: Shutterstock)

Keys to unlocking the subrogation process

Maximizing the subrogation process results in a material impact on loss ratios, which generally outweigh expense savings 3-to-1. Examining this further, we find the top-performing subrogation organizations have not only streamlined back-office processes, but have also focused on five key areas:

1. Liability assessment

Subrogation identification should begin at first notice of loss (FNOL). Understanding the dynamics of the claim allows for proactive identification of potential recovery opportunities. Even beyond the initial stages of the claim, liability decisions are often inaccurate. Only 3% of all claims with comparative negligence are actively evaluated for subrogation potential according to PropertyCasualty360.com. Considering findings from jury verdict research that shows shared liability occurs in 45% of all cases adjudicated, a lot of recovery dollars are left uncollected.

Providing the adjuster with sophisticated analytics increases the likelihood of success in subrogation significantly by helping the adjuster monitor changes in liability as the claim matures, collect evidence earlier in the process, and develop winning settlement strategies.

Related: 5 subrogation recovery tips 

Working through a predetermined workflow can help insure that nothing is overlooked during the negotiation stage. (Photo: iStock)

2. Third-party negotiations

This is one of the most critical aspects of the subrogation process. Far too often we see ineffective negotiations where liability is conceded when it clearly should not have been. This happens for several reasons, but frequently, time constraints and the push for claim disposition have the unintended consequence of adversely impacting quality.

We have found that structured workflow, data collection and sharing in the early triage stages combined with effective decision support tools that expose third-party behaviors greatly improves yield per file in the subrogation process.