Outsourcing, a practice engaged to cost-effectively transfer certain business processes to outside suppliers, often plays a vital role in a company's corporate growth strategy.

The outsourcing process allows companies to focus on their core competencies while mitigating a shortage of resources, skills or internal expertise. Firms taking advantage of outsourcing relationships can utilize each other's strengths to make both firms stronger. There can be a financial benefit, but often the partnership provides other benefits which may include a mutual strengthening of each partner's capabilities, skills and knowledge.  Strong partnerships are built on honest open communication, a strong understanding of each partner's obligations to the partnership and a mutual agreement as to how goals will be achieved.

The insurance industry has had a long history of outsourcing business processes. The claims side of the business typically uses the most suppliers, developing relationships with a variety of service partners to drive internal initiatives, deliver expertise, reduce operating costs and optimize internal resources.  Well known outsourcing practices include the use of independent adjusters, salvage firms, and medical bill review services. Outsourcing, as it pertains to the subrogation recovery industry, is fairly common for either a portion of the recovery efforts or for an entire outsource.  Over the last 20 years, as insurance carriers began recognizing the significant contribution the subrogation process made to their financial stability, many engaged external resources to fully or partially support their recovery initiatives.

There are many reasons why a company may choose to either fully or partially outsource their subrogation. They may have a need for periodic Closed File Reviews to determine if any recovery money was left behind when the claim was closed. High adjuster inventories may not allow time to purse recovery, even if the opportunity is identified. Or there may simply be a need to have a partner which can assume overflow or handle special projects such as arbitration management.

Vendors might consider what they gain from the relationships they engage in, other than monetary compensation.

Often the vendor can both appreciate and learn from different recovery models and how they are administered by their clients.  Gaining knowledge as to what is important for one client in improving their bottom line recovery numbers can be instrumental in assisting another client with similar challenges needing resolution.  Therefore learning to track, monitor and present in various formats will inevitably provide the support needed by most, if not all clients.

In some instances, it is totally incumbent on the vendor to identify the potential recovery opportunity and initiate some or all of the investigation with the client depending solely on the expertise of their partner to analyze and retain the proper experts to support their theory of negligence against a tortfeasor.  The ability of the subro partner to provide this service plays a major role in the ultimate outcome of the cases assigned.  Vendors need to demonstrate flexibility in the services they provide and incorporate their developed understanding and successes from one client, so as to offer suggestions which may assist other clients with similar  needs.

Vendors can provide added value to their client partners by sharing their experience and by providing regressive analysis skills and results that may enhance recoveries in a particular line of business.  Establishing rapport that encourages open communication and honest feedback is one that every good relationship can benefit by.  Vendors going that extra mile will always be appreciated by the client.  Often times claims recovery dollars are hidden well below the surface, especially on property losses.  A reliable vendor will have staff members specifically allocated to review previously closed files to identify missed recovery opportunities which can certainly support the client's recovery objectives.

Vendors can provide Subrogation Awareness Training to their clients' claim staff and especially to clients' first report takers.  It may be incumbent on the vendor to contact the policyholder immediately upon receipt of an assignment on claims involving a defective product, but often the evidence is tossed out even before that occurs.  Subrogation Awareness Training geared for first report takers can often improve the statistics of evidence retention, which ultimately adds to the client's recovery numbers since more claims can be pursued against the manufacturer.

Most clients need status updates and the best vendors provide their clients with direct access to their platform.   While the vendor should provide the client with comprehensive reports once a month giving the client access to create their own reports is the icing on the cake.  Partners need to be versatile in how they provide data and status information.

When considering a subrogation partner, obtain a clear understanding of the dollar value they are willing to purse as some vendors will only pursue claims over a certain dollar value while others are more dollar agnostic.  Whatever the model, it should be in alignment with the client's recovery objectives.  It is imperative to understand how aggressive the vendor is with pursuing settlement monies and agree on how promptly they disburse net recoveries to their clients.

Vendors with superior data security, using a firewall, encryption when necessary, having a disaster recovery plan and investing in staff training relative to security issues are valuable partners.

Lastly, vendors should always be a good resource for their clients.  Subrogation vendors should have ongoing relationships with industry experts and a network of reputable subrogation attorneys with coverage in the areas where the client conducts their business.

Building successful partnerships are important to reaching organizational goals, but they don't just happen.  Finding the right business partner in a sea of vendors can be daunting, and for vendors it is equally important to offer services to companies which align with the vendor's business model and capabilities. Partnerships require open communication, transparency in conduct, a process to deliver the desired results and a shared commitment to a common goal.  Both partners must be equally invested in the relationship from the beginning in order to create a successful and financially worthwhile outcome.

Kathleen Smith CSRP is managing director of Spartan Recoveries LLC. To reach this contributor, send email to ksmith@spartanrecoveries.com.

Donna Geraghty is vice president of Sales & Client Services at Spartan Recoveries LLC. She can be reached by sending email to dgeraghty@spartanrecoveries.com.

To explore a partnership with Spartan Recoveries, call 866-780-0876 or visit our the company's website at at www.spartanrecoveries.com.

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