What’s Keeping You Awake at Night?

A key function of a claims executive’s role is to ensure that the claims department is adequately staffed and trained not only to investigate and negotiate incoming losses, but to reclaim monies paid by pursuing responsible third parties. The executive’s challenge is to maintain a high level of quality in the technical claims process, monitoring performance while balancing production levels. These management criteria are often in opposition and the dilemma is very apparent in the subrogation area. It is estimated 15% - 20% of claims paid are closed prematurely with a missed recovery opportunity. The key to a successful subrogation program is the proper identification of recovery opportunities. You cannot recovery what has not been identified.

If missed recovery opportunities (missed revenue) are one of the things keeping you up at night there is good news…success and a good night’s sleep can be achieved! You can begin by evaluating the expertise of the people responsible for the initial subrogation identification. Start by answering these questions:

  1. How and when are claims identified for recovery opportunities?
  2. What is the skill level of each adjuster charged with making the decision on subrogation potential?
  3. Has the adjuster been trained to look for a responsible party or just to focus on coverage, liability determination as it pertains to claims being made against the policy, timely payments in accordance with state statutes, and goal of maintaining a 100% closing ratio?
  4. Is the adjuster knowledgeable in less obvious recovery opportunities such as UM, UIM, PIP, Med Pay, Priority of Payments Coverage, Product Liability, weather related losses, poor workmanship, Workers’ Comp direct actions, and lien recoveries for the jurisdictions they are handling?
  5. Does the complexity of each adjusters claims pending properly allow for a subrogation analysis?
  6. Are there fail safe measures in place to prevent pre-mature file closure?
  7. Has anyone else in the Claims Department been tasked to review first party claim closures?

Success lies with having a claims team that understands the concept of subrogation, or more importantly the financial impact of a good subrogation program. Different lines of business will require different approaches. A good practice is to train adjusters to recognize subrogation potential early in the claims life cycle so the investigation is conducted with a view towards recovery. There should be good communication with the initial file handler and the party charged with the recovery pursuit.

The claims team must be knowledgeable in local jurisdictions and trained to recognize claims with shared liability. “Subro Awareness” training should routinely be conducted to reinforce proper identification of claims with subro potential. These sessions can be led by more senior level claims professionals or by outside vendors that partner with your subrogation team providing success stories that will be memorable and therefore helpful to the adjuster in the future.

When considering department staffing, there should be reasonable expectations established addressing the volume and complexity of each adjuster’s pending to allow for timely recognition of subrogation potential before closing the file. The first step in a winning recovery program relies on the expertise of the last person to look at the claims file.

The best fail safe measure is the practice of routinely conducting forensic file reviews. While this may be hard to achieve for claims departments with limited resources it is easily accomplished through the engagement of an outside vendor adept at subrogation identification. The best vendors don’t charge for the review and use contingency fee pricing for handling the claims they have identified. A win-win situation for both the carrier and the vendor.

The next step in developing a successful subrogation program is the aggressive pursuit of the identified opportunities. But that’s another topic…for now, get some rest!

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