Subrogation Data – A Billion Dollar Opportunity

Subrogation Data – A Billion Dollar Opportunity

The P&C insurance industry is facing the reality of a new view as it looks to the future.  This view involves IOT, new delivery channels and innovative ways to reduce the loss adjustment expense of the claims workflow. 

IOT is a relatable trend; as consumers we are increasingly surrounded by IOT experiences. If you look closer, underneath the covers of a cool shiny IOT solution is a data strategy. It’s ALL about the data, what can be used immediately, and what can be “banked”, to increase in value for a later application.

In 2013 there were 534,000 arbitrations filed, and by 2017 that number had grown to 790,000 filings!  That is an increase of 48% over that short time period.

Why then, do we fail to recognize that we can apply the same concepts, automation and data, to improve traditional subrogation processes? How easy is it to forget that subrogation impacts the policyholder too.  The dollars recovered offset claims paid, keeping premiums in line and holding wrong-doing parties responsible for their actions.

The question the industry still needs to ask, and understand, is how the inefficiencies of existing processes or lack of data provide an opportunity to add dollars to the bottom line thus making premiums even more competitive.  One component of recovery is settlement through arbitration. The arbitration process is one area where having access to data should reduce filings instead of the continued year over year increases in filing across our industry.  So far, there is no end in sight.

In 2013 there were 534,000 arbitrations filed, and by 2017 that number had grown to 790,000 filings!  That is an increase of 48% over that short time period.  Conventional thinking says that is a good thing, meaning the additional annual 256,000 filings in 2017 didn’t have to go to litigation.  Normally this is regarded as a positive step, and it certainly is when measured against litigation as the alternative.  But what if we looked at this in a different way?  What if the alternative is not arbitrating? By unpacking the components of arbitration, we can easily recognize that those additional subrogation files involve filing fees, labor to file and track the arbitration and for each company to hear another case (provide resources) for every case that is filed.  Calculating the impact for all arbitration related expenses reveals the industry has added nearly $50M annually.  Another way of looking at the equation is to say the industry is using $50M that otherwise could be put back to the bottom line to reduce premiums for policyholders and to improve the business. 

To keep that $50m instead, we need to ask the following questions:

  1. How can we do this differently? 
  2. How can we settle claims rather than having the need to file more arbitrations in the future?
  3. What do we need in order to create processes that will settle more, recover more, arbitrate less?
  4. How does the industry move the needle to a pre-2013 level of filings controlling arbitration just as it has with litigation?

The common denominator for each question rests with the ability to access data and then to animate it when negotiating subrogation claims. The right data creates advantage.

It is estimated that $6B in claims and subrogation LAE could be added back to the bottom line through the use of this data

For example, imagine the value of knowing how you settle claims against ABC carrier on left turn accidents when the impact is to the middle of the vehicle when negotiating the loss. Imagine knowing the settlement data for the adjuster working for ABC carrier.  How would you handle that negotiation differently if that data was easily accessible?  What if you also knew the recovery rates for the same type of file if it was moved to arbitration?  Would having this data presented to you be helpful?  How would this data change your approach, and would you also settle a claim quicker having this information?  By taking a new view, it’s easy to see that having the right data creates advantage, and the use of this data enhances every negotiation process.   Clearly data can provide a competitive advantage when negotiating losses. 

The same unique data, once “banked” can further be used for tools and solutions with a much larger impact, such as predictive analytics, automation, artificial intelligence, and blockchain smart contracts, especially when combined with claims data and information from other sources.  It is estimated that $6B in claims and subrogation LAE could be added back to the bottom line through the use of this data. Imagine the impact of keeping premiums low and fair for our policyholders!

As we look to the future, let’s take a different view of what that looks like and focus on reducing the number of claims requiring arbitration through the competitive advantage of data.  To learn more on how to make your subrogation data actionable and how to gain an upper hand in your negotiations, please contact us at (877) 255-0802. We’ll be happy to discuss how that is done.

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