Value of a Subro Dollar
The insurance vertical has become an EXTREMELY competitive market place with companies vying for a limited number of policyholders. There are probably a number of reasons why this is the focus, but from a profitability perspective, have you ever wondered how a subrogation dollar compares to a new policy?
Dollars flow into a company in only one of three ways… Premiums, Investment Income, and Subrogation/Salvage dollars. The first two areas are a natural focus as they are front and center in management’s mind and if we are all honest, the customer is what keeps all of us in business, no matter our business model. Basically, we are pretty focused on the dollars from the front-end, but I’ll argue we need to also look at the “back-end” dollars and the impact those dollars have on the bottom line (no derogatory intent made to my subro friends regarding the term “back-end”!). Depending on market conditions, subrogation dollars can be the difference between ganering a profit or not. Below is a good illustration of what this looks like when only one additional recovery is made and the comparison to the number of new policies that would need to be written to equal that one recovery.
As can be seen, the additional recovery generates the equivalent of hundreds of new policies for the carrier. The same calculation can be done to determine the area of the company generating the largest R.O.I. as a comparison to the metric of new policies.
The question to be answered for a lot of us is whether we are satisfied to recover millions of subro dollars or do we want to maximize the recovery process grabbing the extra 5, 10, or 15% still available.
Grabbing that extra % can be driven via the implementation of predictive analytics to identify additional opportunities; educating staff allowing them to learn different avenues to collect and/or issues to recognize; system enhancements to increase productivity; or ultimately driving down expenses to have an equivalent improvement in the bottom line. All of these will allow the desired results – Subro Maximization.
Ultimately, the choice of the path to take is yours. Good luck on the journey!
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