Next-gen customers, their rapidly increasing needs, and the emerging technologies growing in the backdrop of the pandemic have started forcing the insurance sector to reimagine how they operate. Customer service, claims automation, innovative models and personalized products, advanced analytics are few among the major digital transformations. And, one which may be overlooked, often leaving company assets unrecovered, is subrogation.
Did you know that insurers are missing out on subrogation opportunities that amount to $15 billion in the US alone?
Subrogation is a familiar term in the insurance industry. For starters, subrogation claims recovery means the insurer has the right to legally sue the third-party responsible for causing damages to the insured. It is critical to the financial strength of the carrier and customer satisfaction.
For example, a negligent driver runs a red light, crashes into a car and causes damages to your customer. You pay for the losses and file a case against the at-fault driver’s insurance company to recover the losses. As an insurer, you get access to the right only after paying the amount claimed. Subrogation clauses may differ across countries but exist in most policies, especially in auto, home and health.
In short, subrogation protects the insured and the insurer from paying for the losses that weren’t the fault of the insured.
Another study by the National Association of Subrogation Professional, revealed that up to 15% of the insurance claims are being resulted in missed out subrogation opportunities, nearly 32% of the total reported claims where the subrogation opportunities are identified but not pursued for recovery collection or the files are closed with zero dollars.
Challenges faced in the manual subrogation claims process
How do typical subrogation claims work in a manual environment?
Once an accident happens, you pay for the damages, review the case and send a subrogation letter to sue the at-fault party. When your customer agrees, you proceed with the litigation and file a claim. The at-fault insurer will assess the case and get the required details from their party. Based on the coverage details, the payer will return the due amount with the necessary explanation.
While this process looks very simple at a macro level, you may be facing multiple challenges like:
- Lack of efficient resources to analyse every document like police records and evidence sheets and assess how liable are the parties. As a result, under-utilized or missed out subrogation opportunities
- Delays in the recovery process
- Coordinating with multiple stakeholders
- Managing the documents
- High cost to collect and loss ratio
- Staying aligned with the changes in laws and regulations
- Lack of proper performance monitoring systems and metrics
- Use of legacy systems
It may take months or even years to fulfil a claim request successfully. It is a time-consuming task, prone to human errors and missed out opportunities.
How to streamline the complex subrogation process?
The answer lies in a subrogation claims management solution. It helps in handling subrogation portfolios, maximizing recovery opportunities and accruing the greatest cost savings over time. Subrogation specialists can handle multiple files and documents more efficiently, in an organized manner.
- Insurers can generate reports on performance of the officers like how many claims each individual has handled and in how much time, the claim status, and the amount settled thus far.
- An effective solution can reduce the number of clerical tasks and track the workload of subrogation specialists. Managers can evenly spread the workload across the team, capitalize on the available skills and time management.
- Insurance agents can create multiple claims at one go, thus leading to minimal errors and reduce time
- An integrated document management system helps in accessing all information about claims at one centralized location
- Get to generate demand letters easily.
- Insurance teams can abundantly reduce any redundant tasks and improve the data quality with consistent communication and claim assessment processes
- The teams can stay organized with reminders in the form of diaries and get notified about the end date
- Electronic data exchanges where professionals can communicate via email and SMS
In a much more advanced environment, there are AI-powered solutions, with OCR and machine learning capabilities, which can examine documents like police reports, claim notes and other structured/unstructured data to pull out the potential candidates for subrogation. Even if there are data entry errors or natural language is used, bots can extract the pieces of information using NLP and text analytics to optimize the subrogation opportunities. With historical claims, models are trained by applying machine learning techniques and decision trees to assess the new claims.
Also, robotic process automation (RPA) can help automate simple and manual tasks, which do not require decision making. For example, follow-up emails, allocating recoveries. Interestingly, industry research states that insurers are investing nearly 70-85% of the overall RPA investments to make claims and policy processing more efficient.
Through digital operations, carriers can reap the benefits such as:
- Speedy recovery
- Gain a 360 degree real time visibility into every subrogation claim
- Enhance the bottomline via focused and timely subrogation
- Streamlining the subrogation workflow
- Reducing the time from notice of loss to recovery
- Reduce payment cycles
- Improved staff productivity
- End-to-end optimization brings in improved straight-through processing
- Insurers can increase recovery rates by 22%, and productivity by 50% with an easy-to-use interface
With AI all set to change the face of the insurance industry over the next 5-10 years where 87% of carriers are investing more than $5m in AI-related technologies each year, subrogation claims have the potential to help carriers in gaining a competitive edge in the market, enhancing customer experience and driving successful business outcomes.
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