AI-Powered Subrogation Detection and its Impact on the Combined Ratio

The third in a series of commentaries addressing the combined ratio problem facing the global insurance industry.

The insurance industry faced an average combined ratio of nearly 102% exiting 2023. And according to widely accepted industry estimates, approximately 15% of P&C claims are closed with missed recovery opportunities. That represents a cost of between £12-16 billion annually, with some calculations putting the cost at closer to £24 billion. Since those missed opportunities directly impact the bottom line, and ultimately the combined ratio, it stands to reason that more effective liability determination and recovery can have a profound impact on an insurer’s bottom line. 

As an industry we have also seen that a strategy that relies only on raising premiums is not enough to have the desired effect on the combined ratio. Furthermore, focusing solely on increasing premiums also creates the real risk of driving customer dissatisfaction if policyholders believe they are being treated unfairly. This can create churn and the new problem of replacing top-line revenue and consumer duty complications. As such, applying best practices to the liability determination and recovery process represents an excellent opportunity to shave points off of the combined ratio. 

Using artificial intelligence (AI) generally, and generative AI (Gen AI) more specifically, to help insurers detect hidden recovery opportunities, assess liability and likelihood of recovery, as well as surface and apply relevant negligence/fault legislation is one of the most effective ways to modernise this important process. The result is fast, accurate, and fair recovery that benefits both insurers and their customers and helps to address the continuing combined ratio problem.

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About the Author

Jeremy Jawish

Shift Technology CEO and Co-founder Jeremy Jawish became acutely aware that fraud detection was one area of the insurance industry that was ripe for disruption while working with a leading global insurance company. There, the seed was planted related to how artificial intelligence and advanced data science could be used to help insurance professionals make the best decisions possible throughout the policy and claims lifecycle. Jawish, along with co-founders Eric Sibony and David Durrleman transformed the idea into reality and now insurers around the world trust Shift’s AI-native solutions to help them solve some of their biggest challenges.