Perspectives

Shift Technology | Maintaining Subrogation Revenue in Natural Disasters

Written by Michael Loiseau | Sep 17, 2024 6:00:00 AM

Subrogation can drive an impressive return for the business.  It's revenue that contributes directly to the bottom line and can offset losses for a carrier. However, whether you use front-line handlers or have a dedicated subro unit, those revenues can be at risk when an antiquated recovery identification process comes under pressure.  A catastrophe event or other disruptive changes in the normal process can create challenges due to increased claims volumes. Given the challenging business climate, should insurers make sure that subrogation has its own disaster recovery plan?

Subrogation expertise is finite

Subrogation requires expertise with skills tuned and developed over time. These professionals understand the nuances of state negligence laws and challenges associated with each individual exposure. They realize the associated intricacies and are often quite efficient in the required investigation and research. However, this expertise is finite. A surge in claim volumes puts pressure on the bandwidth of these teams.

While these teams are strained during high volume periods, the industry’s talent crisis must also be considered. With the insurance industry set to retire half of its workforce in the next 15 years years, the expertise of the specialized subrogation role is at high risk. An outdated system could quickly become a liability as expertise is not available to identify and communicate needed updates of regulations, and IT resources have limited bandwidth to support legacy systems. Carriers must proactively address the talent crisis to secure the expertise in subrogation, otherwise the revenue driven by these recovery experts will be at risk.

Business continuity for subrogation

Automating the detection of recovery opportunities provides an opportunity to better secure subrogation revenue. Subrogation does not typically receive the attention, or strategic investment, in the same way as customer facing technology does. Yet, the process should be protected to ensure it can be maintained. Aspects that are prime candidates for tools to augment the process include enhancing detection capabilities, interpretation of complex negligence laws and recall research using modern technologies.

  • Detection - Handlers spend a lot of manual effort analyzing a variety of claims information.  The quantity of information and research can be aided by automation tools, such as GenAI-based solutions, to more quickly scan and digest relevant information. 
  • Negligence Laws - The varied state laws complicate negligence interpretation.  While segmentation of claims to handlers may drive expertise, this limits the ability to reallocate resources for spikes in claims volume as well as a potential negative impact on quality of outcomes and cycle time.  Assistance with automated interpretation and application of such laws improves accuracy and expedites research.   
  • Recalls - While recall information is accessible when recognized as a potential recovery theory, it is an extra step of time-consuming research for an adjuster to pursue.  Key words and product names that are enabled by automation tools can quickly exhaust a variety of searches to identify relevant recall data.  
  • Modern Technologies - Legacy systems complicate issues when there are limited resources. Engineering and IT resources are more constrained if the skillset are limited. Use of modern technology can help attract talent and help ensure expertise is available to help adopt innovations.  

These are just a few examples of areas that can be maintained more easily when changes occur in staff or when time and volume pressures limit the available experts. Establishing this type of automated detection provides a layer of security and resilience to your recoveries, essentially an insurance for subrogation.

Upside potential

Beyond protection of the existing subrogation revenue, a consideration is the missed opportunity resulting from a status quo approach. As technologies evolve to improve the claims lifecycle, digitization and automation of FNOL through payment, subrogation is a prime candidate to explore what more could be maximized by modernizing the systems and process.

Many Shift customers have robust Subrogation rules in place and are sophisticated in their processes. Nonetheless, with the capabilities offered by AI and related technologies, including generative AI, they are finding more ways to improve consistency, accuracy, turnaround times and recovery dollars. Opportunity areas for improvement can include detection by line of business or further at the exposure level, reducing dependency on second-look vendors, or the ability to enhance the efficiency of a front-line handler in lines of business that do not maintain a dedicated subrogation team.

AI and related analytical capabilities offer an opportunity to rethink how subrogation teams can use technology to augment their teams and drive more recoveries. Such technologies are advancing and continuously learning and adjusting to support carriers’ ever changing and evolving needs.  As we face this impending transition in the industry, it’s time for insurers to re-assess their approach to subrogation.

Watch this video to hear how Central Insurance has embraced AI-powered subrogation detection.