Missed Subrogation by the Numbers
Every year, insurers leave millions of dollars on the table due to missed subrogation opportunities. In fact, studies estimate that up to 15% of claims are closed without identifying valid recovery potential, with certain lines like workers’ compensation reaching as high as 30%. In this blog, we break down the data behind missed subrogation, highlight the hidden costs of claims leakage, and explore how leveraging technology and expert reviews can significantly improve recovery outcomes. At SubroIQ, we combine analytics with over 600 years of adjusting expertise to turn these missed opportunities into measurable results.
- Fire loss: $1,326,534
- Water loss: $2,127,236
- Risk Transfer: $48,237
- Cargo: $759,342
- Business Interruption: $1,653,556
- Uncashed Check in File: $16,250
These are just a handful of examples of potentially missed subrogation from closed claim audits. Six files with over $6 million dollars in missed subrogation. It is estimated that 15% of all files are closed with a missed subrogation opportunity at a cost to the industry of over $15 billion dollars per year. My guess is that figure is substantially higher. During a recent conversation, a leading subrogation attorney shared that four of his 5 largest recoveries (all over $10 million dollars) had been closed by the adjuster as having no subrogation potential.
Missed subrogation is a very real problem costing carriers, TPA’s and self-insured’s sizeable amounts of money.
In addition, there are many policyholders out deductibles because this subrogation was not pursued. This could be a cause for concern if a creative trial lawyer explored breaches of recovery fiduciary duties as a new cottage industry.
Having handled claims for a number of years I will be the first to say that getting outstanding and accurate results takes time and effort. In an environment of doing more with less adjusters are often burdened with large caseloads. In a quest to maximize profit and efficiencies claims organizations are pushing for file closures as a critical metric. As the adage goes, a closed file is a good file. True to a point, but not when money is being left on the table.
So how is subrogation being missed?
First and foremost is a lack of comparative negligence identification and assessment. It is estimated that juries assess shared liability more than 50% of the time. Yet when we review claim files it is rare to see claims that are other than 0% or 100% with an occasional 50/50 sprinkled in for good measure. How is it that jurors, who are not trained claims experts, are getting it right when trained experts are missing it so often?
Accurately assessing liability is fundamental to claims. It is something that should be reviewed in every single claim no matter how apparent one’s negligence appears to be. The liability writeup should focus on duties owed and duties breached by all parties to the claim.
Beyond comparative negligence there are a myriad of opportunities missed because evidence is missing. While claims organizations do a decent job of working with their insured’s to promptly resolve property claims evidence is often left behind. If recovery potential is identified later in the claim cycle it is often too late as the evidence has been discarded. Herein lies the reason that SubroIQ created their Property Recovery Partnership process, working with client’s beginning at FNOL, to identify and score recovery potential and working hand in hand with experts to obtain and preserve critical evidence.
Sometimes recovery just is not obvious to the adjuster.
We often see this in no-fault states that have specific definitions where subrogation may or may not apply. Additionally, we see this in jurisdictions with conflicting caselaw that can impact chain of custody in the supply lines. This has become such a problem that the SubroIQ team is patenting ReverseSubrogation™, a transformational process that will redefine recoveries for years to come.
Subrogation is not rocket science, unless it involves a Royal Caribbean cruise liner straying into a no-go zone off the coast of Cape Canaveral causing a SpaceX launch to be scrubbed at a cost of $1.6 million dollars in fuel and labor.
Rather, subrogation generally involves basic blocking and tackling. Evaluating every claim for recovery potential is a critical part of the end-to-end claim cycle. It is paramount to getting the most accurate claim results possible. Yet we continue to find a significant percentage of files that have been closed with missed recovery potential, a large portion of which is recoverable.
A recent audit of 100,000 New York PIP files SubroIQ recovered over $2 million dollars that both the adjuster and the subrogation vendor missed. In another audit of an outside subrogation vendor SubroIQ recovered an amount missed in excess of 10% of the dollars referred. In an audit of a global insurer, looking at just one jurisdiction, over $5 million dollars was recovered.
This is real money that can have a profound impact on the bottom line of carriers, TPA’s and self-insureds.
SubroIQ provides closed file audits at no charge and has recovered over $1 billion dollars for clients.
Chris Tidball is an Executive Claims Consultant at SubroIQ, a leading provider of audit, consulting, and subrogation services. He spent more than 25 years as an adjuster, manager, and executive with multiple Top 10 insurers. Chris is the author of Re-Adjusted: Taking Your Claims Organization From Ordinary to Extraordinary and is the creator of The Adjuster television series based on his fictional thriller Deep State. He can be reached at christopher.tidball@subroiq.com.