Author: Sam Cooper, SVP TransPaC Client Solutions
Every business strives to be the best at what they do. Some claim to be the best in their field but how do they know? In subrogation, fact based benchmarking of recovery results is a good way to measure success. Benchmarking results can be challenging and requires that key metrics are in place in order to measure recovery results accurately.
In our experience, some key metrics that must be monitored on a consistent basis against best in class targets include settlement ratio, cycle time, identification rate, and recoveries as a percentage of paid claims. With the consistent measurement of these key metrics, carriers can gauge how they stack up against best in class performers and modify their practices so they can reach maximum recovery results. All carriers work to attain a high settlement ratio on their subrogation claims. Each area of coverage, i.e. auto, property, workers’ compensation, has different “acceptable” ranges for the settlement ratio to fall into. The best way to achieve higher settlement ratios on your claims is to proactively pursue recoveries.
There is a mixed opinion on what is “good” in regards to cycle time. While it seems obvious that carriers want their money as soon as possible on subrogation claims, is there sacrifice being made on their recovery result? Consideration should be made towards the time it may take to ensure a file is thoroughly investigated, managed and negotiated to reach a maximum recovery amount. A carrier’s throughput rate, or the percentage of claims to be worked through to recovery that are actually recovered in a given period of time, is another piece to consider when looking at cycle time.
Identification rate is one of the most important metrics to measure when looking at a recovery program. Through the use of front end data mining and knowledge workers, each file can be properly reviewed and identified with subrogation potential, which affects the outcome of all of the other key metrics. The more files which are identified as having subrogation potential, the more recoveries will be made.
Recoveries as a percentage of paid claims is the industry standard for performance measurement. By reviewing your paid claims data and reporting on the recoveries as a percentage of those paid claims, you are able to see just where you stand as a whole in your recovery program. Industry standards for each line of business vary when it comes to this key metric. Fluctuations in year over year claim frequency and severity may mask subrogation performance when evaluated purely on a calendar year basis.
When looking at an overall subrogation process, our experience shows the following step by step process leads to a best in class program.
• Identification – early identification, review of facts, initiation of a liability investigation
• Investigation – determination of cause and origin, evidence retention, development of theory of liability
• File Management – automated assignment, task manager, legal support, letter module
• Recovery – negotiation, arbitration, settlement
• Reporting – key metrics, results
You should be highly focused on each of these steps in order to achieve the most successful subrogation results. Other areas that attention should be paid include deductible recoveries, files per subrogation adjuster and benchmarking on a calendar year versus an accident year. Benchmarking on a calendar year can be misleading to your results. In order to obtain accurate recovery numbers, benchmarking on the accident year is a more effective way to measure performance.
Once the key metrics are in place and performance can be determined, choosing whether a subrogation partner should be used is easy. A subrogation partner is an expert in the field of subrogation and can work with you to bring your performance to the top quartile of carriers. You will have a partner that is working for you in obtaining the maximum recovery amount with each file they work.