January 7, 2021 by Wilfred Tioh, SIAdvisers Consulting & Solutions
The most lucrative opportunities are often hidden in plain sight, and that is true of subrogation.
Subrogation has long been overlooked as an opportunity for insurers to generate a lucrative revenue stream and improve long-term business. A detailed investigation for first-party claims opens the door to effective subrogation, which leads to two major benefits serving both the short-term and long-term needs of insurers.
First, an improvement in the bottom line is guaranteed to occur down the road, since there are no costs or resource-consuming processes to begin or sustain a subrogation claim. With companies dedicated to the process, it enables insurers to focus their resources elsewhere while generating additional gains.
Second, successful claims promote the long-term health of insurers and policyholders alike, since the money claimed through subrogation lowers premium rates for subsequent years. Lower premium rates for policyholders are likely to attract new clients, setting up tremendous potential for continuous growth in the subrogation department.
One benefit that may not be readily apparent is associated with the broker-insurer relationship.
We know, for example, that a low claim-to-premium ratio is the basis of an ideal policyholder. But sometimes that’s not the case with clients brought in through the brokerage relationship. By recovering losses from a broker’s book of business through subrogation, that can help offset the losses of clients with large or numerous claims.
This subsequently gives the insurer flexibility to weigh its options regarding broker usage. Whether that is through seeking out new business, or maintaining current relationships, the insurer is not bound by the performance of its brokers since subrogation will ensure, at worst, minimized losses.
The long-term relationship between the insurer and insured will also see benefits through subrogation recovery. This is particularly true of clients with self-insured retention. Alleviating the financial burden of these clients through subrogation will establish a greater sense of trust that the insurer is putting forth quality of excellence and care in reducing the out-of-pocket expenses of its policyholders. This, in turn, solidifies long-term relationships with existing clients and the greater potential for new business to come in.
Subrogation benefits many elements of insurance: It pertains to risk-free financial gains as well as improved broker-insurer dynamics, policyholder-insurer relationships, and much more.
As the realm of subrogation continues to expand in the field, insurance companies looking to take their business to new levels of growth will be wise to capitalize on the opportunities in front of them.
A small oversight can lead to significant unrealized gains.
Wilfred Tioh is senior vice president of subrogation operations at SIAdvisers Consulting & Solutions
Feature image by iStock.com/sesame