Leading Out Loud: Subrogation

[Editor's Note: The following content is sponsored by SubroIQ and Fleet Response/Paragon Subrogation.] 

How is artificial intelligence changing the subrogation process? How has the economy changed carriers’ appetite to identify subrogation opportunities? And finally, how has increased M&A activity in the subrogation space affected the level of service provided by subrogation firms?

Artificial intelligence (AI) is impacting all parts of the insurance industry, from underwriting to claims management. What has been the effect of AI on subrogation?

Sean Garrett, SubroIQ: AI has significantly streamlined the subrogation process by automating the identification and management of potential recovery cases. AI algorithms can analyze vast amounts of data quickly and accurately, identifying subrogation and reducing both the need for manual review, and missed opportunities. The improved efficiency allows insurers to prioritize cases effectively and maximizes recovery amounts. Furthermore, AI can automate routine tasks, reducing manual labor and speeding up claims cycle time. Ultimately, AI has transformed property and casualty subrogation by enabling insurers to make data-driven decisions and achieve better outcomes, thereby positively impacting the bottom line of insurance companies.

Lucy Avsharian, Fleet Response: AI has made a significant impact globally, both positively and negatively. However, its influence has been overwhelmingly positive in the realm of subrogation. AI applications have become essential assets in aiding subrogators of all skill levels by efficiently identifying opportunities throughout the claims process. AI has effectively prevented the potential missed from any likely subrogation opportunities. AI has provided insurers with a more streamlined solution to tackling complex subrogation scenarios without the need for extensive training or infrastructure investments. Artificial Intelligence is enhancing the subrogation field by enabling a more precise, efficient, and consistent resolution.  

What has been the impact of economic trends, such as inflation, on carriers and how has that translated to subrogation? Is there more appetite now to identify subrogation opportunities? 

Lucy Avsharian, Fleet Response: Economic trends such as inflation have had a notable impact on carriers within the insurance industry. Rising inflation typically leads to higher claim costs as the prices of goods and services increase. This can put pressure on insurance carriers’ profitability and pricing models. To remain financially viable, insurance companies found themselves compelled to boost their revenues, often resulting in the escalation of premiums. Unfortunately, this rise in insurance costs has had adverse repercussions for consumers, prompting them to seek out alternative, more affordable coverage options. Furthermore, subrogation has gained increased importance as carriers seek ways to recover losses from responsible third parties, mitigating the impact of inflation on their bottom line. As a result of this, there is a heightened appetite to identify new subrogation opportunities during these periods of economic instability. Carriers look to maintain their financial health and competitiveness in a challenging economic environment.

Sean Garrett, SubroIQ: Inflation is causing major revenue challenges for carriers. While this affects all lines of business, it is particularly evident in auto lines. Costs for repairs, supply chain issues, and a high market for used vehicles cause claims to be significantly more expensive than they were just a few years ago. The effects reach into subrogation as the only other area outside of premium where carriers can add revenue directly to the company’s bottom line. As carriers grapple with higher expenses on incoming claims, there is a renewed focus on driving increased subrogation opportunity by aggressively identifying more opportunities.  

Are there any particular lines of business experiencing greater subrogation activity, and what is driving that activity in those lines?

Sean Garrett, SubroIQ: Auto insurance stands out due to rising repair costs, supply chain disruptions, and higher used-vehicle prices, making claims more expensive. Similarly, property insurance has seen increased subrogation activity, driven by natural disasters and climate-related events. The need to recoup costs from third parties has pushed carriers to intensify their subrogation efforts in these lines of business, aiming to recover losses and mitigate the impact on their bottom line.

How has increased mergers and acquisitions (M&A) activity in the subrogation space affected the level of service provided by subrogation firms? Has there been a change in the relationship with carriers because of the increased mergers and acquisitions?

Lucy Avsharian, Fleet Response: M&A in the subrogation industry has had a mixed impact on service quality. On the positive side, these transactions grant companies access to new resources, enhancing brand visibility and ultimately improving their service. However, on the flip side, certain M&A deals have led to employee layoffs and the loss of client relationships, thereby negatively influencing service standards. Additionally, some carriers, dissatisfied with the declining service quality post-M&A, have opted to either retain their work in-house or seek alternative vendors for outsourcing. 

Sean Garrett, SubroIQ: M&A is reshaping service providers by enabling them to offer wide ranging, comprehensive services through one single engagement. This not only enhances security for carriers by reducing the number of vendors with which they need to work, but also combines expertise and specialization in one portfolio. Moreover, these mergers provide vendors with the scale to serve larger clients and handle higher volumes, enhancing efficiency and competitiveness in the industry.

What has been the biggest change in the subrogation space over the past five years? Have any legal or legislative changes, technology advancements, or business trends altered the landscape significantly? 

Sean Garrett, SubroIQ: Over the past five years, the biggest change in the subrogation space continues to be accelerated adoption of technology. Advanced AI and data analytics have changed how insurers identify and pursue subrogation opportunities. These technologies enable more efficient claims analysis, making it easier to pinpoint liability and therefore easier to recover costs from responsible parties. Additionally, some legal and legislative changes have placed a greater emphasis on subrogation rights, further helping insurers to maximize recoveries. 

Lucy Avsharian, Fleet Response: Over the past five years, both the COVID-19 pandemic and AI have wrought significant changes in the subrogation industry. COVID-19 introduced various trends, including major delays due to parts availability and labor shortages. These delays, in turn, led to extended rental periods, triggering numerous disputes over damages. Many of these cases ended up in arbitration rather than being resolved amicably. Concurrently, AI is gaining prominence in the insurance subrogation sector, promising enhanced efficiency and cost-effectiveness in subrogation recovery efforts, ultimately boosting revenue. Unfortunately, AI adoption has resulted in the displacement of certain jobs, a trend likely to persist as AI technology continues to advance. In conclusion, the integration of AI, combined with the hurdles posed by the pandemic, have undoubtedly marked the most significant changes in the subrogation industry of the past five years.

Sean Garrett, is vice president, sales at SubroIQ. sean.garrett@paragonars.com

Lucy Avsharian, is arbitration manager of Fleet Response/Paragon Subrogation.
|lavsharian@paragonsubro.com