Subrogation: Cutting Through the Weeds: Part Two

In the first post in this series, we discussed potential claims that might be subrogated in various lines of business. This time around, we’ll take a more general view of subrogation and the importance of managing the intricacies of subrogated claims.

Recently, PropertyCasualty360 published an article entitled, “Why subrogation is more than a final box to check“, that noted the financial importance of subrogating claims efficiently and accurately:

In the current economic environment … insurers are looking for every dollar they can add to the bottom line. Carriers also know that customer experience has become paramount in policyholder retention. The carrier’s ability to successfully subrogate and provide a deductible reimbursement to their policyholders in a timely fashion is a key driver for a positive claims experience.

We’d venture to say maximizing profitability, optimizing customer experiences, and providing a positive claims experience is important in any environment. And if you accept the notion that insurance is the fulfillment of a promise, making your policyholders whole in the event of a loss is the promise.

What to Do?

Needless to say, every insurance company would like to acquire as many new customers — and write as many new policies — as it can. But according to CB Information Services, it costs insurance companies $500 to $800 to acquire each new customer. And according to Insurance Thought Leadership, it costs insurance companies seven to nine times more to attract a new customer that to retain an existing one.

So, if the old saying is true, “A bird in the hand is worth two in the bush,” wouldn’t it make more sense (along with dollars and cents) for insurers to improve their subrogation performance? This may seem counterintuitive, but a small increase in net subrogation revenue could be more profitable than issuing a new policy.

Maybe we should consider that to be food for thought, at least for now. But with competition for new policyholders on the increase, with claims costs an abiding source of concern for every insurance company, and with profitability being a key measure of sound operations, it might be worth looking for that extra buck a little closer to home.

In any event, as they say in Brooklyn, it couldn’t hoit.

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Clean Up on Aisle Five

Supermarkets are often hard to insure. There are at least three reasons for that: First, the number of coverages they need can be daunting. Second, the number of employees (workers compensation) and customers (general liability) that have to be covered can be even more daunting. Third and most important, the sheer number of claims they may incur and have to manage can be downright terrifying. If you think that sounds odd, consider just these four sources of claims:

  1. Slips and falls. Whether those slips and falls occur inside the store from spills and wet spots — or outside the store from ice, snow, and cracks or other defects in walking surfaces — the supermarket could have to manage claims for injuries to knees, ankles, hips, elbows, or skulls.
  2. Injuries to employees from loading, unloading, and other lifting tasks. Those kinds of tasks can lead to back strains, other muscle strains, tendon and ligament injuries, and more.
  3. Injuries to employees from cleaning and other equipment. Floor polishing machines and industrial vacuums can cause scrapes, lacerations, muscle strains, and other injuries.
  4. Spoilage from power outages or other reasons. Storms and aging power grids can cause power failures resulting in the loss of perishable inventory.

In any of those situations, the attendant claims have to be managed and adjudicated.

Claim Management Solution For Supermarkets

To manage all those (types of) claims, you can record, manage, and adjudicate each claim separately. If you do, you’ll learn what your loss costs are, but you won’t be able to connect many dots.

Alternatively, if you adopt a flexible platform that constitutes one source for all of your claims information and gives you a disciplined process and workflow, you’ll be able to:

  • Track all your loss costs
  • Identify the trends suggested by types of incidents, their locations, their causes, and their related claims
  • Determine ways to anticipate and, therefore, to mitigate such incidents in the future
  • Better manage your overall risks, regardless of their types or their corresponding incidents and claims
  • Lower your overall loss costs and, thereby, lower your liability, property, and workers compensation insurance premiums.

We don’t want to tell you what to do. But if it were our supermarket, we know what we’d do. And remember: You can’t manage what you don’t track.

Oh … uh … you missed a spot on aisle five.

Learn more about APP Tech’s Cloud Claims solution.

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Subrogation: Cutting Through the Weeds

You can tell you’re really deep in the claims weeds when you start thinking about subrogation. Since we are deep in the claims weeds, we have to think about it.

To put it simply, just in case you’re not deep in the claims weeds, subrogation refers to an insurance company’s seeking reimbursement for the costs of a claim from the party — or the insurance company of the party — responsible for damages that precipitated the claim. If responsibility is established and documented, subrogation can begin at any point in the process of settling a claim.

Here are some examples from a few different industries:

  • Property/Casualty. A cement truck careens around a corner at 90 miles an hour, on two wheels, and t-bones the car you’re driving. By some miracle, you’re not injured. But your car has to be removed from the scene with a dust pan and a squeegee. The driver of the cement truck is determined to be at fault by virtue of the facts that (A) he was exceeding the posted speed limit by 60 miles an hour and (B) driving a cement mixer on two wheels is permissible only in movie stunts and monster-truck shows. The cement truck driver’s insurance should pay for the cost of finding and replacing your car. But that process is held up because the cement truck driver’s insurance company is also contending with the fact that the cement truck driver filed a workers comp claim, contending he had trouble controlling the vehicle because his vision was damaged from falling into the cement mixer. Under those circumstances, your insurance company would pay to find and replace your vehicle. Then it would seek reimbursement from the cement truck driver’s insurance company for the cost of your claim, including your deductible, the dustpan, and the squeegee.
  • Construction. A plumber is tricked by an electrician into biting a live wire. The plumber suffers burns to his face and ends up with a terrible perm. While the perm will grow out, he files an injury claim with his company’s insurer for the burns to his face. The electrician is determined to be at fault for professional negligence and for playing a practical joke in an inappropriate setting. The plumber’s insurance company uses subrogation to seek reimbursement from the electrician’s insurance company for the plumber’s injury, for playing a practical joke in an inappropriate setting, and for shaving the plumber’s head since he opted not to let the perm grow out.
  • Hospitality: The chef in a restaurant bets a waiter he can’t jump over a patron’s table without disturbing anything. The waiter takes him up on it. Since the waiter had pounded 12 shots of Jose Cuervo at the restaurant’s bar before his shift, he miscalculates his take off, fails to get the necessary speed and elevation, and plants his lead landing foot in the patron’s clam chowder. The patron suffers burns from the hot chowder and files a liability claim against the restaurant. He then goes to the emergency room (ER) to be treated for his burns. His ER visit is covered by his medical insurance. Since the waiter was determined to be at fault for improper execution and being over the legal blood-alcohol limit, the restaurant’s liability insurance is responsible for paying the patron’s liability claim and for comping him another bowl of chowder. And since the patron filed a liability claim against the restaurant, his medical insurer subrogates the cost of the ER visit to the restaurant’s insurer.

Cloud Claims Makes Claim Management Simple

Chances are your claims won’t be anywhere near as complicated — or absurd — as the ones above. Nevertheless, we built subrogation capabilities into Cloud Claims to make sure you’d be able to cut through the weeds and handle anything that comes your way.

You and your claimants will be happy we did.

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Curiouser and Curiouser

`Curiouser and curiouser!’ cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English).

We thought of that line from Alice’s Adventures in Wonderland when we read a recent article in PropertyCasualty360. The article — “Mitigating risk & reducing employee claims for commercial clients” — said this, in part:

As employers continue to struggle with managing remote versus in-person employee working conditions around the United States, it is expected that employee practices liability insurance (EPLI) claims will continue to rise. In fact, data from the Equal Employment Opportunity Commission (EEOC) shows that EPLI claims have increased every year since 2003. EPLI claims include any employment-related claims such as wrongful termination, discrimination, workplace harassment and retaliation.

That citation appears to employ the logical fallacy of false cause. The assertion seems to be (A) managing remote versus in-person employee working conditions will (B) cause EPLI claims to rise. But if EPLI claims have increased every year since 2003, then A is not necessarily the cause of B.

One More Thing

The article also says this:

Some degree of risk is unavoidable for businesses, but ignoring that risk increases the volatility of outcomes and potential damage. Sixty-five percent of founders admit that risk is an inherent part of business and is necessary to grow.

The first sentence is simply and logically true. The second sentence is shocking in that only 65 percent of founders admit to the reality of risk. (And we wonder why tort lawyers are overburdened.)

Manage Claims With Cloud Claims

All of that musing about philosophy and logic notwithstanding, one thing remains universally true: Claims — EPLI and otherwise — have to be managed. And a SaaS platform that automates workflow and operationalizes risk mitigation by enabling users to identify — and thereby mitigate — claims and risk trends by type is a good place to start. After that, if you can find a SaaS platform that also also tracks salvage, recoveries, subrogation, various parties to incidents, claims by type, vehicles, road conditions, types of injuries, wage details, and more — with customizable tags and drop-downs — buy it.

Anything else would even make Alice wonder.

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A Tale of Two Trucks

We have a number of clients in the transportation industry. Given the number of claims to which trucks and truck drivers are susceptible, we’re always eager to help our clients manage, track, and settle their claims as quickly and efficiently as possible.

Two of our client companies — Long Haul Cowboys, Inc. and Big Rigs Amalgamated — recently had separate incidents at roughly the same time. Since each of those incidents produced multiple claims, we asked the CEOs of those companies — Tiny Littlestone of Long Haul Cowboys and Duke Waslewski from Big Rigs Amalgamated — if they would talk to us together. They said yes.

What follows is a cleaned-up transcript of our conversation, with all the bad truck-driver words taken out. Tiny is represented as TL. Duke is represented as DW. And we, as always, are represented as CE (Claims Expert):

CE: Thank you for joining us today, gentlemen.

Burt and his new rig.

TL: It’s good to be here.

DW: Speak for yourself, Tiny.

CE: Well, great start there, men. Let’s start with you, Duke. It seems you had a man who was refusing to drive. Is that right?

DW: Yeah. Burt Sniglitz said he just wanted to stand and admire his new truck.

CE: Did you file any insurance claims on Burt?

DW: No. But we did file claims against Burt for professional liability, property damage, and errors and omissions.

CE: Can you be more specific?

DW: Sure. The professional liability was because he was loitering on company property. The property damage was because he was kicking the tires. And the errors and omissions was because he omitted his job, which was supposed to be driving.

CE: And what was the incident to which you tied those claims?

DW: Burt was an accident waiting to happen. And he did.

CE: Okay, Duke. That’s quite the story, indeed. Tiny, I understand one of your drivers was involved in a crash caused by faulty equipment.

Ernie gets busted on the road.

TL: Yep. But it wasn’t exactly one of our drivers.

CE: Who was it?

TL: That was Ernie Bilge, our head mechanic.

CE: He got pinched for faulty equipment?

TL: He said he was taking it for a test drive to see if the tires were really flat and to determine if the engine was emitting excessive exhaust.

CE: And what were the charges?

TL: Driving with flat tires and emitting excessive exhaust.

CE: And what types of claims did you have to file for that incident?

TL: Well, we had two property damage claims — one for the flat tires and one for the blown engine.

CE: Uh huh. Anything else?

TL: We filed a negligence claim against Ernie.

CE: For what?

TL: Driving with a suspended license.

CE: Why was his license suspended?

TL: Because he had a prior arrest for driving with flat tires and emitting excessive exhaust.

CE: Thank you, gentlemen. We need a drink.

Claim Management For The Transportation Industry

Is that story made up? Well, yes. Is it deliberately absurd. Well, yes. But the fact of the matter is you can manage almost anything — and all of your liability-related incidents — if you have the right claim system. If you’re in the transportation business, you likely don’t have to deal with people like Burt and Ernie. Nevertheless, we’re here to show you how Cloud Claims can transform your claims operations, whenever you’re ready.

In the meantime, be careful out there.

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Cloudfunding

No. The title of this post isn’t a typo.

It occurred to us as we were thinking about crowdfunding, which Wikipedia defines like this:

Crowdfunding is the practice of funding a project or venture by raising money from a large number of people … typically via the Internet.

Then we thought about the time, the effort, and the money (not crowdfunded) we put into developing Cloud Claims. We wondered why no one had ever thought of calling the investment in developing software, the functionality of which is delivered from the cloud, as cloudfunding. We still don’t know. But we decided to use the term anyway.

The Value Of Cloudfunding

Aside from coining the term, cloudfunding, we decided to engage in it because we believed it was a better way to deliver value — more flexibly and less expensively — to the claims managers and risk managers who depend on our software to get their jobs done efficiently. We undertook the conversion of our old, on-premise claim product — IMS — for cloud delivery because we believed the cost savings, the increased productivity, the speed and efficiency, the performance, and the security would constitute valuable assets to our customers. We haven’t heard anything yet to suggest we were wrong.

We also think there’s value in playfulness, in having fun, in engaging in a little word play to come up with a term like cloudfunding, and in deliberately making life a little lighter. We take our work seriously. We take our commitment to our customers — their business and their loyalty — very seriously. But we like to believe we don’t have to take ourselves seriously all the time.

One More Thought On Cloudfunding

We’re a product company. We develop and sell software. But we’re also a service company. We provide the services that enable our customers to get the most out of the software they buy from us. And we’ve come to realize we derive at least as much satisfaction from supporting and interacting with our customers as we do from developing software. If we were inclined to coin another term, we might call that interaction cloudsourcing.

But we don’t want to get ahead of ourselves. 😉

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Don’t Let Your Carwash Take a Bath

As much as anything else, the car care business is a customer-satisfaction business. No satisfaction, no customers.

As a result, car care business owners can incur liability claims for any number of reasons (premises liability, property damage, personal injury, the conduct of others acting on your behalf, and more) from any number of incidents. That’s why God invented insurance, of course. And insurance claims have to be managed.

Service With a Smile

The best thing you can do for your business and your customers is keep the lines moving and provide an exceptional customer experience. The last thing you need is a lengthy holdup if customers cite damage to their cars after going through the carwash — or if there’s an accident in the tunnel caused by the customer or your equipment. The fact of the matter is, given enough time, anything and everything that can go wrong likely will. That’s where we come in.

Whether your parent company is fully insured, self-insured, part of a self-insured group, or works with a TPA, if whomever is responsible for managing your claims is using Cloud Claims, your job gets easier. All you have to do is smile, tell the affected customers their claims will be handled promptly, minimize the interruptions of your traffic flow, and make the experience as positive as possible for your customer.

Claim Management For Car Care Businesses

And there’s another point to be made: Using a system that tracks your incidents and claims — and allows you and your parent company to analyze incidents, injuries, and claims to identify trends — will allow overall risk management to be dramatically improved.

We apologize for the bad pun. But if you don’t measure and manage your claims, you’re likely to get hosed.

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We Have the Net

An article ran in the April edition of Best’s Review entitled, “Risk Managers Walk a Tightrope as COVID-19 Challenges Remain”. The summary under the title says this, “Risk managers say they’re seeing their roles evolve as the old work environment undergoes profound change.” And the article says this, in part:

In the age of COVID-19, the insurance industry and risk managers view the whole process of opening office doors—if that’s even possible—or even setting up remote laptops for millions of workers as a “tightrope” walk that’s very hard to balance.

That statement reminded up of one of our earlier blog posts: “It’s 2022. Do You Know Where Your Claims Managers Are?” In that post, we wrote this:

Many companies in industries as diverse as insurance, transportation, construction, local governments, TPAs, self-insured groups, and restaurants are wondering where their claims managers and risk managers are. They might be in the office. They might be working from home. They might be on the road. It doesn’t matter. Wherever they are, they need access to information. And they need to be able to find the information they need as efficiently as possible.

And the congruence of the Best’s Review article and our blog post reminded us of an old expression: “There’s nothing new under the sun.”

Common Problems Faced By Risk Managers

It really doesn’t matter what industry you’re in. If you’re managing risks or claims, you need to be able to get the information you need when you need it. You need to be able to generate the reports you need to be able to see incidents, the claims related to every incident, the types of accidents or injuries that caused the claims to be filed, the cost of those claims, and the trends suggested by all of that information. If risk and claims managers seem to be walking a tightrope over working from home or returning to an office, can you imagine how thin the high wire would be if they were walking it without all the information and access to it?

The problems of risk and claims managers are common to everyone who works any kind of job that requires work to be done online, regardless of industry.

For the industries in which we work, we have the challenges of risk and claims information solved.

We charge extra for solving the challenges of the rest of the world.

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A Tale of Two Cities

Since A Tale of Two Cities, the 1859 novel by Charles Dickens, is in the public domain, we borrowed the title for this post.

Unlike the novel, which takes place in London and Paris, our story takes place in Baked, Alaska. We called Albert Murfwhiffle, the municipal risk manager for the city of Baked, after hearing about a snow-plowing accident that resulted in multiple claims. We recorded the conversation, then sent the recoding out for transcription because we didn’t think anyone would believe what happened.

This version of the transcript has been edited for brevity and clarity. Al is represented as AM. We’re represented as CE (claims expert, of course):

CE: Good morning Mr. Murwhiffle. Do you have a few minutes to speak with us.

AM: Well, I guess I can spare a few. I gotta get over to the hospital to see Clem. He was in an accident with one o’ them snowplows, ya know.

CE: Yes. We heard about that. We weren’t able to get all the details. So, we thought we’d call and ask you about it.

AM: Yeah. Clem never seen that moose.

CE: Moose?!

AM: Yep. The durn thin’ jumped right up on the hood o’ Clem’s truck and did some kind of Merengue or somethin’.

CE: The moose was dancing on the hood?

AM: Right before he poked Clem in the eye with an antler, he was. Busted the windshield right out.

CE: Is Clem alright?

AM: He’s a little banged up, but he’ll be okay. His truck is totaled, though.

CE: Totaled?!

AM: Right you are. With only one good eye, he couldn’t see past the moose on the hood, and he drove off a bridge.

CE: And he’s only a little banged up?

AM: He was lucky. His airbag deployed, and he was wearing 10 pairs o’ long johns. Cushioned the impact pretty good.

CE: That sounds like a property damage claim, a personal injury claim, and a veterinary claim.

AM: ‘At’s about right.

CE: How are you managing all that?

AM: Mildred in my office has it all diagrammed out on a BOC.

CE: BOC?

AM: A big ol’ chart. Right there on the wall, ya know.

CE: Have you ever heard of Cloud Claims?

AM: Is that anything like weather insurance? We could sure use some ‘o that with all the snow up here.

CE: No. It’s an incident-based claims system that would let Mildred track and manage every claim related to Clem’s accident with her keyboard.

AM: No more BOC?

CE: No more BOC.

AM: Where do I sign?

Choose Cloud Claims For An Incident-Based Approach To Claims Management

We’re happy to report Baked, Alaska is now using Cloud Claims. Clem’s out of the hospital. The insurance company replaced his truck. The city got rid of Mildred’s BOC. And the moose has refused to come out of the house since the accident.

Albert Murfwhiffle is now living in Freemish, Alaska, working for Mildred.

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How High is High Tech?

In September of last year, McKinsey & Company published a report called, How top tech trends will transform insurance. This excerpt about claims technology caught our eye:

Technology trends have the potential to materially change some of the underlying inputs of insurance products and core functions … [allowing] carriers to more effectively manage risk and make use of complex customer data—a critical step in evolving to a “predict and prevent” model of insurance where data is shared more frequently between parties.

It’s actually quite amazing to think about how far we’ve come from paper applications and telephones as means of submitting claims and how quickly it happened. We’re not quite sure what McKinsey means by will transform, since software has been transforming insurance — particularly in claims — by helping companies of all sorts to submit claims, to manage risk, to analyze customer data, to identify risk trends, and to mitigate the risks posed by those trends.

But that’s okay. That’s not the part that really got us.

The Shifting Role Of Insurers

Later in the report, McKinsey wrote this:

The role of insurers may shift from claims to prevention, whereby they are best placed to identify and reduce risk by partnering with clients and using technology.

Whoa! It can be argued (as we did above) that software is already enabling insurers to play a more active role in mitigating risks. But actually shifting roles from claims indemnification to claims prevention? That’s a whole different kettle of fish.

McKinsey may prove to be correct. But for the moment, we’re not sure how software could predict the occurrence of risks well enough to preclude them. If we take into account the vagaries of human nature alone, it seems like a stretch. How, for example, in any given scenario, can we know Person A will do this, instead of that? Under what specific conditions is he likely to do one and not the other? How can we know?

We’re software developers. We believe in technology, of course. But we don’t want to get ahead of ourselves in predicting the omniscience of software, even the software we develop.

That doesn’t mean we sell ourselves short. But it does mean we wonder how high tech can go.

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