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.