How Subrogation-as-a-Service Can Transform P&C Insurance

The Property and Casualty (P&C) insurance industry is grappling with an uncertain landscape. Rising inflation, supply chain disruptions, geopolitical turmoil and climate catastrophes are combining to fuel a ‘permacrisis’ era, with uncertainty the only certainty. Consistent instability has seen the Combined Operating Ratio (COR) for the US P&C industry trend over 100 percent for three consecutive years. 2023’s COR of 103 percent was driven by particularly impacted segments like home and motor insurance, which peaked at 110 percent, according to AM Best.¹

In response, insurers are being pushed to innovate to help boost their cash flow and profitability and accelerate their transformation efforts. Increasingly, organizations are identifying subrogation as an area ripe for re-invention, potentially boosting an insurer’s overall profitability.

Achieving this, however, requires a mindset shift. It means no longer viewing subrogation as a subset of claims but as a distinct pillar within the insurance lifecycle. In treating it this way, leading insurers are contributing to the genesis of a new subrogation paradigm that is highly automated, tech-driven and underpinned by niche expertise.

These holistic endeavors – encompassing the entire lifecycle of subrogation – are beckoning the emergence of Subrogation-as-a-Service model, based on the no-win, no-fee commercial construct that enables insurers to seamlessly tap into the diverse domain, data and digital expertise with limited financial risk. Here, we explore the barriers faced when realizing this future for subrogation, how future-facing insurers can meet these challenges and the full extent of transformation that successful subrogation can unlock.

The Need for Subrogation Advancement

Subrogation, when executed correctly, can significantly improve cash flow and help insurers lower their indemnity spend, positively influencing the COR. However, a series of challenges lead to missed subrogation opportunities, representing lost revenue and higher premiums for policyholders.

Complex claims management processes are one such challenge. Combined with organizational dependencies on claims adjusters to refer claims to subrogation departments, this creates significant manual inputs and potential for errors.

These issues are further hindered by often understaffed and overworked teams. The identification and execution of subrogation cases require unique skills and attention to detail. A lack of investment in digital capabilities represents another issue, with significant opportunities existing to automate processes.

Promisingly, however, the industry looks prepared to meet these challenges head-on. A recent study by HFS Research, in partnership with WNS, unveils compelling use cases of insurers leveraging Generative AI (Gen AI) to assist underwriters in risk assessment and decision-making. According to research from Forrester, in collaboration with WNS, 70 percent of insurers expect increased organizational spending on data and analytics, focusing on building data products and services and recruiting people with advanced data and analytical skills. Two-thirds (66 percent), meanwhile, recognize data and analytics as critical or high priority for their business performance.

Enter Subrogation-as-a-Service

Despite this recognition and maturity in certain areas, building a new subrogation paradigm calls for diverse domain, data and digital expertise, alignment on key decisions across approach, design, tools and platforms and significant internal investment. Failure to get these decisions right will stymie implementation efforts and leave opportunities missed.

Here is where the concept of Subrogation-as-a-Service can enter the fray, providing insurers with fully integrated business solutions that address the full spectrum of challenges across the subrogation value chain. Organizations can adopt this concept from different purviews based on their internal capabilities, selectively onboarding the services they need.

While journeys will be unique to each insurer, four areas form the cornerstone of Subrogation-as-a-Service solutions :

01

Domain Expertise

Deep domain knowledge is integral to making subrogation a success. The right external support means companies can leverage industry and staff expertise in subrogation and collections to deliver a more effective and efficient subrogation process and ensure opportunities aren’t missed.

02

Recovery Analytics

Harnessing AI and machine learning, predictive analytics platforms can identify missed recovery opportunities for both open and closed claims, assessing structured and unstructured data to prioritize these opportunities. Platforms can also determine the propensity to recover from third-parties within stipulated timeframes, even profiling companies through behavioural analysis to identify potential avenues of negotiation.

03

Technology Stack

Access to comprehensive, next-generation technology solutions is key to managing complex subrogation processes. These solutions bolster existing technology through seamless integration of industry subrogation platforms such as Guidewire and E-Subro Hub and set the scene for the seamless introduction of emerging technologies like Gen AI.

04

Smart Insights

Successful subrogation also relies on delivering insights to the enterprise. AI-led data contextualization platforms can ingest subrogation data and deliver quick, accurate and actionable insights, enabling subrogation to play a strategic role and unlock new avenues of growth for insurers.

Provided as a ‘no-win, no-fee’ model, Subrogation-as-a-Service will enable insurers to seamlessly tap into these capabilities. Organizations can improve their recovery rates, pinpoint missed opportunities and streamline manual efforts through automation, realizing the business impact of reduced leakages, indemnity savings, operational efficiencies – and more.

Partnering for Subrogation Transformation

The outlook for the P&C insurance industry in the year ahead looks decidedly more favorable than in years past, with strong premium gains, easing inflationary pressure and higher investment returns helping. But with a COR of 100.7 percent projected for 2024 by AM Best, the need for change continues to be felt.²

Finding the right partner will prove integral to unlocking further transformation. Firms that currently leverage external support expect an average 41 percent increase in the engagement of strategic partners. Doing so means instant access to holistic solutions that cover the entire value chain of subrogation and beyond, providing insurers with the tools to innovate and adapt in an uncertain landscape.

About the Author(s)

Shomi Agrawal is an Insurance Solutions Leader at WNS, bringing over two decades of expertise in the insurance and outsourcing industries. He leverages his profound knowledge of claims, underwriting and technology practices to spearhead business and transformational solutions for WNS clients.

Karan Masand is a Subject Matter Expert in Claims and Subrogation at WNS, with more than two decades of experience in the insurance sector. His background encompasses claims, underwriting, policy administration and digital capabilities. Karan specializes in indemnity reduction, claims cost management and recovery rate enhancement, among other areas.

Neha Singh serves as an Insurance Solutions Consultant at WNS, with extensive experience in pre-sales solutioning, organizational transformation and change management. She specializes in subrogation and outcome-based models, with a particular focus on outsourcing strategy, operating model design and transformation-led change.

Click here to learn how Subrogation-as-a-Service can power transformation and revenue growth for P&C companies.

References

1. Reinsurance and the weather impact huge US P&C underwriting losses | Insurance Business

2. U.S. P/C Industry Underwriting Loss Reaches 10-Year High: AM Best | Carrier Management