1. Workers’ Compensation Subrogation Benchmarking Session M. 2
Workers’ Compensation Subrogation Benchmarking Session M.2.5 Monday - November 7, :45 p.m. to 2:00 p.m.
Mark Schultz
Schultz Law
8 Tower Bridge, Suite 400
Conshohocken, PA 19428
Chris McPadden
Travelers
One Tower Square, 5MS
Hartford, CT 06138

2. National Association of Subrogation Professionals
2011 Workers’ Compensation Subrogation Survey
Sponsors
Praxis Consulting
Latitude Subrogation Services
Schultz Law
Ward Group 2

4. What is a Benchmark? The process of comparing performance against
baseline
Internal comparison
Practices of other leading companies
Purpose of improving performance 4

5. Why is Benchmarking Important to your company?
Alignment
Measurement
Drive Performance
Continuous Improvement 5

6. Metric Definition “A metric is not simply measurement.
It is a measurement taken over a period
of time communicating vital information
about a process or activity.” Ralph Dandrea 6

7. Internal Analysis Understanding Your Company’s Business
Three-year Data History
Changes in Your Book of Business
Current Subrogation Pending 7

8. External Analysis Peers -- Geographic -- Business -- Size
Market Changes
Variables (i.e. CATs) 8

9. Apples v. Oranges? Reporting Criteria Specific Business Practices
-- Philosophy
-- Workloads
-- Organization
Results
-- Representative Sample
-- High Performers 9 9

10. “Not everything that counts can be counted and not everything that can be counted counts.”
Albert Einstein 10

11. Profile of Participants
Fifteen companies participated in the subrogation study. Individual company results and the names of participating companies have not been released in order to maintain the confidentiality of the data. A profile of the group follows:
Number of Participants
Average Annual Premium (000s)
Average Annual Workers’ Comp Premium
Average Number of Active States
Overall Benchmark 15
$5,087,677
$921,898 27
Small Company 7
$3,883,108
$258,867 22
Large Company 8
$6,141,674
$1,502,050 31
Workers’ Comp Carriers 6
$814,162
Multi-Line Carriers 9
$7,936,687
$993,722 38 11

12. Organizational Practices
Benchmark Categories
Performance
Number of Files Opened
Average Time to Closure
Total Dollars Received (% of Total Paid)
Potential Subrogation (% of Total Paid Losses)
Number Closed with $ 0 Subrogation Recovery
Operating Practices
Identifying Subrogation Potential
Investigating
Hiring Subrogation Firms
-- When? -- How?
Audits
Training
Organizational Practices
Workloads
Recovery Expense
Centralized / Decentralized
Service Level Standards
Philosophy
Measuring and Tracking Performance
Personnel
Salary, Authority, Incentives, Experience,
Expense
Organization Structure 12

13. Subrogation Performance
Number of Files Opened
Average Time to Closure
Total Dollars Received (% of Total Paid)
Potential Subrogation (% of Total Paid Losses)
Number Closed with $ 0 Subrogation Recovery 13

14. Subrogation Performance
Management
Subrogation Tracking Percent of Companies Tracking Metric
Organization
Office
Unit
Market Type
Cause of Loss
Coverage Type
Geographic Concentration
Gross Recoveries
79%
50%
43%
29%
21%
Net Recoveries
71%
14%
Gross Recovery Ratio
86%
36%
File Quality Score 7% 0%
Number of Files with Recoveries
64%
57%
Referrals to Subrogation
Assignments Ratio
Cycle Time
Average Age of Inventory
Days to Credit 14

15. Operating Practices Identifying Subrogation Potential Investigating
Hiring Subrogation Firms
-- When?
-- How?
Audits
Training 15

16. Percentage of Subrogation Files Assigned to Counsel
Subrogation Legal
Percentage of Subrogation Files Assigned to Counsel
In-House Counsel
Outside Counsel
Overall Small Large WC Multi-Line
Benchmark Co Co Carriers Carriers 16

17. Subrogation Legal
Counsel’s Involvement in Investigation Overall Benchmark
Supervise Coordinate Determine Put Parties
Investigation Expert Hiring Subrogation on Notice 17

18. Outside Subrogation Counsel Payment Method
Subrogation Legal
Outside Subrogation Counsel Payment Method
Overall Benchmark
Contingency Fee Schedule
Negotiated Hourly Rates 18

19. Benefits of Hourly Fees
Can minimize fees if cases are resolved quickly
Can negotiate favorable hourly rates with panel
counsel
Can minimize costs on large exposure files
Can more easily segment work 19

20. Benefits of Contingency Fee
No fees incurred if no recovery
No need to set up for hourly billing
Can negotiate favorable contingency fees
Profit motivated counsel produce the best results
Can participate at all levels without additional cost 20

21. Accounting for Outside Counsel Contingency Fees
Subrogation Legal
Accounting for Outside Counsel Contingency Fees
Overall Benchmark
Gross
Net 21

22. Contributory and Negligence
Laws by State 22

23. Legal Factors Affecting Recovery Rates
Is jurisdiction made whole?
-- GA, MT, KY
Does jurisdiction have some other mechanism
for reducing the lien?
-- NC, SC, IN, CA
Is jurisdiction a contributory state?
-- MD, DC, VA, AL, NC
Does jurisdiction prohibit suits against
other contractors?
-- VA, FL 23

24. Organizational Practices
Workloads
Recovery Expense
Centralized / Decentralized
Service Level Standards 24

25. Centralized/Decentralized
Strategic Importance of Subrogation Performance
Overall Benchmark Group
Centralized 88%
Outsourced 7%
Decentralized 5%

26. Philosophy Measuring and Tracking Performance Personnel
Salary, Authority, Incentives, Experience,
Workloads
Expense
Organization Structure 26

27. Authority Average Subrogation Examiner Settlement Authority
Overall Benchmark Group

28. How Do You Measure Up? Strategic Planning Management Goals Team Goals
Individual Performance Goals 28

29. Goals Most companies (85%) do not set recovery goals by state
8% of companies segregate recovery goals by specialty line of business
100% of the companies measure goals quarterly, semi-annually and annually with 93% monthly and 7% other

30. Settlement Metrics and Definitions
There are many terms used to refer to an insurer’s avoidance or reduction of future exposure resulting from the negotiation or settlement of a lien. Currently there is no industry standard. In an effort to establish a more uniform understanding of settlement terms, participants were asked to provide their company specific definitions. 30

31. Tracking Holidays and Credits
Are they real?
Do they affect premiums?
Do they affect company financials?
How do you calculate them?
How do you track them? 31

32. Utilization and Tracking of
Settlement Terms 32

33. NASP Benchmarking Surveys
Edition
First
Second
Third
Fourth
Auto Collision
2003
2005
2008
2012
Property
2004
2006
2010
2014
Work Comp
2011
2015
Healthcare
2013
2017 33 33

34. NASP Industry Benchmarking Dashboard
Quarterly, semi-annual and/or annual update of
subrogation performance, by line of business:
Personal Auto
Commercial Auto
Homeowners
Commercial Property
Workers Compensation 34 34

35. NASP Industry Benchmarking Dashboard
10 Key Subrogation Performance Metrics - PI Vs BI:
Average Notice of Loss to closure with recovery
Average Notice of Loss to closure without recovery
Notice of Loss to 1st Subrogation Credit Date
Calendar Year Claims Assigned in Subrogation
Calendar Year Recoveries (Ex CAT)
Calendar Year Payout (Ex CAT)
Calendar Year Deductibles Recovered
Calendar Year ALAE
Calendar Year ULAE
Count of Calendar Year Claims with recovery
Count of Calendar Year Claims with payout
Count of Calendar Year Claims Received (overall claim notices
regardless of payout) 35 35

36. NASP Industry Benchmarking Dashboard
Metrics that can be calculated:
Average Notice of Loss to closure with recovery
Average Notice of Loss to closure without recovery
Notice of Loss to 1st Subrogation Credit Date
Gross Recovery Rate
Net Recovery Rate
ALAE As Percentage of Recoveries
ULAE AS Percentage of Recoveries
Deductibles as a Percentage of Payout
Deductibles as a Percentage of Recoveries
Claims with Recovery / Claims with Payout
Count of Calendar Year Claims with recovery/Calendar Year
Claims Assigned in Subro (% of claims assigned with recovery)
Count of Calendar Year Claims with recovery/Calendar Year Claims
Received (% of claims with recovery)

37. Questions? 37