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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
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National Association of Subrogation Professionals
2011 Workers’ Compensation Subrogation Survey Sponsors Praxis Consulting Latitude Subrogation Services Schultz Law Ward Group 2
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What is a Benchmark? The process of comparing performance against
baseline Internal comparison Practices of other leading companies Purpose of improving performance 4
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Why is Benchmarking Important to your company?
Alignment Measurement Drive Performance Continuous Improvement 5
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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
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Internal Analysis Understanding Your Company’s Business
Three-year Data History Changes in Your Book of Business Current Subrogation Pending 7
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External Analysis Peers -- Geographic -- Business -- Size
Market Changes Variables (i.e. CATs) 8
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Apples v. Oranges? Reporting Criteria Specific Business Practices
-- Philosophy -- Workloads -- Organization Results -- Representative Sample -- High Performers 9 9
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“Not everything that counts can be counted and not everything that can be counted counts.”
Albert Einstein 10
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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
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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
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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
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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
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Operating Practices Identifying Subrogation Potential Investigating
Hiring Subrogation Firms -- When? -- How? Audits Training 15
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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
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Subrogation Legal Counsel’s Involvement in Investigation Overall Benchmark Supervise Coordinate Determine Put Parties Investigation Expert Hiring Subrogation on Notice 17
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Outside Subrogation Counsel Payment Method
Subrogation Legal Outside Subrogation Counsel Payment Method Overall Benchmark Contingency Fee Schedule Negotiated Hourly Rates 18
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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
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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
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Accounting for Outside Counsel Contingency Fees
Subrogation Legal Accounting for Outside Counsel Contingency Fees Overall Benchmark Gross Net 21
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Contributory and Negligence
Laws by State 22
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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
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Organizational Practices
Workloads Recovery Expense Centralized / Decentralized Service Level Standards 24
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Centralized/Decentralized
Strategic Importance of Subrogation Performance Overall Benchmark Group Centralized 88% Outsourced 7% Decentralized 5%
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Philosophy Measuring and Tracking Performance Personnel
Salary, Authority, Incentives, Experience, Workloads Expense Organization Structure 26
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Authority Average Subrogation Examiner Settlement Authority
Overall Benchmark Group
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How Do You Measure Up? Strategic Planning Management Goals Team Goals
Individual Performance Goals 28
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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
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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
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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
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Utilization and Tracking of
Settlement Terms 32
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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
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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
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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
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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)
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Questions? 37
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