Subrogation White paper with Bigdata

Subrogation white paper

Dillip Kumar MajhiBigdata and Analytics ArchitectDate : 15-03-2014

SubrogationAbstraction :Subrogation can be a difficult legal concept, but in simple words, we can say it is an act of substituting one creditor for another. When an insurance company pays a policyholder for a loss, the insurance company has a right of subrogation against persons responsible for the loss. The right of subrogation allows the insurance company to pay its policyholder and then pursue the responsible party for the payments made.

When the insurance company collects against the responsible party or its insurance company, the policyholder will receive a pro-rata share of the deductible applied to the original loss payment made to the policyholder. If the subrogation claim is original loss payment made to the policyholder. If the subrogation claim is unsuccessful, then the accident may become a chargeable accident to the policyholder. It possibly results in a premium increase i.e. if you do not pursue subrogation, insurance premiums will increase. Hence, it is a result of poor loss experience.

Generally, the commercial automobile insurance policy will have a section under the policy’s conditions, with outlines the insurance company’s right of subrogation, such as: Our Right to Recover from Others: If we make any payment, we are entitled to recover what we paid for other parties. Any person to or for whom we make payment must transfer to us his or her rights of recovery against any other party. This person must do everything necessary to secure these rights and must do nothing that would expose them.

What it is?

•When an insurance company pays a policyholder for a loss, the insurance company has a right of subrogation against any person or persons responsible for the loss.

Subrogation in Nutshell

Why it is important?

•Specialized subrogation efforts can yield an attractive return on investment.

•The benefits of subrogation have demonstrated in company performance

•A company with an effective subrogation department can offer lower premiums to their policyholders

•Any monies recovered through the subrogation process go directly to the insurance company’s bottom line

Complexity in Subrogation implies need of prediction

Not possible for all Claims• Time Consuming

• Money Consuming

• Complications in rules and Claims

• Favorable probability of success of subrogation

• Likelihood of good recovery amount

• Effortless to obey

Invest time & money intellectually

rules and regulations

• Overworked and Understaffed

Claims contain

good potential of subrogation

• Effortless to obey complicated rules and regulations

In the context of business issue

In the context of business issue

To trim down unnecessary investigation

To trim down unnecessary investigation

Subrogation Solution Architecture

Identification for authenticate claim

If YES Fault Measure(Percentage)

Predict subrogationopportunity

Predict settlement amount

Good %

GoodOpportunity

Total CompensationClose claims

If NO Less % HighCompensation

Recovery from subrogation = 0%

Poor Opportunity

Estimate percentagerecovery

Predictive Modeling

Logistic regression

Generalized Linear Model

Regressor variables:

Claim Number, Jurisdiction Local, Claim LocalClosed Outcome, Gross incurred loss,Total reserve amount, Exposure Type,

Claim Age etc.

Claim Data

Report of final outputs

How it Matters !!

Handles the unlimited volume of claims data

Extract hidden information from unstructured & complex data

Predictive modeling to train model with historic data

Predict probability of success of subrogation

Predictive analytics to determine the success of subrogation claim

accurately

Effective use of Big Data

Predict settlement amount from subrogation

A broad selection of data manipulation

Advance & complex modeling algorithm

To increase accuracy of prediction of good potentials of subrogation

claims

http://www.megaputer.com/site/pr_nwcsse2008.php

http://www.sconsig.com/success/success001.pdf

http://www.megaputer.com/site/pr_nwcsse2008.php

http://www.optuminsight.com/~/media/Ingenix/Resources/White%20Papers/Ingenix_

Exec_Brief_Subro_Science_Art_409.pdf

REFERENCES

Exec_Brief_Subro_Science_Art_409.pdf

http://www-

05.ibm.com/cz/businesstalks/pdf/wp_business_analytics_for_insurance.pdf

http://www.amisinsurance.com/content/subrogation_information_article.php