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