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7 Oct 2021

The AI subrogation solution

Subrogation image

By Jimmy Spears, MAL, MSPM, AIC, AAM, AIS

Subrogation is a critical part of the insurance process. Every auto insurer will, inevitably, have to deliver and respond to demand packets from adverse parties. For those on the receiving end of the demand, the labor-intensive process of review is a major sticking point and expense. AI Subro solves that problem, enabling insurance companies to respond promptly with the assurance that their reviews are AI-accurate.

Responding to the demand packet

When an insurance company receives a demand packet from an adverse party, the goal is always to get that claim reviewed and closed as soon as possible. It certainly has to aim to get to that point within the 30 days that it typically takes to close such claims. The motivations for that are as follows:

  1. Maintaining a relationship of trust with other insurance companies requires a point of view of reciprocity. All insurers will be in both the position of demanding and receiving demands, and so it is to their mutual benefit to retain an expectation of prompt payment.
  2. Over time, costs only go up; they never come down. As long as the claim remains open, the insurance company on the receiving end of the demand remains exposed to the possibility of increasing costs with supplements sent by the adverse party.
  3. A company that delays payments to the extent that impacts the insurer waiting on the claim compensation can be flagged for regulatory compliance. The expenses involved in that process are considerable.

Given those compelling reasons to keep up the pace when reviewing demand packets, insurance companies have traditionally had two choices: adding people to their payroll to handle the work in-house or outsourcing it and paying a service to handle those claims.

Both choices involve significant labor costs. Also so long as humans have to manually complete each review, only so many can be approved in a day. The average claims review takes between 15 and 30 minutes just to approve the recommended amount for repairs sent in.

A better way forward

Leaders in the insurance industry recognize the need for a more efficient solution to this problem. AI Subro offers that to insurance companies in the United States. It digitizes and automates what had been a fully manual process, enhancing both efficiency and transparency.

AI Subro is an application of Tractable’s AI Review solution, already used by leading insurance companies around the world. It applies AI to expedite claims’ assessment through automation and allows for management by exception, as it flags any discrepancies between the adverse carrier’s estimates and the insurance company’s standards.

Tractable’s AI consistently matches or exceeds the accuracy of a human assessor. As it is fed additional images and applications, it continues to learn and improve. The results are on par with an auto appraiser who has seen millions of cars in all types of conditions so that the estimate is based on an understanding of all the permutations that go into an estimate.

The benefits of a customized solution

AI Subro doesn’t impose a one-size-fits-all mold for all companies but is customized to the individual insurance company’s needs. It takes into account both state regulations and individual insurer’s standards for payouts.

For example, for many insurers the standard is to only allow aftermarket parts for repairs on cars that are older than one year or two years. That standard is applied to the review of the claim for damages from the adverse party.

The overwhelming majority of subrogation demand packets are in line with the insurer’s payout policies and can be approved by the adjuster immediately. Consequently, AI Subro reduces the insurer’s review time for the majority of claims from as long as half an hour to as little as 15 seconds.

Typically, only a relatively small percentage of claims involve a discrepancy between what the adverse party demands and the standards of the insurance company typically follows. The AI would flag those for human review. That means that in-house reviewers would no longer have to waste time reviewing run-of-the-mill claims and instead focus on the more challenging ones.

The benefit for the employees is greater work satisfaction as a result of getting to use their time more effectively and doing more interesting work rather than just rote reviews. The business benefits from better use of its own internal experts and greater value added from HIL (human in the loop) contributions.

For those who had been outsourcing their subrogation reviews, the AI solution means they can reduce their outsourcing. Because it is so easy and efficient to use, they can manage most of the subrogation reviews in-house and only send a small portion to the outsourced service.

Insurance companies now have access to a valuable tool that will simplify and accelerate their response to subrogation demands. Closing these claims quickly will, ultimately, benefit all involved — the insurance companies on both sides and their customers.

For more information, visit tractable.com/subro.

See the video and explainer blog here: Tractable’s AI Subro expedites insurers’ review of demand packets

Further reading:

Three key takeaways on claims automation

Touchless auto claims: the industry verdict

 

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