How COVID-19 affected workers' compensation subrogation
An overwhelming number of factors has created an increase in the number of claims to be subrogated.
The impact of COVID can be felt everywhere and that is certainly true in the world of workers’ compensation insurance and subrogation. Despite remaining closed for periods during the height of the pandemic, many businesses were required to pay for temporary disability benefits related to employees’ inability to return to work.
Social-distancing protocols over the last few years have also led to the meteoric rise in delivery services like Amazon, UberEats and DoorDash, increasing common on-the-job injuries such as auto accidents, slip-and-falls, and dog bites. For workers’ compensation subrogation adjusters, this combination of factors has led to an overwhelming rise in claims to be subrogated and recovery opportunities. However, addressing this demand isn’t a simple matter.
For insurance professionals, two primary issues can hinder the management of a significant increase in claims volume: resource constraints and focus. There are never enough adjusters to manage their workload, but more importantly, the focus of a workers’ compensation adjuster centers on getting the injured party the needed treatment and getting them healthy so they can return to work.
This is time-consuming work and exponentially so when a claims handler has hundreds of open claims. This overload leads to less focus on determining the liability for the injury, creating missed opportunities for subrogation and claim cost recovery.
Volume meets variety
Consider the range of the most common workers’ compensation claims. They include:
- Auto collisions
- Strains/sprains
- Slip-and-falls/trips
- Dog bites
- Product liability-related injuries
- Other environmental exposures
The subrogation potential for these types of claims is meaningful but can be complex. The state where the claim occurs can make a difference and affect whether or not it is referred for subrogation.
Complexity grows as cross-state claims and claims involving third parties are introduced. For example, for an auto collision that happens across state borders the workers’ comp subrogation adjuster needs to determine in which location to pursue the subrogation action. For slip-and-fall claims, janitorial services or any other third party that helps to maintain the facilities can present a subrogation opportunity as well.
Given the plethora of internal video camera systems that exist in both commercial and residential settings today, it is increasingly likely there is documentation of an incident in question. With dog bite claims, property policies and liability coverage need to be understood. And, sometimes a slip-and-fall happens when a person is running away from a dog on private property, so understanding the coverages and moving parts is essential.
Product liability-related injuries can be a bit more complex to investigate because of the need to rule out all the other “potential” mechanisms of failure and ensure that the product itself actually failed. Prompt investigation and evidence preservation are crucial to successful recovery, especially in these product liability cases.
Some classic examples include employees running a piece of equipment that keeps tripping the breaker, so they bypass the circuit breaker and continue to run the machine to the point of failure. Another example could involve a machine guard that gets in the way of workers doing the job quickly, so an employee removes the guard in order to work faster, and is then injured.
Making the complicated simple
With the ubiquitous nature of cell phones and camera availability, it’s becoming commonplace to incorporate documentation requirements and training for employees into standard operating processes. There is still a stigma for policyholders who don’t want to be caught doing something wrong. It is much easier and cheaper for everyone if there is clear, documented evidence of negligence early on, and the carrier can simply accept responsibility for the claim and pay it. However, spending a lot of time investigating a claim only to end up with clear liability is very frustrating from everyone’s perspective.
Another data source to help create transparency is the equipment itself. A significant amount of data is stored in increasingly sophisticated equipment running most businesses, across industries. SCADA-type control systems or Internet-of-Things (IoT) devices embedded in machines are designed to measure the operation and provide information related to maintenance requirements, dangerous condition changes and more. It’s incredibly important for workers’ compensation adjusters to understand what data may be available, and how to request evidence preservation of those equipment logs, maintenance records, service invoices, and more.
Workers’ compensation subrogation professionals have an incredibly difficult job, interacting daily with people who are injured. Thanks to modern technology, smartphones and IoT specifically, new data sources are available to help professionals more quickly and easily gather information that can help understand the dynamics of a claim.
Historically, subrogation may only be pursued against 2-5% of all workers’ comp claims, so it’s easy for an adjuster to miss if 90% or more of the files are straightforward, first-party recovery efforts. However, once it’s understood that more total paid losses can be recovered, executives see the potential opportunity. Carriers could handle this recovery themselves but it would require a massive training program, more oversight on their claims team or leveraging a third-party administrator.
A few other data points for claims managers to gain additional insight into their subrogation process include:
- Understanding the average number of days from the date of loss to the date of referral to the subrogation unit.
- Working with a TPA to conduct a missed opportunity review of all files not referred for subrogation.
- Measuring the percentage of recovery to the total settlement dollars and separated by attorney-represented and non-represented files.
- Knowing how often day-one letters go out to all parties involved.
- Knowing the right balance between cycle time and outcomes. For example, can a claim settle for 3% less but four to six months faster?
COVID has illuminated a new opportunity in workers’ comp claims management, and while it’s impossible to predict the future, COVID will not be the last time these claims see a surge due to unforeseen events. As medical costs continue to increase, it puts direct pressure on workers’ compensation subrogation teams to better identify and pursue recovery opportunities to help manage the overall profitability of that line of business. By equipping teams with the data and tools they need to better manage the claims and recovery processes, subrogation outcomes can improve across the board.
Timothy D. Christ (tchrist@cccis.com) is the senior solutions engineer for CCC Safekeep, CCC Intelligent Solutions’ AI-powered subrogation platform for auto, property and workers’ comp and a frequent contributor to PropertyCasualty360.com.
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