Insurers have traditionally focused on gaining new policyholders for growing top-line revenue. But when it comes to profitability, adding new policies to increase your customer base may not be the best way to boost the bottom line, especially as a changing economy causes prospects to become more conservative with new expenditures. Increasing net income through legal subrogation can be even more profitable than issuing a new policy.

New Policies or More Recoveries?

Insurers face competitive landscapes and high costs to acquire new customers. The average Cost per Acquisition (CPA) for the industry is estimated to be $300-800.¹ It also generally costs insurers seven to nine times more² to attract a new customer than to retain one. With this kind of cost to add new policyholders, it can easily be more profitable to improve the profitability of your existing customer base through legal subrogation.

Imagine a carrier secures a new policyholder with a $400 premium. Assuming a 5 percent profit margin for the insurer, they would realize a $20 profit from the acquisition of a new policy. But imagine if the same carrier could recover one additional payment of $2,000 from boosting its subrogation efforts through litigation. It would take 100 new policies to equal the profit from just one subrogation win.

Better Representation Means Better Results

Subrogation can be defined as a legal doctrine in which the insurer assumes the rights of the insured against an adverse party that is responsible for damages covered by the insured’s policy. Insurers can improve the recovery of payments to their insured party by retaining legal representation that focuses on the subrogation practice area. Ideally, it’s best to work with a subrogation attorney that is local to the jurisdiction involved, and who takes the claim on a contingency-fee to minimize any up-front costs. The National List of Attorneys (The NL) uses an industry-wide legal claim performance database and proprietary algorithms to support insurers in working with subrogation attorneys that focus on delivering maximum profitability for insurance clients.

The ROI of Contingency-Fee Subrogation

Insurers who don’t think of legal subrogation when it comes to increasing profits might be missing out. Investing in subrogation operations can yield a better ROI than acquiring a new policyholder, especially in tougher economic conditions. Effective legal subrogation requires the right employee training, claim data, and most of all the right attorney to increase recoveries, but the results are worth it.

A legal networking service that concentrates on supporting subrogation, like NL Envoy, can support your recovery process and improve profitability with no up-front service or legal fees. When insurers identify potential recovery opportunities early and outsource the subrogation process on a contingency basis, it results in more net profits and time to focus on other areas of business, such as the acquisition of new policyholders. This means subrogation vs new business isn’t an either-or choice… but a strategy for how to do both.

How much does your subrogation earn you compared to new policy holders? Join the discussion in the NL Community Forum on LinkedIn and let us know!

About The National List of Attorneys

The NL is the premier B2B legal networking hub where contingency-fee attorneys connect with the business clients who need their help to get paid what they’re fairly due. We use claim performance data to optimize legal referrals, advance the legal industry’s use of technology, and develop tailored client-focused strategies to maximize financial outcomes of legal claims.

References:

¹ Digital Insurance, 4 steps to a strong insurance customer acquisition program, Marshall 2020

² Daily Fintech, Insurtechs Need to Ace Customer Acquisition Cost (CAC) Optimization, Rintupatnaik 2022

Categories: Insurance, National List, NL Insider, subrogation