“I started a small business because I just love insurance…”
Said no entrepreneur ever.
Unfortunately, insurance is a must-have for any risk management plan. General liability, commercial auto, workman’s comp, the list goes on.
Even for the most robustly covered companies, having to navigate numerous claims each year puts the company at the unique risk of assuming liability for a negligent third party. With resources spread thin, it can be all too easy to trust that the insurance process will play itself out in good faith.
At businessingmag.com, we are focused on empowering small and midsize businesses with strategic insights and management solutions. One such realm involves fostering professional partnerships, such as subrogation firms to handle insurance recovery cases, to enhance profitability and long-term growth.
Keep reading as we dive deep into how subrogation services businesses recover hidden revenue.
What Is Subrogation?
Subrogation is the legal right of an insurance company to pursue a claim against a third party.
Essentially, insurance covers your business. Subrogation then serves as recourse for your insurance provider to retrieve funds from the liable party.
Here is a basic example of subrogation in action:
- A contractor (let’s say an electrician) is negligent at the job site and causes a fire that destroys your company headquarters.
- Your business files a claim with your property insurance.
- After your business pays its deductible, your insurance provider pays out losses, per your insurance contract.
- Your insurance provider then turns its attention to the negligent contractor who caused the fire. If the contractor is properly insured with standard general liability and/or professional liability insurance, they will be the target of recouping funds. If the contractor is uninsured or underinsured, they may be personally responsible to pay back your insurance provider.
Although numbers vary, some estimates indicate that roughly 15% of all insurance claims are closed without identifying valid subrogation potential. This figure doubles to 30% for worker’s compensation cases.
As you will see, this is a significant oversight that takes a major chunk out of your business’ revenue potential.
How Subrogation Helps Businesses Improve Revenue
Now you know what subrogation is.
Why does it matter for your small business? Isn’t it something that is best left to your insurance provider?
Well, either directly or indirectly, companies forfeit millions of dollars each year via insurance payments that could have been successfully subrogated. A few examples include:
- Costs from damaged property – your property insurance may cover the cost to repair and or replace damaged property. But does it cover operational losses? Successful subrogation may help you retrieve lost revenue incurred while the property was out of commission.
- Deductibles – the deductible is the amount your business must pay out of pocket before insurance kicks in. Depending on the type of policy, this can be a hefty amount. Subrogation can help you recoup money paid out for the deductible.
- Premium hikes – every time insurance pays out, regardless of whether you were at fault, premiums will inevitably go up. By transferring costs to the liable party, subrogation can help your business from paying out unnecessarily high premiums.
Proper subrogation provides more than just a “bonus” revenue stream for businesses. It can help improve their overall financial resiliency when navigating costly insurance incidents.
Investment in Subrogation for Improved Business Resilience
It is no secret that the cost of insurance is high. This is especially true for business owners who must carry a variety of coverages.
Wouldn’t adding subrogation services only add to the bill?
By serving as an advocate for your business and offering specialized insight into complex insurance issues, a subrogation company should be viewed as an investment that pays for itself many times over via a more optimized insurance infrastructure. Among the ways a subrogation specialist will help include:
- Streamlined recovery process – most insurance companies use outdated methods, often involving mail-in questionnaires, to investigate potential subrogation cases. Unsurprisingly, most of these questionnaires go directly in the trash can. Subrogation specialists use the latest technology, market trends, and data-driven insights to identify subrogation cases that would have otherwise flown under the radar.
- Legal compliance – as a business owner, your energy is focused on growing your company. Optimizing operations. Building the best team to satisfy customers. Insurance is very likely not among your core competencies. A subrogation specialist knows the fine print that pertains to each of your insurance policies. They understand deadlines. They are versed in the proper protocols for initiating claims. You don’t need to worry about some obscure loophole causing you to miss out on a potential subrogation opportunity.
- Risk management support – it may not come to mind at first, but subrogation plays a key role in risk management. It helps create a safer work environment by limiting the incidence of negligence in the workplace. Through increased awareness, it can also help prevent the chance of a repeat incident occurring.
As you can see, a subrogation specialist should be part of a comprehensive financial plan for any business exposed to the diverse challenges of insurance claims.
Don’t Wait: Find a Subrogation Specialist and Recover Revenue for Your Business
Even for well-covered businesses, too many negligent third parties fly under the radar. Find a seasoned subrogation specialist and retrieve the revenue that is rightfully yours. For more of the leading trends in the small business landscape, explore the resources at Businessing Magazine for additional thought leadership!
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