Batenhorst: Are Subrogation Recovery Trends Driving Antitrust Behavior Among Insurers?

CIC Palm Springs was only a week ago, and I felt compelled to bring this topic up at the open mic in a room of 450+ industry members. Over the past four to six months, I have noticed an alarming uptick in out-of-pocket expenses for my customer base. For the past 20 years, I have gotten used to the “flavor of the month” behavior from adjusters, which is what happens after claims management notices a metric is out of place and drills down on the adjusters to “tighten it up.” However, what I am seeing now is categorically different than the past. I have not changed my damage assessment style, nor have I had a significant rise in cost that has forced me to increase my prices. Vehicle technology has also not dramatically changed in this time frame either.

Increases of 30 to 40% in out-of-pocket expenses for a customer over four to six months are not normal. Pulling back the curtain and diving deeper, adjusters are stating that they are under intense scrutiny from their leadership. They have AI audit tools monitoring their estimates for accuracy, along with managers at any level who randomly pull claims to review their performance. On top of that, their pay and bonuses are directly tied to these metrics. Labor, parts, and materials that they used to pay for are now being denied. The adjusters have no logical answer to provide for this change, other than “my manager told me to stop paying this.” OEM procedures that used to be approved are now “not customary in the market” or “not needed to facilitate repairs.” At a time when customers are already fearful of making a claim due to policy premium increases, they are now at very high risk of having to pay for repairs that their insurance denied, just to make sure their car undergoes safe and proper repairs. 

Diving even deeper, I have had many conversations with local claims management to try to find out what triggered these changes. The number one response I get is that they are not achieving a tolerable subrogation recovery rate. This figure represents the percentage of total paid claim costs that insurance companies can successfully recover from at-fault third parties. Their target is typically around 10-15%. One claims manager told me, “If we pay you for labor operations that another carrier typically does not pay when they adjust claims, we will not get paid during recovery.” Yet I am also told that every claim is supposed to be adjusted on its own merit, based on the circumstances of what that car needs to be put back to pre-loss condition. Sadly, I kept hearing this same rhetoric from other adjusters and claims managers. I am not an attorney, but this appears to be a systemic way of price fixing and anti-competitive behavior. 

Now is not the time to stand on the sidelines and watch this continually happen. Speak up! Post about it on whichever platform you choose. Shops need to educate their customers about their rights and know their place in the process. The insurance company does not authorize repairs; only the customer can. Follow repair instructions, perform your safety inspections, and when an out-of-pocket expense arises, make a choice; don’t roll over and ignore it.