Business Need
A leading specialty insurance writer with longstanding, loyal customers regularly used third party deductibles (TPDs) to provide pricing flexibility and reduce nuisance claims. The company had internal systems in place to minimize TPD leakage, but wanted to review their existing process. They engaged Paragon to conduct a DART to provide an objective assessment of their process to ensure that recovery opportunities were not being omitted.

Situation Analysis
The company used a decentralized identification process where finding and collecting TPDs was the responsibility of the claim adjusters. Additionally, they were very focused on maintaining their client relationships and had concerns about contacting their customers and going back in time.

Paragon's Actions
A DART was performed to quantify the amount of TPDs missed and the amount which could still be recovered. Vulnerabilities were identified throughout the existing TPD process, including:

• Omission of endorsements & customized manuscript policies
• Knowledge of specialty deductibles contained only within the underwriting department
• Improper coding of allocated loss adjustment expense and per-claim policy indicators
• Usage of percent deductibles, variable deductibles, coverage specific deductibles and built-in mandated deductibles
• Missed supplemental payments

Based on the results of the DART analysis, the client went forward with the recovery assignment. Paragon created a customized and highly coordinated recovery approach that was developed to address the client's concerns about maintaining relationships. Paragon educated representatives from more than 30 branches on the TPD process and ensured a seamless and non-intrusive recovery effort. Additionally, the recovery effort was coordinated with the client's in house recovery department to ensure there was no overlap.

Results
Paragon netted over $2 million in missed TPD recoveries for the client. Based on the success of the engagement, the client decided to retain Paragon annually to identify and recover any missed TPDs.

Since 2001, $8.3 million in missed TPDs has been recovered. Additionally, 83% of the deductibles invoiced have been recovered, even though many of these invoices were sent more than a year after the claim had been closed.