Recovery
Definition
The process of collecting payment from a responsible party after settling a claim with the insured. Recovery efforts include subrogation, salvage, and other methods of recouping claim payments.
Example
An insurer pays a $50,000 property damage claim to their insured after a car accident. The insurer then pursues recovery from the at-fault driver's insurance company through subrogation, successfully recovering $45,000 of the claim payment.
In Practice
Recovery departments are common in larger insurance companies and focus on maximizing the return on claim payments. Recovery can come from third parties (subrogation), salvage of damaged property, or reinsurance. Effective recovery programs can significantly reduce net claim costs. Recovery efforts must comply with state regulations and time limits.