State Farm said it is testing a blockchain product for auto claims-related subrogation.
Subrogation is typically the last part of an insurance claims process, where one insurance company recovers claim costs it paid to its customer for damages from the at-fault party.
State Farm said its goal is to determine if the blockchain product it is testing can be adopted for the insurance industry and help bring value to customers. The insurer is working with another unnamed insurer to understand how an enterprise blockchain product can reduce the time needed to complete the subrogation process by securely and automatically compiling all subrogation payment amounts, netting the balance and facilitating a single payment regularly between insurers.
Blockchain technology can be used to manage transactions and store information using cryptography, peer-to-peer networking and data storage. Companies across many industries are using blockchain technology to securely store data and manage transactions with an idea of boosting efficiency and reducing costs.
Mike Fields, a State Farm innovation executive, said the new technology would be a great leap beyond current subrogation practices.
“Today, subrogation is a relatively manual, time-consuming process often requiring physical checks to be mailed on a claim-by-claim basis between insurers,” Fields said in prepared remarks. “You can imagine the time and resources required to complete these transactions.”
Fields said the newer blockchain product currently being tested has “many potential benefits,” including the potential to reduce the time needed for consumers to get their deductible reimbursement. As well, the technology would automate a manual process securely, creating a permanent transaction record of each payment, and this could be easily verified for accuracy.
Source: State Farm