On May 30, leading U.S. insurer State Farms announced in a press release during the 2019 Dig In Conference that they were testing a blockchain-based system that uses live claims data. They are performing the test in conjunction with the United Services Automobile Association (USAA), which is a financial institution affiliated with the U.S. military.
The technology is helping the two companies improve the way that they subrogate insurance claims, by both streamlining and automating the process. It does this by automatically calculating both the total amount of payments and the net balance. It also allows insurers to process regular payments that are made between them.
Subrogation is typically the final step an insurance company takes when processing a claim. It happens after two insurance companies come into agreement in regards to the amount of money that will paid by the at-fault party in a claim to the claimant.
In the press release, Mike Fields, who is the Innovation Executive at State Farms, mentioned how resource intensive the subrogation process has been. He said that last year insurance companies transferred nearly $10 billion between them while performing subrogation, and that doing this required lots of time and manpower.
Ramon Lopez, who is Vice President of Innovation at USAA, said that blockchain technology not only automates the subrogation process but also allows for the verification of transactions. He added that the system could lead to consumers receiving their deductible reimbursements faster than ever before.
According to State Farms' website, the company processes more than 38,000 claims every day and manages funds in more than 500,000 accounts.
At the end of last year, the company first mentioned that it was developing this blockchain-based subrogation solution, and in the current press release they stated that they had working with USAA on developing the solution from the beginning of last year.
The system is reportedly the first of its kind between two major insurance companies.