Blockchain Solution Solves State Farm®, USAA Subrogation Challenge
In an age of fast-paced technology, large insurance companies need to work together to meet rising customer expectations. It’s important for insurers and financial institutions to continuously invest, innovate and evolve for the future. For State Farm® and USAA, blockchain has provided the answer. Today, State Farm and USAA announced that auto subrogation claims settled between the two companies will be processed using blockchain technology.
The blockchain solution is the first of its kind between the insurance industry leaders. In 2019, the companies announced advanced testing of a blockchain solution to automate the time-consuming and paper-heavy processing of subrogation claims. Subrogation is used by insurers to recover money when settling claims between their customers. Since then, the solution has been extensively tested using historical data and is now in full production.
“We are always looking at ways we can operate more efficiently to benefit our customers," said Robert Yi, chief claim officer at State Farm. “In most cases, this blockchain solution will assist in speeding up subrogation recovery, resulting in an earlier return of the customer's deductible.”
Companies across many industries are using blockchain technology to securely store data and manage transactions. With its unique encryption and security features, blockchain has the potential to affect and transform many industries.
“Carrier-to-carrier claims payments will be almost completely automated in the future, saving time and money,” said Sean Burgess, USAA chief claims officer. “Utilizing blockchain technology helps us securely improve and automate a manual process and ultimately gets money back to our members and customers faster.”
Every year, about 75,000 subrogation checks are exchanged between State Farm and USAA. With the move to full production, the companies hope to see other carriers sign-on to participate throughout 2021.
“We are actively seeking other insurers to join us in this subrogation blockchain solution," Yi said. “The more insurers that embrace secure and efficient technology solutions, like blockchain, the greater the return for all of our insurance customers.”
What is Blockchain?
Blockchain is a distributed ledger technology that can be used to manage transactions and store information using cryptography (i.e., mathematical algorithms and secret keys that encrypt data), peer-to-peer networking and data storage. This type of digital technology can create value in ways customers wouldn’t expect from their insurance company. Subrogation is one example where blockchain technology has the potential to reduce expenses while making processes more efficient and secure. No sensitive personal data is shared using this blockchain solution.
What is Subrogation?
Subrogation describes the right held by most insurance carriers to legally pursue a third party that caused a loss to an insured. Information about the claim is collected and the insurance companies negotiate the claim amount. If an agreement is reached, the insurer of the at-fault party submits payment to the other insurer on an individual claim basis.
The mission of State Farm is to help people manage the risks of everyday life, recover from the unexpected, and realize their dreams. State Farm and its affiliates are the largest providers of auto and home insurance in the United States. Its 19,200 agents and 57,500 employees serve approximately 85 million policies and accounts – which includes auto, fire, life, health, commercial policies and financial services accounts. Commercial auto insurance, along with coverage for renters, business owners, boats and motorcycles, is available. State Farm Mutual Automobile Insurance Company is the parent of the State Farm family of companies. State Farm is ranked No. 36 on the 2020 Fortune 500 list of largest companies. For more information, please visit http://www.statefarm.com.