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.

Subrogation is typically the last phase of an insurance claims process, when one insurance company recovers claim costs it paid to its customer for damages from the at-fault party’s insurance company, which includes its customer’s deductible.

“Today, subrogation is a relatively manual, time-consuming process often requiring physical checks to be mailed on a claim-by-claim basis between insurers,” says Mike Fields, Innovation Executive, State Farm. “In 2018 alone, the total amount of dollars demanded and issued through the subrogation process was over $9.6 Billion for all insurance carriers. You can imagine the time and resources required to complete these transactions.”

Companies across many industries are using blockchain technology to securely store data and manage transactions. USAA and State Farm are testing how blockchain can be used to gain efficiencies in the subrogation process by securely and automatically compiling all subrogation payment amounts, netting the balance, and facilitating a single payment on a regular basis between insurers.

“The blockchain solution we are working on has many potential benefits,” says Ramon Lopez, Vice President, Innovation, USAA. “It helps us automate a manual process securely and creates a permanent transaction record of each payment which can easily be verified for accuracy. It also has the potential to decrease the amount of time for consumers to receive their deductible reimbursement.”

The blockchain subrogation solution is the first of its kind between two major leaders in the insurance industry. The companies began working together in early 2018 and plan to continue testing to determine if the blockchain solution can be a viable product for industry adoption.

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 for customers in ways that they wouldn’t expect from their insurance company. Subrogation is one example of where blockchain technology has the potential to reduce expenses while making processes more efficient and secure.

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 two insurance companies negotiate the claim amount. If an agreement is reached, the at-fault insurer submits payment to the other insurer on an individual claim basis. Insurance companies only share claim numbers and dollar amounts for subrogation purposes. No sensitive personal information is shared.

In the News:

• Forbes (7/18/19) State Farm And USAA See Stark Increase In Efficiency When Testing Blockchain Subrogation

• Digital Insurance (4/29/19) Inside State Farm's blockchain journey

• Forbes (4/16/19) Block Chain 50: Billion Dollar Babies