American insurance giant State Farm is testing a blockchain product to speed up the subrogation process for auto claims.
State Farm is a large group of insurance and financial services firms that provides auto insurance in the U.S. The organization was ranked 38th on the 2018 Fortune 500 list of companies. Per the company’s website, it processes 38,300 claims per day and has nearly 519,000 accounts in mutual funds.
State Farm is working on blockchain-based solution to speed up the subrogation processes in the insurance industry. Subrogation is a legal right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured, and is usually the last part of an insurance claims process.
State Farm is reportedly testing a blockchain solution collaboratively with another insurer, to see whether it can reduce the time needed to complete the subrogation process by automatically compiling all subrogation payment amounts.
According to Mike Fields, State Farm’s innovation executive, “subrogation is a relatively manual, time-consuming process often requiring physical checks to be mailed on a claim-by-claim basis between insurers.” He added:
“It [blockchain] 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.”
Insurance companies globally have been integrating blockchain technology into their operations. Last month, Japanese insurance company Sompo partnered with pan-African digital payment platform BTC Africa, also known as BitPesa. The partnership is focused on the “digitalization of global remittance services.”
In September, major insurance firm the People's Insurance Company of China (PICC) partnered with blockchain platform VeChain and global quality assurance and risk management company DNV GL to make their business more time and cost efficient. The partnership also aims improve fraud prevention, Know Your Customer (KYC) compliance, as well as the claims experience.
Meanwhile, market research firm MarketsandMarkets predicted that blockchain in insurance market will grow to $1.4 billion by the end of 2023, at a compound annual growth rate of 84.9 percent.