US-based insurance group State Farm is in the process of testing blockchain technology as part of a new platform for insurance subrogation.
The company announced on Monday that it was putting Blockchain technology on trial to try and make the manual and time-consuming process of insurance subrogation faster and more efficient. Subrogation is the legal right for companies to pursue damages from a third-party responsible for causing a loss to the insured party.
According to a press release, the company’s primary focus in the trials is to find out whether a Blockchain platform would be a “viable product for insurance industry adoption.” State Farm currently holds the rank of 36th on the Fortune 500 for this year and as such, is one of the most recognizable entries into the list of firms testing Blockchain tech solutions for their activities.
State Farm explained that during an auto claim, the insurance firms in question would settle on a claim amount. Then, the insurer for the party in question would pay the insurer of the party making a claim. To put the story into perspective, around $11 billion in claims were transferred due to subrogation last year, and almost $750 million out of that was involved in private-passenger insurance claims.
State Farm’s Innovation Executive Mike Fields explained how insurance subrogation has traditionally worked. It generally involves an employee physically checking every claim by insurers, making it a manual and extremely time-consuming and costly process. The introduction of Blockchain into the system would automate the process and speed things up a few notches. Fields said,
“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.”
It is also evident that automation would decrease the risk of error that a human is naturally susceptible to, such as the risk of failure in processing a claim. It would also reduce the number of paper checks sent from one insurer to another.
Innovation Manager Dustin Helland added that the company is also looking into the possibility of Blockchain as an immutable piece of technology as a bonus.
The tests will happen throughout early 2019 while traditional subrogation processes are still kept in play. Helland added that the “test results and other factors,” will be used to conclude the company’s final decision on whether to move forward and finalize on adopting Blockchain technology on a larger scale.
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