Blockchain powered solutions have been going around in a lot of industries as they are beginning to realize its true potential to make a significant and much needed change in the current system. Recently the blockchain tech has made its debut in the arena of insurance in the United States.
According to an announcement that was published on the 10th of December, State Farm, the U.S.-based insurance company, is in the process of testing a blockchain-based solution in order to speed up the subrogation process for auto claims.
Before we get into what exactly is the subrogation process, lets take a look into State Farm. Essentially, it is a large group of insurance and financial services firms that are responsible for providing auto-insurance in the U.S. According to its website, it carries out 38,300 claims per day and has nearly 519,000 accounts in mutual funds. State Farm also made it to the Fortune 500 list of companies in 2018 and the organization managed to grab the 38th spot.
The insurance company is leveraging the blockchain tech to make the subrogation process more efficient in the insurance industry. Subrogation is basically a legal right that is held by most insurance carriers, which allows them to legally pursue any third party that was a reason for an insurance loss to the insured. This just happens to be the last part of an insurance claims process.
State Farm explains that during an auto claim, two insurance firms would determine the claim amount. The insurer for the party at-fault for damages would pay the insurer for the other party.
It is carrying out these trails in collaboration with another insurer, in order to observe whether it has the potential to reduce the time needed to complete the subrogation process by automatically compiling all subrogation payment amounts.
The company’s Innovation Executive, Mike Fields believes that in its present state, the subrogation process is a time-consuming and relatively manual process. And more often than not, it requires for physical checks to be mailed on a claim-by-claim basis between insurers, even in this heavily digitized age.
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.
Furthermore, State Farm believes that the blockchain-powered solution could in fact reduce the risk of an error that is involved in processing a claim. And more obviously, it would drastically decrease the amount of paper checks that are sent from one insurer to another. In addition to that, Innovation manager Dustin Helland added that the team was looking at the immutability of a blockchain as another benefit from the technology.
The said tests are scheduled to run through the first half of 2019, parallel to the existing subrogation processes. And the result of the trials will determine whether or not the launch of the solution will take place.
Stay tuned to BlockPublisher for further details.