American insurance giants State Farm and USAA want to use blockchain to speed up auto claims. 

They’re focusing on the last part of the claims process called subrogation. Subrogation is the legal right that allows one party (e.g., your insurance company) to make a payment that is actually owed by another party (e.g., the other driver’s insurance company), and then collect the money from the party that owes the debt afterward. 

“Today, subrogation is a manual, time-consuming process often requiring physical checks to be mailed on a claim-by-claim basis between insurers,” said Mike Fields, Innovation Executive at State Farm. “In 2018 alone, the total amount of dollars issued through the subrogation process was over $9.6 billion.”

USAA and State Farm are testing how blockchain can be used to gain efficiencies by securely and automatically compiling all subrogation payment amounts, totaling the balance, and making a single payment 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 companies say their blockchain subrogation solution is the first of its kind between two major leaders in the insurance industry. They 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.