Today U.S. insurers State Farm and USAA announced their jointly developed enterprise blockchain solution for auto claims will be used by both firms in production. The two companies have been working on the project since early 2018.
After an auto accident, both party’s insurers communicate with each other and decide which driver is at fault. Based on that, one insurer will pay the other. But that process of settling claims is rather manual and inefficient. And it involves reconciliations between the insurers. With a blockchain that shares the data, there should be no need for reconciliations.
“In most cases, this blockchain solution will assist in speeding up subrogation recovery, resulting in an earlier return of the customer’s deductible,” said Robert Yi, chief claim officer at State Farm.
Each year the two insurers exchange about 75,000 subrogation checks. Given that scale, they are hoping to attract other insurers to the platform in 2021.
“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.”
State Farm’s 2019 revenues were $79 billion, and USAA’s $36 billion.
Both insurers are members of the RiskStream Alliance, but this is not a RiskStream blockchain project. When we last checked in 2019, this subrogation project uses enterprise blockchain Quorum, as opposed to Corda used by RiskStream.
When the subrogation solution was being tested back in May 2019, a State Farm spokesperson told Ledger Insights: “State Farm and USAA both recognize the benefit consortiums such as RiskBlock [RiskStream] bring to the industry. By bringing two of the largest players in the insurance industry together to apply real-world testing, we feel this approach will provide a faster to market capability, which ultimately benefits the entire industry.”
RiskStream also has a subrogation solution that nets off payments between insurers, meaning a check will be cut weekly or monthly rather than for every claim. But it was put on the back burner for a while to focus on getting RiskStream’s first two applications live for “Proof of Insurance” and “First Notice of Loss”..