Insurance on Blockchain: State Farm, USAA Testing Quorum-Powered Payout Product
Major U.S. insurance companies, State Farm and the United Services Automobile Association (USAA) are jointly testing a blockchain solution that aims to automate the process of automobile claims. State Farm announced the development on May 30, 2019.
Blockchain to Streamline the Cumbersome Insurance Process
The long untouched insurance sector could soon experience a large-scale disruption courtesy of blockchain technology.
State Farm and USAA recently announced that they are in the final phase of testing a blockchain-powered subrogation solution which could make the paper-heavy and time-consuming process of automobile claims a lot smoother. Notably, the solution is developed on Quorum which is JPMorgan Chase’s high-profile private enterprise version of Ethereum.
According to the announcement, the two companies started working on the platform in early 2018. In December 2018, State Farm announced that it had started testing the solution.
The two firms declared that they plan to continue extensive testing of the solution to ensure that it can be deployed across the automobiles insurance industry without any hiccup. Currently, they are using real claims data to gauge the viability of the platform and expect to conclude the final phase of testing by the end of 2019.
The said solution focuses on the process of subrogation which is essentially the last phase of the claims process. Subrogation involves the paying insurance company to recover claim costs from the insurance company of the at-fault party. For instance, if John dents Zoe’s car, Zoe’s insurer would make the payment to Zoe to repair the car. Later, the firm would invoice John’s insurer.
Mike Fields, Innovation Executive at State Farm, said:
“Today, subrogation is a relatively manual, time-consuming process often requiring physical checks to be mailed on a claim-by-claim basis between insurers.”
“In 2018 alone, the total amount of dollars demanded and issued through the subrogation process was over $9.6 Billion for all insurance carriers. You can imagine the time and resources required to complete these transactions.”
The jointly developed distributed ledger technology (DLT) solution could bring much-required simplicity to the seemingly complex process by automating the payout from the paying insurance company to the recipient firm.
In similar news, BTCManager reported on December 4, 2018, that fintech startup HurricaneGuard had deployed an Ethereum-based blockchain product to automate insurance payouts for people affected by a natural calamity.