State Farm is Testing Blockchain to Expedite Auto Insurance Claims


Insurance is one of the golden geese of the blockchain, an industry with so much paperwork, sensitive data, and manual processes that it almost seems obvious that it will eventually adopt blockchain technology to streamline its claims processes, data storage, and even — eventually — its payments. State Farm is among the first notable insurance carriers to announce that it is investigating such a move as regards the claims payment process.

In insurance, subrogation is when one insurance company settles a debt with another. According to a recent statement by State Farm, among their multiple blockchain initiatives is one that they believe has the potential to improve their subrogation process. They have a working solution that they are currently testing against existing processes, which they describe as inefficient, requiring more than a few man-hours, manual issuance of checks, and other 20th-century methodologies.

“State Farm is working on a blockchain solution that could speed up the subrogation process for auto claims. The company is testing the solution against existing subrogation processes to determine if it can be a viable product for insurance industry adoption and bring value to customers.”

blockchain auto insurance state farm

Even if an insurance company had precisely zero claims for a period of time, the cost of insurance would still be relatively high because of the number of employees who are required to work on a single case. You need an adjuster, an accountant, a customer support specialist, a salesman, and so on, and each can only deal with so many clients in a given timeframe. Actual use of insurance policies increases costs, but that’s not something that can ever actually be brought to zero or anywhere near it. However, the cost of processing claims and the speed at which they can be handled are things that technology, specifically blockchain technology, can greatly contribute to.

State Farm also expresses a willingness to be a leader in the space, writing:

“State Farm is working with another insurer to understand how an enterprise blockchain solution can be used to reduce the time needed to complete the subrogation process by securely and automatically compiling all subrogation payment amounts, netting the balance and facilitating a single payment on a regular basis between insurers.”

The part of the claims process affected is the last step. Prior to that, there are other opportunities for the blockchain, including secure tracking of client behavior, secure storage of records, and, at some point, payments systems and potentially even some form of good behavior credits. The whole insurance industry is ripe for blockchainization, as is much of the medical system it works intimately with.

“The blockchain solution we are working on […] helps us automate a manual process securely and creates a permanent transaction record of each payment which can easily be verified for accuracy,” concluded State Farm Innovation Executive Mike Fields. “It also has the potential to decrease the amount of time for consumers to receive their deductible reimbursement.”

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