US-based insurance company State Farm is now testing a new blockchain-based platform for settling insurance-related cases. The firm announced that the trial blockchain solution was meant to streamline the manual process of subrogation.
Subrogation is a process which involves insurance companies suing third parties to pursue damages they did to an insured party. Basically, if person A causes an accident and damages person B’s property, then B’s insurance company can file claim against A for recovering damages to settle the insurance claim of B.
The new system being trialed has been termed as a “viable product for blockchain insurance industry adoption”. State Farm is ranked 36 on the list of Fortune 500 companies in 2018 and is, therefore, a heavy-duty entry in the world of blockchain development and adoption.
State Farm said that the auto claim system will determine the claim amount automatically between two insurance companies and the party at fault will then pay the amount to the affected party. Subrogation amounts recorded over USD 11 billion in 2017 according to a State Farm source and USD 750 million of these were private passenger-related claims alone.
According to Innovation Executive of State Farm Mike Fields:
“Today, subrogation is a relatively manual, time-consuming process often requiring physical checks to be mailed on a claim-by-claim basis between insurers.”
Fields went on and said that the new Distributed Ledger Technology (DLT) system will help reduce the error in processing claims and reduce the amount of unnecessary paperwork from one insurance party to another.
The initial trial will run till the first half of 2019 by State Farm in parallel with the current manual subrogation system. The trial’s results will show whether a full-fledged solution will be feasible or not.
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