How State Farm and USAA got together on blockchain

In one year, State Farm processed 295,000 subrogation demands that involved transferring $1.4 billion dollars. But there was a catch, says innovation executive Mike Fields.

"The net was only about $70 million, one half of one percent of the total," he said in a talk at Digital Insurance's Dig | In conference in Austin.

As the leader of State Farm's Red Labs team, which focuses on emerging technology and new business models by building minimum-viable products, Fields saw the opportunity to test blockchain as a way of creating a more efficient subrogation process. What they needed was a partner to try out the concept.

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Enter USAA. A team led by Ramon Lopez, VP of innovation for the insurer, worked with Fields' team on building the blockchain platform to handle subrogation requests between the two companies. Using Ethereum Quorum as a base, the piloted product records subrogation requests and nets them out weekly -- cutting only one check in either direction at the end of the week, with all requests and payments recorded on the immutable blockchain.

The companies are currently in the second of a four-stage rollout process. By 2020, the final product should be in production.

Both members of the RiskStream Collaborative (formerly RiskBlock Alliance), Lopez and Fields say the goal isn't just to do something within their own companies, but to have this solution serve insurance at large. Fields says that he has approached other carriers about joining, but none have signed on besides USAA so far.

"Having two very large companies talking about working together on a product like this can bring the industry to greater heights," Lopez said. "Hopefully this test and learn gives us the ability to drive back efficiency and savings to the policyholders."

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