State Farm turns to blockchain for subrogation
State Farm is working on a blockchain application to assist in subrogation, leveraging open-source software and in partnership with at least one other insurer.
The company’s goal is to establish whether blockchain technology can make subrogation more efficient, in particular by preventing repetitive transfers of funds back and forth between insurers.
Innovation executive Mike Fields says that on a high level, State Farm sees blockchain as serving two key business goals for insurers: increasing efficiency in business processes and improving he customer experience.
“The subrogation use case we’re working through has elements of both,” Fields says. “Subrogation has lots of manual processes, so there’s lot of opportunity to make it more efficient. But also, for customers, when their claim is subrogated they get their deductible back. If we can do that faster, there’s a customer benefit.”
Fields declined to name the companion insurer or the software State Farm is using to build the platform. However, he said that this is one of “about 50” use cases State Farm has come up with for blockchain in its Red Labs innovation unit, and that “getting something in the wild” is important for establishing blockchain as a real benefit to carriers.
“We have to understand what it means to get things outside, working with competitors in the right way,” Fields explains. “We really hope we get something moving.”
The subrogation application is currently in the second phase of a four-phase rollout, in which it will be rolled out in parallel to the existing process to find out where it makes it smoother. The first phase, coming up with a demo, was completed at the end of October. Phase three is a controlled test, while phase 4 is bringing in more members of the network.
“The way the subrogation works is that all carriers do it,” Fields says, noting that State Farm is happy to get input on the network itself and is leaving data exchange and integration up to each particular insurer. The carrier is an active member of the RiskBlock Alliance, a consortium run by The Institutes for exploring blockchain technology, as well as the Hyperledger Framework and the Linux Foundation.