USAA Testing Blockchain Solution

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USAA and State Farm know how important it is to continuously invest, innovate and build for the future. During the 2019 Dig In Conference, the two insurance companies announced a joint net subrogation solution, and are now using real claims data to test how blockchain technology can improve the speed of the subrogation process during auto claims.


Subrogation is typically the last part of an insurance claims process, when one insurance company recovers claim costs it paid to its customer for damages from the at-fault insurance company, which often includes its customer’s deductible. Today, subrogation is a relatively manual, time-consuming process often requiring physical checks to be mailed between insurers on a claim-by-claim basis.  In 2018 alone, the total amount of dollars demanded and issued through the subrogation process was over $9.6 Billion for all insurance carriers.


“The blockchain solution we are working on has many potential benefits,” says Ramon Lopez, Vice President, Innovation, USAA. “It helps us automate a manual process securely and creates a permanent transaction record of each payment which can easily be verified for accuracy. It also has the potential to decrease the amount of time for consumers to receive their deductible reimbursement.”


Companies across many industries are using blockchain technology to securely store data and manage transactions. USAA and State Farm have been testing how blockchain 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 blockchain subrogation solution is the first of its kind between two major leaders in the insurance industry. The companies began working together in early 2018 and plan to continue testing to determine if the blockchain solution can be a viable product for industry adoption.


What is Blockchain?

Blockchain is a distributed ledger technology that can be used to manage transactions and store information using cryptography (i.e., mathematical algorithms and secret keys that encrypt data), peer-to-peer networking and data storage. This type of digital technology can create value for customers in ways that they wouldn’t expect from their insurance company. Subrogation is one example of where blockchain technology has the potential to reduce expenses while making processes more efficient and secure.


What is Subrogation?

Subrogation is the legal right held by most insurance carriers to pursue a third party that caused a loss to an insured. Subrogation is the process used to exchange money between insurers to settle a claim. Subrogation occurs when an insurance company pays one of its customers for damages, then makes its own claim against others who may have caused the loss or the company who insured the loss. Information about the claim is collected and the two insurance companies negotiate the claim amount. If an agreement is reached, the at-fault insurer submits payment to the other insurer on an individual claim basis. Insurance companies only share claim numbers and dollar amounts for subrogation purposes. No sensitive personal information is shared.



Auto insurance provided by United Services Automobile Association and its property and casualty affiliates, San Antonio, Tx.

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