Since the FAA relaxed the regulation of drone use for commercial operators in 2016, many insurers have found innovative ways to make use of them.
Drones are increasingly playing vital roles in all stages of the insurance life cycle - leading to greater accuracy in underwriting, and cost savings which increase competitiveness in premiums for policyholders. Like much of the technology we now regard as mainstream drones were initially developed for military applications, but both consumer and business demands across all sectors are increasing dramatically.
Accurate ariel surveys
Before a risk is insured, drones are frequently the perfect solution to gathering photographic evidence of state in inaccessible locations. Roof inspections particularly are hazardous and time-consuming for humans to conduct, and drone imagery provides a time-stamped baseline of condition (including any areas of pre-contract repairs), while also removing any doubt about locations of insured properties with GPS tagging. This enables data-driven underwriting of unprecedented accuracy based on individual circumstances, rather than area-based or predictive data.
Regular inspections of inaccessible areas are also made possible, like industrial boilers and chimneys - frequently located at height and requiring regular maintenance reviews. Or pipelines and cables which may be hundreds of kilometres long… where previously inspections by manned helicopter would have cost thousands of dollars per hour to conduct.
But naturally it is in claims assessment that drones are truly transformational.
Access all areas
Drones can reach disaster areas quickly, even if transport links are damaged. They can venture into areas which may be practically off-limits to human claims inspectors or even first responders - helping to prioritise emergency repairs and assess safety for access. A drone can go where no human can, to capture images and other sensor data about a live situation, from radiation to chemical leaks. Birds-eye (drones-eye) views of damage facilitate actuarial planning in real-time in the face of events such as flooding, and an office-based loss adjuster - with the assistance of a drone operator - can both swoop and dive: comparing the extent of destruction across wide areas, followed by zooming in to assess the needs of individual policyholders in close-up.
Such events create a large volumes of claims to process, and customers facing devastating losses appreciate the faster settlement and payment of claims facilitated by rapid drone imagery. Reduced operational costs are a win-win in these situations, and of course evidence from drones are a vital tool in the prevention of fraudulent claims too.
Drones are furthermore very attractive to businesses in sectors from real estate to agriculture, as well as growing numbers of tech-hungry consumers. As such there’s an expanding area of new business: insuring the drones themselves.
The future is airborne
Operating professional drones remains a specialist professional skill however, and there continues to be uncertainty around regulation of drone flight in different areas. In the wrong hands, drones have the potential to cause a lot of damage, whether breaching privacy, crashing into things, or disrupting aviation - as happened at one of the UK’s busiest airports at the end of 2018.
So as a vital enabler of insurtech we’ll be watching for more consistency in regulatory frameworks, as well as extension of present limitations on operating heights and speeds. Currently, drones are restricted to typical maximums of 400ft heights above ground level requiring human operators working within their line of sight. However Deloitte predicts significant technological advances in remote monitoring and self-piloting drones for non-military use within the next few years, which will dramatically increase the scope of drone use at all stages of the insurance lifecycle.
Quid Pro Quo
Usage-based insurance is important, not just because telematics is making insurance cheaper and driving habits safer, but because it reflects a major attitudinal difference between Millennials and their predecessors.
While Baby Boomers and Generation X-ers may be reluctant to share real-time driving data with their insurers, Millennials have adopted telematics with enthusiasm, seemingly without the privacy concerns exhibited by others. Research has shown that nine out of ten of them would be willing to pay for services like stolen-car tracking.
The willingness to share personal data from wearable devices is part of the same trend, as is Millennials’ openness to sharing data from connected devices around the home, Put simply, this is a generation generally willing to share data and deploy new technology to secure the best deals.
Written by Fadata Group
Fadata Group is a leading provider of software solutions for insurance companies. It helps insurers stay competitive in the digital economy by implementing the processes needed to connect faster and more effectively with their customers and distribution partners.