By Paul Webster · June 07, 2022
6 minute read

Drone insurtech: insurance claims investigation from above

Drone insurtech for property insurance claims investigation

Drone technology has caused a buzz for the property insurance industry in recent years, and its prospects as an essential tool are set to fly long into the future. Paul Webster looks at how drone insurtech is being used to cut costs and maximize profits during claims investigation.

Paul Webster, Insurance Presales Manager, FintechOS
Paul Webster, Insurance Presales Manager, FintechOS

Having progressed from the early days, when drone use might have seemed limited and gimmicky, unmanned aerial vehicles (UAVs) are becoming increasingly valuable and efficient tools. According to the US Federal Aviation Administration (FAA), there are more than 314,000 commercial drones in the US, 17% of which are used for insurance purposes.

That’s considerably more than in the UK currently, but this is set to rise significantly. PWC predicts more than 70,000 commercial drones will fly over UK skies in 2030, of which around 2,500 will be for insurance.

It’s not surprising, therefore, that the first adopters of drones in the industry were largely American firms, such as Allstate, Erie Insurance, Farmers Insurance, Liberty Mutual, and Travelers. So, what are drones being used for, and why are they so crucial for the property insurance industry?

Drone insurtech for claims investigation

Broadly speaking, drones are helping to mitigate risks by improving data harvesting and analytics while cutting operational costs by providing better accuracy in inquiry processing and delivering customer satisfaction. Efficient data gathering is, of course, a crucial exercise for competitive, agile underwriters.

In addition to taking photos and videos, drones can capture thermal imaging and detect details such as moisture trapped in roofs. They can also produce 3D models.

More specifically, property insurance companies are finding benefits of drone insurtech in the following areas:

  • Inspection
  • Risk assessment
  • Claims adjustment
  • Fraud prevention
  • Risk pricing
  • Natural disaster monitoring

The insurance industry uses drones to assess risks, monitor damage, and interrogate claims from the typical roof to tall, dangerous structures or remote and hard-to-access assets.

Underwriters have deployed drones to examine commercial and residential roofs since 2015. Flawed and deteriorating roofs can often lead to further damage and more claims.

Insurers want to know whether roof quality is adequate; poor quality roofs are riskier for property insurance companies and carry higher premiums. Claims for roof damage are quite common and require a claims inspector to survey the damage.

In the past, this usually involved physically climbing onto the roof. This has presented safety risks to the inspector or incurs a cost when bringing in equipment like a cherry picker, making the process more time-consuming and expensive.

As the profession has grown more confident in insurtech, drones are increasingly used beyond the leaky roof scenario. Arson investigators, for example, are using drones to help determine the causes of fires and identify damaged areas.

Natural disasters: using drones to assess the damage

The speed and efficiency of the process are attractive. Drone inspections take a fraction of the time compared to manual ones, 10-times faster according to CBInsights. This makes it easier for insurers to determine accumulated and major losses following a peak event.

Following natural disasters, there’s no time to waste when policyholders expect insurers to deliver on their pledge. In large disaster zones, accessing damage is a challenging and sometimes dangerous pursuit, and often thousands of claims are put on hold, causing dissatisfaction for customers.

Deploying drones can dramatically reduce the time for processing claims. A single drone operator can feed data to multiple adjusters with accurate and precise information. In the wake of Hurricane Irma on the island of St Martin, for example, 300 buildings were mapped by drones in 10 days.

Pre-loss deployment and anti-fraud

Drones can also be used before a customer even takes out a policy. Because insurance premiums are based on the level of risk, each feature of a home that reduces risk allows property insurance companies to calculate accurate, personalized premiums.

Insurers are using drone insurtech to collect information about a property before a disaster hits to assess the best premium for that property. It means that customers who have invested in appropriate mitigation are more likely to be rewarded with lower premiums.

Furthermore, drones help insurers wheedle out fraudulent claims, which can be challenging to detect. A customer with a deteriorating, leaky roof before a hurricane may later claim that the storm damaged it and, therefore, an insurable event caused the leaks.

Having a clear picture of the state of the property before and after an event can help insurers sift out bogus claims from the genuine.

The constraints of using drones for property insurance

There are some constraint factors to consider, however. Various jurisdictions have particular laws regarding the use of drones commercially and understanding these is essential.

It may account for the disparity in commercial use between jurisdictions. In many places, technology and data protection legislation don’t permit large-scale data collection. There are also exclusion zones, such as near airports or where police or emergency services are operating.

In the UK, for example, to use drones for insurance, an operator must be a Civil Aviation Authority-approved drone pilot. This requires both a written and practical flight test and ensures that the operator understands the laws controlling the use of drones.

For this reason, drones are commonly operated by service providers with specialist expertise that can conduct challenging operations with UAVs that work with the latest insurtech.

Flights of fancy?

UAVs are one part of a much more significant shift in the industry where processes are increasingly digitized and automated. The next wave of development will focus on the range of data collected and integrate this information into the company and its products to support brokers, underwriters, claims adjusters, and reinsurers.

While this supports an accelerating claims process, the data will also influence underwriting decisions and the definition of premiums according to the risk situation.

There are substantial potential benefits to successfully importing that data into an insurer’s systems. Exposure data could be extracted and evaluated automatically using artificial intelligence (AI), providing underwriters with more actionable data on the risk highlighting any aggravating or mitigating risk factors.

Over time, the accumulated data could provide better catastrophe models with a better degree of regional detail than is currently possible with satellite data. The claims handling process will also be simplified and faster, reducing costs and improving customer satisfaction due to slicker decision-making processes.

Ultimately, drone insurtech will only improve, and the regulatory framework will develop to benefit commercial use. The real value, however, will be storing, processing, and analyzing all the valuable data it can capture.

To find out more about how FintechOS can help you take advantage of the latest insurtech, book a demo.

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