Discussion on the use of drones has predominantly focused on insuring them and the regulations (or lack of) relating to their operation. An area of drone use which is starting to be discussed more is their use by insurers to further understand the risks that they write and respond to claims.
The use of drones pre-loss could assist insurers in: (1) surveying the insured property; and (2) obtaining a greater understanding of the area / risk surrounding the insured property.
With regard to (1), sprawling industrial sites or power plants can take days to survey and some areas (particularly those at higher levels) could prove inaccessible or unsafe to survey properly. Drones could survey these sites quickly, instantly recording and capturing high quality data (which can be compared against at future renewals, risk surveys or in the event of a claim). Drones can access those 'hard to reach' areas of the property and free-up risk teams so that they may focus on other aspects of the survey.
With regard to (2), drones could provide insurers with a greater understanding of the area and associated risks surrounding the insured property, as well as the changing nature of that risk over time. That could, for example, include photographing and/or videoing incremental changes (perhaps at placement and during each renewal) of soil or river bank erosion and any change in the size or location of flood plains.
As discussed in our firm's report on inclusive insurance, a lack of historical data and infrastructure are challenges in providing insurance solutions in emerging markets, particularly in rural and remote areas. Drones can access those areas more easily than human survey teams and could obtain necessary data and provide a greater understanding of the risks to insurers. In addition, using drones in those circumstances is likely to be quicker and more cost effective than using human surveyors. All of this could attract insurers to look to provide insurance solutions in emerging markets and might play a part in helping to slow the growth of the insurance protection gap in those markets.
There are a number of possible benefits in using drones in claims assessments. One of the most important is the early and speedy access that drones can afford to areas / sites which are inaccessible to humans following an incident. In Asia Pacific, drones have been some of the 'first responders' from the insurance industry following natural catastrophes. That has included in the aftermath of cyclone Debbie, to survey parts of North Queensland where areas were inaccessible due to closed roads and floodwater, and in Fukushima to survey the nuclear power plant and radiation levels following the 2011 tsunami. More recently, insurers have used drones in Japan to assist in rescue missions and assess damage following this year's typhoons.
Another benefit to using drones is that it frees up loss adjusters from undertaking post-loss surveys (sometimes accompanied by insurers' claims handlers) and allows them to focus on other aspects of the loss assessment. That could speed up the claims process and allow insurers to approve and make indemnity payments more quickly (which would naturally improve customer satisfaction).
There are also the safety benefits to consider; using a drone to respond in the aftermath of fires, explosions, natural catastrophes and the like removes human involvement on those sites, thus reducing the chance of injury.
What does the future hold? It is reported that Tokio Marine is working with a U.S. software developer to build an AI system to be paired with its drones. The system would analyse the photos and videos captured by drones and calculate the extent of damage and estimate reinstatement costs. The developers are expecting claims assessments to be completed in a matter of days using this software, which would be a significant decrease on the current time needed.
One of the main challenges for international insurers in using drones is the inconsistent approach from country to country in regulating their operation. Some countries might not have any regulations, whereas others might be quite strict. Our earlier updates (see links below) addressed regulation in different parts of the world. Before insurers utilise drones in any country, they should confirm the applicable regulations.
Another challenge is the risk associated with a reliance on technology, for example, hacking, data leakage, the need for consent to capture and store data and transferring data between jurisdictions (if it contains personal or private information). That said, the insurance industry is generally aware of these issues and is used to navigating them.
In conclusion, drone use is expected to increase insurers' understanding of risks and provide a cost effective tool in assessing claims. Longer term, drones could have a part to play in reducing the insurance protection gap.