Unmanned aerial vehicles (UAVs), more commonly known as drones, are growing at a rapid rate for both consumer and professional markets.
Market research firm IHS Markit forecasts the professional drone market will manage a compound annual growth rate (CAGR) of 77.1% through 2020 driven by industries such as agriculture, energy and construction using the technology for surveying, mapping, planning and more. Meanwhile, the consumer drone market will maintain a CAGR of 22.1% through 2020 with companies such as DJI, Parrot and 3D Robotics driving the market with a wide range of devices for photography, recreational use and racing.
While these markets will be the main drivers for the next few years, one industry that isn’t discussed often as a main driver is the insurance market. However, according to professional services company PwC, the addressable market of drone powered solutions in the insurance industry is valued at $6.8 billion. This is mostly through three segments where drone operations can enhance an insurer’s procedures: risk monitoring, risk assessment and claims management.
Drones are being used by insurance firms for faster assessment of claims where one agent equipped with a UAV can set up automated flight patterns to cover multiple insured locations, capture images and evaluate property damage. Drones allow claims adjusters to get better views of hard-to-see areas and better analyze the cause of the loss — without disturbing the scene. This capability results in a savings of time and improved efficiency to the tune of 40% to 50%, according to services vendor Cognizant.
For example, drones were deployed to take pictures of the aftermath of a 2016 earthquake in Ecuador. One of the world’s leading reinsurers was able to respond to the catastrophe quickly and effectively, and sped up post-disaster relief and rebuilding through fast claims processing and payment. Because there is no need to wait until conditions are safe, claim resolution is much faster, and assessors and adjusters are safer.
Liberty Mutual has started using drones remotely controlled by a claims representative to do bird’s-eye inspections of the rooftops to damaged homes. The insurance company said it uses UAVs because they are safer than using a ladder and sending someone up to a roof. Liberty Mutual said the use of drones helps speed up the claims process with most inspections taking under 10 minutes. That means the faster it is to complete the inspection, the faster claims can be sent and repairs can be made to the home.
Travelers’ claims service is also employing drones for a similar use and has even brought the technology to its Claims University where it trains agents on how to operate UAVs and use them in the field. The insurance company is using drones to aid in property inspection associated with risk control, pre-loss or the claims process after a loss.
Better Data When Catastrophe Hits
Because drones can take detailed aerial imagery, when a catastrophe hits data can be easily collected for claims adjustment or catastrophe model validation purposes. UAVs can be used to cover wide areas for crop insurance claims or can be used to create a 3D model of major infrastructure damage caused by hurricanes and earthquakes. And since drones don’t require takeoff and landing strips, they can be used over properties that otherwise may be inaccessible to capture detailed images and videos without human risk.
This was the case with last year’s severe damage in the wake of Hurricane Harvey in Houston. Drones were used to inspect roadways, check railroad tracks, and assess water plant conditions, oil refineries and power lines. Some 100 drones were used after Hurricane Harvey to help a wide range of industries pinpoint damage and accelerate response times from insurance aggregators.
Lowering Pricing, Lowering Fraud
Insurance companies get consumers to purchase their policies based on the types of services they offer and the best prices that they can provide. Because insurance premiums are based on the level of risk, each feature a home has that reduces risk allows the insurer to calculate accurate personalized premiums. Insurance companies are using drones to collect information about a property before a disaster hits in order to formulate the best premium for that home.
For example, if a homeowner installs storm shutters in an area that experiences severe weather, a drone inspection that shows that a home has these features can justify a lower premium.
But drones can also be used to discover when a property does not have a feature in a home or building that the owner claims it does. Insurance fraud is a common problem and mitigating that fraud can help save companies millions of dollars. After an extreme event happens, some policy owners try to claim damage that was done prior to the disaster. Using drones to capture images of insured properties before an extreme event can help insurance companies protect against such fraud.
Not only are drones changing how insurance vendors mitigate their own risk; they also affect how quickly companies respond to problems when disaster hits, how fast they can process claims for policy owners and how fast claims are paid. While drone use is still in the nascent stages in the insurance industry, with these benefits to vendors and policy owners, the use of UAVs is bound to accelerate in the coming years.