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What Is the Future for Drones?

In 2013, Amazon CEO Jeff Bezos announced to the world that the online retailer would begin to develop a “drone-to-door” delivery service for its loyal customers. Dubbed Amazon Prime Air, the system would deliver packages directly to your doorstep in just 30 minutes after an order is placed, setting a new and higher bar for “fast delivery.”

However, after a variety of issues and concerns were addressed by increasing regulations added by the Federal Aviation Administration (FAA), it  appeared that Bezos’ announcement would never get off the ground. But after two years of waiting for the FAA, Amazon will finally get to test these drones on U.S. soil — or, should I say U.S. air? — bringing customers one step closer to having their Tide detergent refilled by a delivery drone.

Despite the U.S. government dragging behind on approvals, for retail and civilian use, sales for drones aren’t expected to slow any time soon. Companies like Teal Group, an aerospace research firm, estimates that sales of both military and civilian drones will total more than $89 billion by 2023.

Other big companies, such as State Farm and AIG, are also getting into the drone business. In fact, State Farm is the first insurance company in the U.S. to receive regulatory approval to test drones for commercial use. With drones popping up in so many different industries, it makes me wonder, what impact will drones have on companies’ customer experience — good and bad?

The Good

State Farm plans on changing the insurance industry for the better, using drones to aid in natural disaster relief. For instance, instead of State Farm spending the money (and time) to ship hundreds of claims adjusters out to natural disaster sites to assess damages, the company will send only a handful of agents equipped with a drone partner to more efficiently survey damaged property.

Jason Wolf, a property defense attorney and shareholder at the Florida-based firm, Koch Parafinczuck & Wolf, stated in an interview to ClaimsJournal.com: “I envision a time when, after a catastrophe, an adjuster pulls up to a neighborhood and opens the trunk of his car and presses a few buttons on his tablet device, and the drone does an immediate survey of everything and streams it all right to his tablet device, and he knows exactly where to go first and what’s most significant within minutes. Costing very little money, the insurance company has a sense of everything that needs to be done in a very short amount of time.”

Imagine all the headaches this could mitigate for customers and employees after the chaos caused by unfortunate losses created by natural disasters.

It’s interesting, too, how this type of surveying will require additional training, but training we might be familiar with. Much like a police officer who trains alongside his dog in a K-9 unit, insurance adjusters will train alongside their partner – only, in this industry, it would be a drone.

While there is debate in the insurance world about how drones will operate, one thing is for sure – they will be operated and used to speed up services and save on cost, making customers’ lives a little easier. As such, claims assessment aided by a drone will yield quick turnarounds and an even quicker payout to the insured.

Additionally, insurance companies will start offering drone insurance to owners of unmanned aircraft systems (UAS). RiskandInsurance.com noted that the general types of coverage that will be required for the use of UAS and ancillary business activities will include liability, personal injury, invasion of privacy, property and workers’ compensation. The publication also mentioned that, given the conservative nature of the insurance industry, carriers could place stricter guidelines on drone coverage than the FAA does.

Once regulated and insured, drones will be sent out into the community to collect data. For example, what if someone’s home flooded? Well, insurance companies could send their drone to the flooded house and survey the area for all damages, speeding up the process for families affected.

There is also the use of drones for the collection of data by third parties. Imagine that Ford is looking to target advertisements for a new truck to areas where the road conditions would demand the use of four-wheel drive. Ford hires an agency to send out drones to specific cities where it is looking to advertise.

This drone will collect data on road conditions and take images of cars on the road to make sure a majority of drivers are in trucks, and will then report back on economic conditions. Ford doesn’t want to be advertising where citizens can’t or won’t pay for the product.

In a world becoming more drone-centric, these types of background checks and data collections via UAS will become increasingly more frequent.

The Bad

The government review process for a drone is 120 days, but, by the end of the process, Amazon says the technology of the drone submitted for regulation is outdated. Therefore, Amazon must update its filing and submit to the FAA for regulation, starting the 120-day review process all over again.

The other concern of the FAA is air traffic. Coming down with a few regulations on drone flight, the FAA is requiring that drone controllers have sight of the drone at all times and that they must operate under 400 feet.

Exelis, a global aerospace, defense, information and services company, was featured in an article on Engadget recently, discussing its development of an air traffic control system for drones. Nearly ready for testing at the FAA approved drone-testing sites, the low-altitude monitoring system would keep tabs on compact aircrafts flying at or under the mandated 400 feet.

It’ll be interesting to see how industry giants, such as Amazon, overcome these obstacles to create a non-invasive customer experience with drone technology.

Once regulated, the next issue is invasion of civilian privacy. Private and civil liberties advocates have raised doubts about the legitimacy of facial recognition cameras, thermal imaging cameras, open Wi-Fi sniffers, license plate scanners and other sensors commonly used by drones in the civilian sphere.

Civilian uses of drones for hobby are already causing issues, most notably at the White House, but across the country, as well. The LA Times reported last June that while LA Kings hockey fans were celebrating their Stanley Cup victory, a group noticed a drone flying over their heads filming the scene. Angry at the invasion of privacy, the crowd knocked the drone out of the sky using a T-shirt and then smashed it to bits with a skateboard.

In Los Angeles, flying a drone in public is not illegal, but LAPD Cmdr. Andrew Smith commented that, “It was kind of an eye-opener for us, that this something we really need to pay attention to.” While the Kings fans reactions may seem a little over the top, the general population seems to feel the same way when they see a drone overhead.

With no official laws on the books regarding the use of domestic drones, the right to privacy becomes a large topic of concern for many citizens. The American Civil Liberties Union states on its website, “Congress has ordered the Federal Aviation Administration to change airspace rules to make it much easier for police nationwide to use domestic drones, but the law does not include badly needed privacy protections.”

It will be interesting to see how industries promote drone use to their customers, without raising fears about a threat to privacy. After all, customers may not always be right, but they are always the customers.

Drones will also need to be protected from cyber attacks.

“Cyberattacks on your PC – they can steal information, and they can steal money, but they don’t cause physical damage, whereas cyber-attacks in a UAV or a car can cause physical damage, and we really don’t want to open that can of worms,” said Kathleen Fisher, the previous program manager of the DARPA project in a statement to NextGov.com

The Pentagon is currently working on developing code that will protect a Boeing Little Bird unmanned aircraft from being hacked. Defense industry programmers are rewriting software to safeguard the computer onboard the helicopter drone and aim to have the project completed by 2017.

The Future

It’s exciting to think about what drone technology will bring to companies and their customers – and to people everywhere. Let’s face it, if we think we have seen the complete potential of what customer experience has to offer, then, well, we’re being naive. The new drone technology will reinvent customer experience once again. And the best part? We all get to see how it unfolds.

The future seems endless for drones. Whether you feel they are an invasion of privacy, or they will begin to make our lives easier and aid society in ways that haven’t even been thought of yet, drones aren’t going anywhere any time soon. If you need to put it in perspective, a white paper featured on Cognizant.com notes that 40,000 drones are expected to deploy in 2015, and this is a number that will continue to increase each year. This industry is ready for take-off.

drone 2

If you haven’t come face-to-face with a drone yet, don’t worry, you will.

The Many Questions Raised by Drones

State Farm, AIG and USAA have received preliminary approval from the Federal Aviation Administration to test drones for their claims and underwriting functions. On the surface, this sounds like a straightforward proposition. Drones can more quickly and easily survey damage sites after fires, tornados and hurricanes than personnel on the ground. Drones can be equipped to use global positioning software to identify insured structures and take pictures of damage to better and more quickly inform ground-based adjusters, leading to faster settlements and good press for insurers. Drones might also be used by adjusters to reveal hail damage on roofs, which will help to mitigate falls and other injuries to adjusters. The thought is that drones also might be helpful in certain loss control activities, such as identifying otherwise hidden internal or external fire hazards to large structures or plants.

Small portable drones may also find bodies or even survivors in the aftermath of storms. Drones and their operators may see crimes such as looting or arson being committed.

But questions arise: What responsibilities will insurers now have to report crimes to the authorities? How quickly will insurers be required to report? Some drones may use live streamed images to ground-based operators; others may take static pictures that will be retrieved when the drone returns to base. Will the drone-equipped disaster adjuster be required to analyze these pictures immediately or send them to the authorities via Internet uplink as soon as they are retrieved? To avoid problems, should drones not be sent in until after all rescue efforts have ended? However, would this also not create an ethical issue about delaying the use of lifesaving tools because of possible legal complications?

What issues of privacy of customer information or stranger images will insurers face as a result of these new capabilities? For example, the camera is left on while the drone ascends the side of the building, capturing images of people in various stages of dress, seeing a man beating a woman on the 14th or witnessing people shooting up at a party in the penthouse. What must the adjuster report and to whom? What if the party in the penthouse is for diabetics and the adjuster reports this to police as a suspicious incident? Will the adjuster now need to add police investigative skills to competency requirements? How secure will these drones be from tampering if they should malfunction, or how easily can hackers intercept image transmission? Will they be equipped to hear, meaning they can record conversations that may have otherwise been thought to be confidential? In other words, will the drone engender additional responsibilities for the adjuster or will issues otherwise be covered by existing laws and regulations?

We can argue that the courts have agreed that our expectations of privacy with airplanes flying overhead is already reduced. However, airplanes and other commercial or pleasure craft rarely fly under 1,000 feet for any length of time. Commercial drones will operate at a much more personal, in-your-face, level; today they cannot fly higher than 400 feet. Will the courts react the same way as they have with aircraft to privacy concerns associated with drones?

Underwriters will want to use drones, as well, to survey large property complexes to establish baselines not only for pricing and capacity purposes but to provide claims adjusters with a before-loss picture of the property. Drones may also capture more than their own customer’s property. For example, the drone captures a picture or a video of a new product being tested in a courtyard of another business. The other business, fearing industrial espionage, calls the police and gives the clearly visible drone FAA-issued ID number to them.

Ground-based adjusters can trespass or go where they aren’t wanted. However, most are trained to get permission directly from owners and others before trampling on private property. I do not think we will see distantly operated drones knocking on doors, “Greetings human, I am seeking permission to scan your property…please sign here or just nod your agreement.”

Then again, there is the psychological. The convoy of multiple insurer trucks shows up at the town just after a devastating tornado. Up go the drones, circling like buzzards over the wreckage and the dead. Townspeople make rude gestures to the eyes in the sky and clamor after the trucks to gain anything, any image of a missing relative or friend. And the police and fire officials are there, too, crowding the adjusters for information. Will the insurers need to circle the wagons, be available all together to the authorities in an approved command post so that the authorities can gain immediate access to their images? The authorities might have some immunity if they arrest looters from these pictures, but will the insurers, for giving the authorities pictures of the alleged crime? Will the drone bring more frivolous lawsuits from perpetrators of crimes at disaster sites for invasions of personal privacy?

I do not want this to be a Luddite’s rant against drones. Far from it; drones have useful purposes. While drone capabilities were honed in war, their peaceful use should be considered. There is no reason why realtors, insurers, surveyors and others should not have a shot at making their case to use drones in the course of their legitimate business. However, there will be others who use drones in less than legal ways, and we must provide some guidance to insurers and others what constitutes legal and authorized use. We must also have means within each drone’s system that provide credible and legal evidentiary documentation of use: authorized, legal or not. Because the drone increases the field of vision for its user, issues of privacy and legitimate acquisition of images and other information by authorities needs to be spelled out. Disposal of drones must also be spelled out in regulations so that they or any remnant information are destroyed so that they do not get into the wrong hands.

The question isn’t whether drones will be used for legitimate business reasons; the question is when. Because they increase the visibility of their users, issues are raised in the area of privacy that require discussion and perhaps court attention. There is also the unknown, the psychological—the vulture drones over the tornado-stricken town. People in war zones have learned to fear the drones because they are harbingers of death. Granted, we have not experienced drone warfare in the U.S., but we know that they have been used as impersonal killers in other places. Unlike whirring helicopters and buzzing planes, they are small, quiet, can hover low to the ground and will interface with individuals. What will we think of the drone climbing outside of our apartment building with its dark camera lens pointed directly at us? Will we think Big Brother, or will we come to accept this new technology as we have the convenience store video camera or the red-light camera at the busy intersection?

These questions must be asked and answered to some satisfaction before we go trundling off and build vast drone fleets. The time is now, because after drones are deployed is not the time to understand that the user has increased his or her company’s risk of lawsuit and even criminal prosecution that has not been properly identified, assessed, and managed.

Select articles and studies of the issues associated with drones.

— Calo, Ryan. “The Drone as Privacy Catalyst.” Stanford Law Review Online 64 (2011): 29-33. Abstract: Associated today with the theater of war, the widespread domestic use of drones for surveillance seems inevitable. Existing privacy law will not stand in its way. It may be tempting to conclude on this basis that drones will further erode our individual and collective privacy. Yet the opposite may happen. Drones may help restore our mental model of a privacy violation. They could be just the visceral jolt society needs to drag privacy law into the 21st century.

— Cavoukian, Ann. Privacy and Drones: Unmanned Aerial Vehicles. Information and Privacy Commissioner of Ontario, Canada, 2012. Summary: The aim of this paper is to provide a background for general privacy readers, as well as for potential users or regulators of UAV activities, as they relate to the collection, use, and disclosure of personal information.

— Friedenzohn, Daniel, and Alexander Mirot. “The Fear of Drones: Privacy and Unmanned Aircraft.” Journal of Law Enforcement 3, No. 5 (2013): 1-14. Abstract: The article focuses on the consequence of the use of unmanned aircraft systems, (UAS) or drones, planned to be integrated by U.S. in the national space. Topics discussed use of the technology by military forces, confirmation hearings of disclosed by Central Intelligence Agency (CIA) Director John Brennan and degradation of privacy as a result of law enforcement’s relation with the use of the UAS.

— Pasztor, Andy, and John Emshwiller. “Drone Use Takes Off on the Home Front.” The Wall Street Journal, April 12, 2012. Issue Discussed: With little public attention, dozens of universities and law-enforcement agencies have been given approval by federal aviation regulators to use unmanned aircraft known as drones, according to documents obtained via Freedom of Information Act requests by an advocacy group.

— Wesson, Kyle, and Todd Humphreys. “Hacking Drones.” Scientific American 309, No. 5 (2013): 55-59. Abstract: The article focuses on the lack of safety measures in drone aircraft. It states that drones can be used in various settings, which include search and rescue operations, scientific research and power line monitoring. Also mentioned are the Modernization and Reform Act of 2012 issued by the U.S. Federal Aviation Administration (FAA), effectiveness of jamming devices in the navigation system of drones and the challenges to balance the economic benefits of drones. considering the public safety.

2015: Pivotal Year for Emerging Technology

The Consumer Electronics Show (CES) has been the preeminent show for seeing, hearing and feeling what is emerging and hot in consumer electronics. It is the place to go to see new electronic games, mobile devices, TVs, home appliances and other electronics that will be coming to market to amaze and excite us. Remember Onewheel, a self-balancing, one-wheeled, motorized skateboard? Occulus Rift virtual reality? The curved HDTV? Or the best in laptops, tablets and smartphones?

The 2015 show may have been an inflection point, where CES also becomes the leading edge for emerging technology that should be of keen interest for businesses, especially insurance. It is the year where new products will go from science fiction and future thinking to Main Street reality and demand! Move over, George Jetson. For insurers, the future starts right now!

Emerging Technologies

The proliferation of emerging technologies seen at CES is considered by many to contain some of the greatest change agents since the introduction of the Internet, offering breakthroughs that will challenge businesses in many ways. In our 2014 research report, Emerging Technologies: Reshaping the Next-Gen Insurer, insight into the adoption, investment plans and opportunities for business of nine emerging technologies reveals the vast potential for transforming insurance. The research found that adoption is being led by the Internet of Things (IoT) followed by wearables, artificial intelligence (AI) and drones/aerial imagery, with driverless vehicles coming up quickly behind. In fact, five of the nine technologies are projected to arrive at or go well beyond the tipping point within three years, and all nine to surpass the tipping point within five years. CES has reinforced this view. Insurers that have not accepted as fact the fast-paced adoption and impact of these emerging technologies should take great pause. Here are a few reasons:

Autonomous vehicles became one of the hottest items during the show, and even before. Audi drove its autonomous vehicle from Silicon Valley to Las Vegas, generating pre-show buzz. Kicking off the show was Mercedes showing a concept car that looked more like a futuristic living room than a car. These and the other major automotive companies all demonstrated their acceptance, commitment and fast adoption of this new form of transportation introduced by Google just a couple of years ago. At this show, many of these automakers announced their plans to offer autonomous vehicles beginning in 2017! Note they did not make the announcement at the traditional Detroit Auto Show the following week. The future of autonomous vehicles will quickly be a reality, and so much sooner than most thought. So share the road, George J!

The Internet of Things (IoT) was everywhere, exemplified in the connected car, connected home and wearables … highlighting a fast paced market that is reinventing how we work, live and play in a connected world. Wearables with fitness and activity bands were prevalent, along with innovative devices like a pacifier that can monitor a baby’s health. Also included were wearables that were integrated with autos to enable the starting of parked cars. But it was the connected car and connected home that had the highest profiles.

The connected car was touted by many major car manufacturers. Ford, Volkswagen, GM, BMW, Toyota, Audi, Mazda, Daimler and others were showcasing their connected car capabilities and the growing array of services that come with them. The media noted that Mark Fields, Ford’s CEO, sees Ford as thinking of itself as a mobility company rather than an automotive company, delivering a wide array of services and experiences via the auto instead of the mobile phone. Added to this are Apple’s CarPlay and Google’s Android Auto systems that mimic and integrate the functions of smartphones on the auto dashboard touchscreen. Quite a reimagination of the automotive business!

All the devices and capabilities for the connected home added to the IoT’s momentum. Familiar tech companies like Google, Microsoft, Amazon and Apple, along with traditional companies like Cisco, GE, Bosch, Samsung and others, are powering ahead with innovative capabilities that will drive rapid adoption. In fact, Samsung Electronics CEO Boo-Keun Yoon indicated that, by 2017, 90% of all Samsung hardware (TVs, ovens, refrigerators, purifiers and more) will be connected, creating a home personalized to your unique needs. Many of the companies also announced the development of connected home hubs to integrate these wide arrays of devices from various manufacturers and third-party providers. Data from the connected home devices can be used to offer new services. The Jetsons’ home is finally here!

And drones were flying everywhere to demonstrate the high interest and potential for many businesses – from phone and video purposes to building inspections, surveying, delivery, weather data gathering, traffic and much more. The Federal Aviation Administration (FAA) had a booth at the event, announcing that it expects well over 7,000 drones in use by 2018. All of this indicated that, literally, the sky seems to be the limit for drones!

Insurance Implications

What does this all mean for insurers? The event emphasized the need for insurers to take these emerging technologies seriously and to quickly explore, experiment and consider their uses in the business. Why? Because traditional competitors like Progressive and USAA made announcements at the event concerning the connected car and connected home and the potential of new competitors that are looking at how they might leverage these new technologies.

The SMA 2014 emerging technologies survey indicated that these technologies would reach a tipping point in three to five years — or from 2017 to 2019. Based on the announcements at the CES about autonomous vehicles by 2017, home hardware being 90% connected by 2017 and large numbers of drones in use by 2018, the estimated arrival time at the tipping point is right on track, or could even come much earlier.

The results? New customer demands and expectations. Decreased risk. New insurance product needs. New service revenues. New competitors. Redefined customer relationships. Reimagined businesses and industries.

To stay in the game, let alone win it, insurers must aggressively find a way to embrace these technologies and uncover their potential. And, to do so, they must have modern core systems as the foundation to integrate the use of these technologies for innovation, as well as plans to pilot some of these technologies, because the future is coming fast.

The Consumer Electronics Show 2015 has foretold that 2015 will be a pivotal year for many businesses and industries, including insurance, for emerging technologies. Adoption of the emerging technologies is on track or accelerating toward the tipping point. It is no longer science fiction. It is science reality. Welcome to the future … today!