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New Applications for Drones

Drones are becoming widely used in a variety of industries, including insurance. As mentioned last week, millions are expected to be sold in 2017, with PwC calculating the global market for the commercial application of drones at more than $127 billion. So how are insurers using drones right now, and what opportunities are arising?

Though drones could theoretically benefit many different aspects of insurance operations, to date the most common application has been roof inspections conducted by certified insurance assessors before payment is made on claims for storm or hail damage. Traditionally, assessors use ladders to climb onto roofs and sometimes need harnesses if the roof is high or steep enough. A manual inspection can take half a day.

See also: Drones + Gig Economy = Win for Insurance  

A 20-minute drone inspection captures around 350 images of the property in question and provides data that can be used to identify moisture trapped in roofs, produce 3D models and elevation maps, calculate flood or wildfire risk and derive property measurements.

This gives insurers several good reasons to carry out these drone inspections. Here are some notable examples in the area:

  • Erie Insurance, an American traditional insurer active in the auto, home, commercial and life insurance sectors, is generally credited as the first insurer to use drones to inspect roof damage. It received approval from the American Federal Aviation Authority in the spring of 2015.
  • Betterview is an insurtech devoted to using drones for property inspections. The company announced this April that it had executed 6,000 rooftop inspections in the last two years and then signed a partnership agreement with Loss Control 360, which makes software for insurance carriers and inspectors. “We have seen insurers allocate budget dollars in 2017 to move from concept to real production use,” Betterview CEO David Lyman told the Insurance Journal. “In 2018, we expect to see a significant ramp up in the use of drones by insurers and reinsurers.”
  • Travelers has used drones to inspect damaged roofs since 2015. The carrier provides insurance-specific drone pilot training to its claims teams; by May this year, it had trained 150 pilots and expected to train hundreds more before the end of the year.

But it’s not just roof damage that drones are being used for.

Beyond roof inspection

The French global insurer AXA reported in 2016 that it was using drones in a variety of applications in France, Switzerland, Belgium, Mexico and Turkey. The business case is simple— to assess claims, drones can go places that are risky for humans: into fire-damaged buildings, into places where chemical toxicity is suspected and into manufacturing plants or other areas that have been subject to natural or other disasters.

AXA is developing tools and platforms to use drone images more efficiently, including this new data source in its claims adjustment processes.

Coupling imaging technologies with advanced analytics is proving useful across industries. Drones are being used in disaster management, geographic mapping, crop monitoring, supply chain monitoring, storm tracking and weather forecasting, to maintain power lines, monitor traffic flows and conduct surveillance—all instances that may assist insurers to dynamically adapt and innovate on insurance products and risk cover, especially for short-term cover.

Country Financial is, for example, using drones to identify issues in fields that are hard to spot with just “boots on the ground.” It says its crop claims adjusters using drones can scout three times as many acres as an adjuster on foot. This technology also gives farmers more information to consider when choosing how much crop insurance coverage they need, the company says, and it means more insurance plans can be based on enterprise-level data rather than county numbers.

Evolving drone technology

While these examples provide a snapshot of the growing use of drones in P&C insurance inspections, they also highlight some of the limitations of current applications.

Regulators require drone pilots to maintain line-of-sight during a flight, limiting the range of a drone’s flight. New regulations—and wider use of fixed-wing drones—could dramatically boost this range, with corresponding increases in the amount of property a single flight could cover. Technology and regulation could also conceivably enable greater autonomy for drones in the future, allowing a single pilot to oversee multiple drones at once.

See also: What Is the Future for Drones?  

A recent Businessinsider.com article highlights the emergence of generation seven of the technology, with the announcement of 3DRobotics’ all-in-one drone, Solo. These next-generation smart drones have built-in safeguards and compliance tech, smart accurate sensors, platform and payload interchangeability, automated safety modes, enhanced intelligent piloting models and full autonomy, full airspace awareness, auto action (take-off, land and mission execution). Imagine the future opportunities these drones will open up for insurers.

Insuring Drones – A Growing Opportunity

Drones are flying higher than ever. A recent Goldman Sachs forecast values the overall market opportunity for drones at $100 billion between now and 2020Gartner predicts that global sales of drones for personal and commercial use will hit $6 billion this year and grow to $11.2 billion by 2020. But, as drone sales and applications grow, drone accidents are keeping pace. It’s a big opportunity for insurers.

By the end of 2020, the drone insurance market could be worth more than $500 million in the U.S. and $1 billion globally, according to Allianz.

See also: 5 Ways Drones Are Changing Insurance  

Drones have already been involved in many incidents of property damage and other mishaps. Notable examples include collisions with a nuclear power station in Cape Town, the Empire State Building in New York, the grounds of the White House in Washington, DC, a Norwegian ski hill in the middle of a World Cup slalom race and the fingers of the singer Enrique Iglesias during a concert in Mexico. The most recent statistics from the Federal Aviation Authority (FAA) reveal that drone safety violations in the U.S. are up 46% year-over-year.

It is therefore no surprise that insurers have started to offer coverage for private and commercial drone users. Some notable examples:

  • In July, a subsidiary of the German insurer Allianz announced a partnership with Flock, an insurtech startup that analyzes real-time flight-risk information to provide pay-as-you-fly insurance. Allianz and Flock plan to launch the “Flock Cover” app in the U.K. sometime in 2017, which will offer recreational and commercial coverage for up to £10 million (US$13.6 million). The app is still in development as of this writing, but enthusiasts can sign up to beta test it on Flock’s website.
  • Munich Re began offering commercial drone insurance in the U.S. in June in the wake of new regulations from the FAA. The product targets small and medium-sized businesses, including farms, that use drones. It covers injury and property damage coverage for drones that weigh as much as 55 pounds (25 kg).
  • Founded in 2015, the insurtech startup Verifly offers on-demand drone insurance for recreational and commercial flights in the U.S. Earlier this year, Verifly partnered with Loveland Innovations to offer insurance for insurance adjustors and contractors using drones. The insurance is provided through Loveland’s IMGING drone property inspection platform.
  • In May, a subsidiary of Liberty Mutual Insurance Group announced DroneInsurance.com in conjunction with the insurtech Acend. The site aims to offer a convenient place for American drone users to buy flexible insurance from brokers. As of this writing, DroneInsurance.com was still in development, though interested parties could sign up to be notified when it launches.
  • Ageas, a multinational insurer based in Brussels, includes drone coverage in the U.K. under its “Back Me Up” flexible insurance platform. Customers are covered for accidental damage, theft and loss of their drone, anywhere in the world. Coverage starts at £8 (US$11) a month.

See also: Drones + Gig Economy = Win for Insurance

As drones become more popular and profitable, insurers will create offerings similar to these examples and innovative new ways of mitigating risk. Some of these new ideas will tap into the broader potential of the Internet of Things, which I recently wrote about in another blog series, and which is becoming increasingly visible in the industrial sector.