The wildfire that swept through your neighborhood was devastating. Access to nearby roads is limited, and insurance companies are slow to the scene. And when they do arrive, adjusters must walk on foot, block by block (find out How to Protect Your Home from Wildfires).
The rumors start circulating about insurance companies taking days – if not weeks – to evaluate home damage. With one major exception: insurance companies using drone technology.
Nearly a dozen insurers are using the latest advancements in drones to, among other things, determine preliminary damage estimates. With the number of companies using drones expected to climb, the benefits will likely have a positive influence on the premiums we all pay for insurance.
Here are just a few ways insurance companies will use these little flying data collectors to improve insurance for everyone.
Eliminating the Ladder
When the insurance industry first started using drones, the most obvious use for them was ditching the ladder to climb onto roofs.
Adjusters, often working by themselves, are tasked with determining roof damage by physically climbing and reviewing the damage.
After hurricanes or hail storms, it can take over an hour just to adjust one roof. With a drone, however, an adjuster can simply send the device up above the roof to take photos or record video, allowing them to evaluate three times as many houses in the span of time. This means a quicker claim determination, faster payout for the insured, and fewer work hours than would be required when using the ol’ ladder. The end result is less cost to the insurance company, which can ultimately translate to a lower premium for you.
Drones for roof evaluations do have their drawbacks. For one thing, not all locales will allow the use of drones. And second, we don't have drone technology advanced enough to detect minor damage. Over time, both of these issues are expected to be overcome.
Every insurance company has to be on the lookout for fraudulent claims. After catastrophic events, it's not uncommon for insurers to receive claims for damage that existed prior to the hurricane, tornado, or blizzard.
Insurance companies can solve that problem by using drones to pre-inspect properties before an impending natural disaster. With close to a week's notice in advance of a land-falling hurricane, insurers can deploy a small army of drones to record the state of the properties before the storm hits. With this information available to them, they won't find themselves making claim payments for pre-existing damage.
The same tactic can be used for impending blizzards or before the start of tornado season for twister-prone areas. For each scenario, insurance companies have the ability to reduce claim payments resulting in stronger underwriting profit and lower premiums.
Inspect and Insure
We’ve talked a bit about how inspecting prior to a catastrophic event can reduce fraud. The same approach can be used to accurately underwrite risks for policyholders.
Drones have the unique capability of not only scanning roof tops, but other insurable risks. Large machinery and equipment, for example, can be difficult to examine. From boats to boilers, perimeter walls to wind turbines, proper inspections can take months to complete.
Inspections are often completed long after an insurance policy has been in place. Every day that passes without one keeps the insurance company exposed to potential, unknown claims scenarios.
Although drones can't yet provide the same detail as human eyes and hands, what they can provide is a cursory evaluation of difficult to evaluate risks. At a minimum, insurance companies can quickly identify obvious exposures which can be addressed before a loss occurs.
Crop and Cattle
Agricultural insurance encompasses many different risks, including, crops, cattle, tree and sod farms, and other exposures. They're a unique underwriting challenge for insurers. Policies often provide coverage for hundreds of acres of land, heads of cattle, or even individual trees (see An Overview of Revenue Protection Insurance to learn more about this kind of coverage).
The underwriting risks borne insurance companies are twofold. First, the amount of land, cattle, or trees insured is only known by a warranted statement provided by the insured. It is all too easy (albeit fraudulent) for potential customers to grossly underestimate their exposure to risk.
Second, understanding the overall nature and health of the insured property is difficult to ascertain. Drones, however, can cover large distances and accurately calculate the size of a crop field. And with advanced imaging, they can also count the number of cattle or trees present in a given field.
Both of these uses benefit the insurer by allowing them to calculate an accurate premium based on the risk, reducing fraud, and improving their competitiveness in the agricultural niche.
Owning and operating drones capable of being used for these insurance applications doesn't come cheap. Drones equipped with state-of-the-art cameras and sensors can run into the tens of thousands of dollars. Adjusters also need to be trained in how to use them and insurance companies need to acquire any licenses that are required.
In the end, however, insurers are seeing the tremendous benefits drones can provide to them and their insureds. By eliminating fraud, enabling better risk evaluation, and allowing for shorter claim processing, drone use by insurance companies will not only boost company profits but should also reduce your insurance premiums in the process.