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A recent outbreak of devastating tornadoes in Alabama highlights a trend of insurers expanding their use of drones to assess damages caused by intensifying and more frequent natural catastrophes.
Previously, drone programs developed by insurers primarily focused on claims, but recent efforts have evolved to include underwriting and risk mitigation, including using drone imagery to identify problems prior to catastrophes and to take steps to fortify the resilience of properties to weather events.
The major inflection point for insurer usage of drones was 2017 due to the cost of hurricanes such as Harvey and Irma, said Edin Imsirovic, senior financial analyst with A.M. Best Co. Inc. in Oldwick, New Jersey.
“These catastrophe events proved the value of drones for the industry, as it would have been impossible to immediately access some of these areas in great detail using anything else but drones,” he said.
“It was really due to these catastrophe events that the insurance industry moved away from the concept of whether the drones are useful to ‘How do we scale our drone operations?’ given the tremendous benefits of drones: efficiency, safety and customer satisfaction,” Mr. Imsirovic said.
Drone utilization in the insurance industry is being driven by technological advances in artificial intelligence and image recognition — “the ability to automate all of these processes and sort through all of these images without the human intervention,” he said. AI can now “categorize objects and images more accurately than humans.”
Prior to the 2018 natural catastrophe season, drones were not often used in the surplus lines markets, but hurricanes Florence and Michael and the Camp and Woolsey wildfires created a scarcity of field adjusters, contractors and ladder companies, said Emily Daugherty, claims supervisor at third-party administrator Minuteman Adjusters Inc., a unit of H.W. Kaufman Financial Group Inc. based in Farmington Hills, Michigan.
During the wildfires, “we were able to use drone images of properties to determine exactly which properties were total losses before we would have been able to if we had to use field adjusters, and that allowed us to go to our carriers at Lloyd’s (of London) and get emergency funds to insureds,” Ms. Daugherty said.
Policyholders have benefited from the use of drones to validate claims, she said, citing a $700,000 hurricane-related loss in North Carolina in which the TPA used a drone to examine the exterior of a building and the roof to look for holes and determine the policyholder was entitled to coverage because the interior water damage was caused by an exterior opening.
The TPA also used a drone to assess damages on a claim from the tornado outbreak in Alabama in early March, Ms. Daugherty said. “Anything that’s a widespread disaster whether it be a hurricane, a wildfire, a tornado, flooding — really anything that goes across multiple properties and makes it difficult to access the area, or resources are limited in the area — drones are great for,” she said.
Travelers Cos. Inc., whose drone program has about 600 Federal Aviation Administration-certified pilots and has operated about 31,000 drone flights, has mostly used drones from a claims perspective, said Jim Wucherpfennig, Travelers’ vice president of property in Hartford, Connecticut.
“We look at a drone as just another piece of equipment that’s necessary for our claims professionals to do their job,” he said. “It’s no different from an iPhone, no different from a laptop or a laser measurer, etc.”
But drones can also be used for tasks such as fraud management, including investigating contractors’ repair work, he said. Drones also improve workplace safety because insurers can send drones to inspect properties rather than having adjusters or other staff climb ladders to inspect damaged roofs, he said.
Insurers are also beginning to use drones for risk mitigation. FM Global used drones to record and assess Hurricane Florence-related damage in South Carolina, but then used drone pictures to help create 3D images and analyze the potential for future floods and communicate the best protection methods to its policyholders, said Jaap de Vries, vice president of innovation, science and technology for FM Global in Johnston, Rhode Island.
Advances in GPS technology and sensors, cameras and battery technology have contributed to improve drone imagery, but progress in the utilization of artificial intelligence has improved the efficiency of drone imagery analysis, experts say.
“Just having a folder with thousands of images is not necessarily going to be very helpful for our engineering staff or our clients, for that matter,” Mr. de Vries said. “What we’re really focusing on is what you can do with those images.”
Drone usage has its limitations because of regulatory restrictions, experts say.
Entire areas are often closed off during catastrophes such as the California wildfires while the FAA prohibits drones from entering restricted airspace to avoid potential collisions with commercial aircraft, experts say.
But insurers should continue to expand their use of drones, including deploying drones prior to a catastrophe to record the exact status of exposures and any prior property damage, as well as using drones immediately after a catastrophe to survey damage and inform policyholders that they have a loss rather than waiting for a claim so that damage can be addressed sooner and does not create more difficult, expensive losses later, Ms. Daugherty said.
“I would like to see them used more proactively rather than reactively, and I think it’s something that’s going to start happening more and more, unfortunately, as these cat events keep hitting,” she said.
Geofencing technology is being used by the construction industry to improve workplace safety, among other uses, experts say.