Listed by Lloyd's in 2016 as an 'emerging risk', drones have caught insurers' attention in the last few years. However, the potential benefits for the industry go further than the new capital received from premiums.
Drones are becoming more and more prominent in modern life. Either they feature in headlines for the latest attempt to reach space, or 'near miss' with an aeroplane, or there's a strange buzzing noise above our heads... Is it a bee, is it a plane? No – it's a drone.
All of the above can make it rather easy to overlook the positives associated with the small(ish), flying machines. However, in the insurance market, the pros seem to be outweighing the cons. Insurers in the UK and worldwide are beginning to use drones to gather data for the underwriting process, and to assist in assessing claims.
More than just a pretty photo
The advantages of using drones for photography are understandable. A drone is able to capture more than an ordinary camera, especially where a wider or more extensive image is required. Drones were used in the aftermath of Hurricane Harvey in 2017 to photograph extensive areas affected, in order to assess property damage and detect fraudulent claims. The use of drones also enabled photographs to be collected in the immediate aftermath of the disaster, as opposed to days or weeks later once the area could be accessed. This is a further advantage of using drones: their size and mobility means that they are able to access areas that a human photographer cannot.
Furthermore, developing technology enables drones to provide more than photographic images. Drones with infrared and thermal sensors are able to provide thermal imagery which would not otherwise be visible to the human eye. Such imagery may be of use in claims concerning faulty electrical items, for example, as the images are able to show where overheating has occurred.
Drones have also been created with the ability to collect material. This allows for samples to be taken from inaccessible areas such as hazardous buildings or deep sea projects.
Minimising loss, one drone at a time
Though the initial outlay is likely to be rather expensive, drones can operate more cheaply and quickly than humans. Perhaps this is an argument that can be run in favour of any technology replicating human skill. Nonetheless, whilst time and cost savings are inevitably important to all businesses, the ultimate reward that may come with using drones is the removal of risk to life.
For many categories of risk, it is conceivable that the individual undertaking an assessment will face low risks as to their safety. However, this is not always true. Consider a situation where an insurer requires an assessment of an offshore oil rig following an explosion. There is a significant risk for any individual attending the rig, if that individual is even able to gain access at all. In flies the drone to save the day, snapping away, taking samples if required, and sending back thermal imaging to determine the cause of loss. Possibility of risk to life averted.
Other similar scenarios where risk to life is prevented may include: assessments of damaged properties and/or roofs, or capturing information in the aftermath of natural disasters such as floods, where individuals attending would potentially be at risk of contracting infectious diseases.
But what happens when the technology fails?
It is, sadly, a well-known fact of modern life that technology is not infallible, and drones are no exception to this fact. A drone failure or malfunction could result in photographs being lost, samples being dropped, or the drone becoming stuck or going missing, the 'worst case scenario' being damage caused to property or bodily injury to a bystander.
A further concern associated with the use of drones is the possibility of criminal sanctions if a drone is misused. Regulations implemented in the UK by the Air Navigation Order 2016 impose safety rules on drones being operated commercially. If a drone is flown above 400ft (which is the statutory limit) the registered operator could receive an unlimited fine and/or be sent to prison for five years. Furthermore, a fine of £1,000 may be issued if a drone has not been registered with the Civil Aviation Authority, or has not completed the requisite safety test.
Ultimately, the answer to 'what happens when it all goes wrong' is not yet known. This is new technology that insurers, and other markets, are beginning to utilise. However, as manufacturers continue to develop more complex drones with further capabilities (including AI), the benefits for the insurance market can be expected to grow.