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Drone technology, friend or foe to the Insurance industry?

July 28, 2016
Posted by Gareth King

UntitledOutside the news stories where drones have headlined as causing havoc with civil aviation, there are serious questions about how these machines can be used to the advantage of business. As an example, News reporters already use them to film interesting angles for their reports, but does drone technology hold any real value for the insurance industry?

There have been some mentioned benefits and risks associated with their use in the insurance supply chain – but what are they and do the pros outweigh the cons?

Pros Cons
·        Reach more inaccessible areas safely

·        Collect video evidence remotely

·        Quicker claims processing

·        Reduced on-site visits

·        Reduced assessor costs

·        Increased security

·        Reduced fraud opportunity

·        Safety Concerns of unmanned aircraft

·        Needs tighter flying regulations

·        Potential for increased damage/collision claims

The benefits of using drones as part of your insurance supply chain solutions

By far the greatest advantage of unmanned aircraft is its ability to reach inaccessible and sometimes dangerous areas relatively easily. Mounting a camera on a drone allows claims assessors to quickly investigate damage to property or assets remotely. Height and physical obstacles are no longer a problem when viewed from above using a flying drone.

As drones make it possible to video and photograph structures from the air, building contractors and property surveyors are already using them to assist with inspecting properties.  They’re being used to gather evidence that can then be sent to a claims handler for further investigation. Collecting evidence remotely in this way, is quick, simple and safe.  There is less need for a person to directly access unsafe structures, reducing the risk of harm to Loss Adjusters and Claims Assessors in the field. Claims handling teams could even accept drone footage taken by the claimant themselves if appropriate, so that the cost of assessors visits are not incurred.

Furthermore, simplifying the evidence gathering process helps to reduce the cost of processing claims. As fewer site visits, mean fewer risk assessments and the reduced instances whereby safety equipment is needed to be deployed. In addition to a reduction in mileage as a result of assessors not being required to travel.

The speed at which drone equipment can be deployed also helps to reduce the time taken to lodge and process more complex claims. In the event of a flood for instance, assessment work can begin immediately without having to wait for the water to recede. Reducing the time taken to process a claim allows an insurer to offer customers an improved service. This is important at a time when on-demand services are becoming the norm, as policyholders are less willing to wait patiently for their claims to be processed. Instead they expect to get on with business as usual, as quickly as possible.

Moreover, being able to deliver a quick and efficient service to customers is becoming increasingly important for the insurance industry. Insurers and their suppliers should be looking to encourage customer loyalty through added value services instead of only competing on price which will erode profit margins.

The risks associated with using drones in the insurance supply chain
Despite their relatively harmless nature – at least in a civilian setting – drones have quickly gathered a bad reputation. Most of the problems relate to carelessness by operators where they have flown unmanned aircraft into restricted airspace or similar.

This year in April, an aircraft landing at London Heathrow, reported being struck by a drone on its descent, causing widespread panic in the media. Similar incidents in the US and across the European Union have led national governments to call for their use to be regulated – perhaps even implementing a licensing system for operators.

The perceived bad reputation of drone technology, coupled with an increase in the number of unmanned vehicles operating overhead will create further problems for legitimate users. If current trends continue, we can expect to see a rise in the number of insurance claims against drone operators for damage caused by collisions or crashes.   If using drones in the insurance supply chain, making sure drone operators have had appropriate training and are insured themselves is a necessary requirement to help mitigate any risks.

If operators need to be licensed, they will have to carry specific insurance. Therefore, the total cost of running a drone programme needs to be considered as the costs shouldn’t outweigh the savings that could be made as a result of operating them.

A look to the future

 Where firms decide to press ahead with the use of drones, initial programmes will see unmanned aircraft deployed to improve internal supply chain processes. Yet, we predict that the future of drones in the insurance industry will be more diverse.

Insurers may encourage clients to deploy their own drones to improve security. For example, airborne video feeds could supplement on-site CCTV. As drone technology matures, new and innovative ways to reduce crime and fraud will be developed, helping to reduce the cost of premiums for customers and the likelihood of claims for an insurer.

As a similar comparison, consumers may not have fully understood the benefits of ‘black box’ technology in their cars to begin with, but as their driving improved and their premiums fell, they began to see the value. And the same is likely to be true of drones in future too.

The risks associated with using drones are genuine. Insurers who can overcome these challenges in a cost-effective way and improve the service offered to clients, before or during a claim, could make drones a major asset to their insurance supply chain processes.

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Gareth King – Senior Insurance Product Manager, Adjuno
Gareth is an expert in supply chain management software and has worked in the industry for over 14 years, specialising in the retail and insurance sectors. He currently manages the insurance product portfolio and future roadmap for Adjuno, who are a leading supplier of web-based supply chain software. Gareth’s knowledge and hands on experience has guaranteed the successful implementation of supply chain solutions to clients including Marks & Spencer, New Look, Randall & Quilter, AXA and Zurich Insurance.