Insurers’ drone programs can take a page from their IoT experiences has been saved
Insurers’ drone programs can take a page from their IoT experiences
It is no surprise that drone-based InsurTechs have garnered attention and investment dollars from venture capitalists and insurers alike, along with increasing budgetary commitment from insurers. Drone applications are spanning the entire insurance industry and value chain. What do carriers need to do to get the most out of their drone programs?
January 16, 2019
A blog post by Nikhil Gokhale, Insurance research manager, Deloitte Support Services India Pvt. Ltd.
I grew up watching reruns of "The Jetsons," and that's where my fascination for flying objects began. I would spend hours imagining myself zipping through the air and reaching my destinations in a flash. Even today, when I'm stuck in miles of traffic, there are times I press an imaginary button on my dashboard and pretend I'm flying over all the chaos.
In fact, my colleagues tracking the aerospace industry tell me that flying cars are not too far away and that the biggest thing holding them back are psychological barriers, not technological ones.1
One flying object that seems to have somewhat broken past those psychological barriers—and is set to become a part of our "normal" life—is the drone. In just a few years, drones have gone from "something the military uses" to "they have so many personal and commercial possibilities."
Follow the money
It is no surprise then that drone-based InsurTechs have garnered a lot of attention as well as investment dollars from venture capitalists and insurers alike. As many as eight deals were announced in 2018, totaling more than $145 million. Seven out of the eight deals were either later-stage or follow-on rounds of funding, a trend consistent with the one we identified in our recent report, "InsurTech entering its second wave," that investors have started leaning towards more established entities over new InsurTechs.2
This also signals increasing budgetary commitment by insurers to drones as an innovation. As noted by my colleagues Akash Tayal and Nikhilesh Ramani in their report, "Insurance industry drone use is flying higher and farther," with applications spanning the entire insurance value chain,3 many large carriers that piloted the technology in the last two to three years have started ramping up their investments.
The Travelers Companies, which launched its drone program in 2016 to support claims inspection, has completed more than 17,000 drone flights across 48 states4 and employs almost 600 claims professionals who double as FAA-certified drone pilots5, making it one of the largest commercial drone users across all industries in the US. Similarly, Allstate, which began testing drones for property claims in late 2015,6 settled approximately 12,600 claims in 2017 and about 16,500 claims in the first half of 2018 using drones.7
In September 2018, the federal aviation regulator for the first time granted State Farm permission to fly drones over populated areas beyond visual line of sight (BVLOS) in four states to survey losses from Hurricane Florence.8 While it was a one-off approval, BVLOS flights represent the potential for greater drone-driven automation and operational efficiencies in the future.
What should carriers do to get the most out of their drone programs?
Most drone programs started off as pilots in different pockets within the organization. But as insurers move past initial pilots into broader deployment across different functions, they will likely confront questions around data management, insights generation, drone security, process flows, etc., which, if not solved quickly and effectively, could eat into the technology's potential benefits.
Herein lies the opportunity for insurers.
Most insurers would have faced similar challenges and would have taken measures to overcome them, as they rolled out their Internet of Things (IoT) programs. If companies incorporate drones into their IoT adoption strategy, they can leverage some of that experience, as well as resources and governance structures, thereby reducing complexity and cost of deployment.
At the same time, drone data, when used in conjunction with data from IoT devices, can provide greater value to businesses. For example, data from drones deployed to assess damage in a residential area after a storm may be used with data from connected homes and other connected devices to paint a comprehensive picture of storm damage and immediate policyholder needs.9 This could also help insurers identify ways to mitigate similar losses in the future.
Points to consider
Here are a few points for insurers to consider when drawing up their drone programs:
- Accelerate deployment: With proven use cases, companies might look to maximize their competitive advantage by accelerating drone adoption. Companies could also consider working with external service providers/InsurTechs to fast-track drone adoption.
- Ensure compliance: Keep a razor-sharp focus on ensuring compliance with federal and state regulations. Although the regulatory environment is generally becoming more accommodating, a single bad incident could negate all the benefits accrued, or worse, it could have a reputational impact on the company.
- Integrate with the IoT platform: Incorporate drones into the company's broader IoT adoption strategy to decrease cost and complexity of deployment and management and to realize synergies from data from nontraditional/ alternative sources such as telematics, other IoT devices, social media, etc.
- Treat drone programs as an AI automation opportunity: As artificial intelligence (AI) technologies advance, carriers have an opportunity to utilize drones to completely automate parts of their claims and underwriting processes. Differentiation among all the carriers using drones may eventually come down to the level of AI sophistication they can apply to drone data.
These suggestions could help ensure that drones do not remain just a digital optimization initiative but instead become a part of a larger digital transformation.
1 Robin Lineberger and Aijaz Hussain, "Psychological barriers to the elevated future of mobility," Deloitte Insights, November 26, 2018.
2 Sam Friedman, Malika Gandhi, and Mark Purowitz, InsurTech entering its second wave, Deloitte, October 2018.
3 Akash Tayal and Nikhilesh Ramani, Insurance industry drone use is flying higher and farther, Deloitte, April 2018.
4 Denise Johnson, “Insurers’ Drone Use Picks up After 2017 Hurricane Season,” Claims Journal, July 19, 2018.
5 Greg Nichols, "Travelers broadens claims-by-drone insurance with strategic investment,” ZDNet, October 3, 2018.
6 Subrat Patnaik, “Home insurer Allstate's drone project takes flight,” Reuters, December 18, 2015.
7Leslie Scism and Nicole Friedman, “Insurers Are Speeding Up Claims. Their Worry: More Mistakes,” Wall Street Journal, August 6, 2018.
8 Miriam McNabb, “State Farm Gets FAA Waiver for BVLOS Flight and Flight Over People to Aid Hurricane Victims,” DroneLife, September 20, 2018.
9 Jeff Haner, The P&C Insurance Industry Nears a Tipping Point on Drones, Gartner, June 1, 2018.
QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.
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