Author: Dr. Swati Srivastava is a seasoned underwriter with ICICI Lombard General Insurance.
Unmanned aerial vehicle commonly known as “Drone” were first developed for surveillance activities in military operations. Soon the utility of drones was realized in other sectors as well and now we hear usage of drone extensively in various different sectors like entertainment, agriculture, surveillance or insurance.
Drones were used for the first time in assessing the damage done post Hurricane Harvey in U.S.A in 2017 in insurance industry for claim processing. Since then, the significance of Drone has increased leaps and bound. It is now seen as a very useful scientific tool which can solve wider purpose from claim assessment to fraud detection to faster claim processing and better customer experience.
Drones are small aircrafts which do not carry any human pilot and it could be remotely operated either by a human or by built in software like a computer. A drone usually has a built in camera and GPS system which acts as an eye for the operator standing at a distance from the drone while flying. It can also have a luggage carrier which can be used for on-loading and offloading for courier services. They can also have ladar (laser radar) and sensors which can record information regarding temperature and weather conditions.
Huge varieties of drones are available in the market today of different sizes, weights, inbuilt tools and technology depending upon its utility and purpose. Drones are classified into below five categories based on their weight (including payload)
- Nano Drones- weighing less than 250gms and have a flight restriction of maximum 50ft above ground level
- Micro Drones- weighs between 250gms and 2kgs. They can fly upto a height of 200ft above ground level. Permits are mandatory only if micro drones are used for commercial purposes
- Small unmanned aircraft- Drones weighting more than 2kgs but less than 25kgs.
- Medium unmanned aircraft- Drones weighting more than 25kgs but less than 150kgs.
- Large unmanned aircraft- Drones weighting more than 150kgs
Commercial Drones are light in weight and work on propulsion system and can easily move in different directions as desired. For the commercial drones to operate there are certain guidelines issued by the Directorate General of Civil Aviation which has to be adhered to before flying-
- All drones except for Nano drones need to obtain a Unique Identification Number (UIN) from DGCA (Directorate General of Civil Aviation) for operating in a define airspace and it will be affixed to that drone.
- No Drones can fly near airport or military base or government building or next to another drone except if it has taken a special permit.
- Drones can fly only in the visual line of sight of the pilot with the maximum vertical height of 400ft.
- Drones can fly only during daylight at a maximum speed of 100mph
Application of Drones in insurance Industry
Insurance companies are fast adopting drone technologies to add more to their competitive advantage taking the two pronged approach of better risk assessment with enhanced data collection on one hand and improved claim processing there by giving a better customer experience on the other hand.
- Risk assessment and underwriting
Drones require minimum human interference and can reach such locations which are difficult or impossible for a human to reach. For underwriting to be precise, need to evaluate a property from all dimensions. With the help of drones property inspection could be done faster, safer and in more detailed and cost efficient way. For instance, in property insurance, assessing the roof of the building is very important parameter and it might not be possible for a human to physically reach the rooftops, there comes the role of drones. Now with enhanced information, deciding the premium seems more logical. - Claim assessment
The biggest advantage of drones comes at the time of claim processing. The high definition pictures recorded by drones can be used in claim adjudication in crop insurance, motor insurance and property insurance. At the time of natural calamity like flood, earthquake etc, a human surveyor might take time to reach the site for examination. Drones not only evaluate the claim but also save the human being from going to such dangerous locations. So it makes the claim processing faster and safer with no chance of human error. - Fraud Detection
With more information captured, the chances of misinterpretation of facts can be minimized and fraudulent claims cloud be identified. - Increased sensitivity for upcoming claim
Drones have inbuilt sensors for recording weather conditions and they can intimate in advance to have better preparedness for any upcoming natural disaster like storm, cyclone, fire etc. With better preparedness, the extent of damage could be controlled to a significant level and thereby reducing the burden of insurance claims.
Drones usage today and tomorrow
Technology integration has been promoted by Government of India for crop insurance. The agriculture ministry has taken DGCA’s approval for allowing certain private agencies to use drone technology for assessing crop yields at gram panchayat level under Pradhan Mantri Fasal Bima Yojana (PMFBY) in 100 districts in 10 states as a pilot project.
Imagine a time where in drones will be part of all segments of insurance. When someone meets with an accident, the person will inform his insurance company. Soon a drone will be sent to that site for inspection. Drone will record the images of damage done and send the data to the claim processor in real time. At the same time drone will inform the nearby health facility in case any medical help is required post accident. It will also connect with the nearby garage to take the vehicle for repair. Claim will be assessed and paid to the customer immediately based on the details shared by drone. This stage requires amalgamation of various technologies of artificial intelligence and machine learning for the drone to act proactively. But there are various challenges to be overcome before we reach the above mentioned dreamy future.
Challenges and the way ahead
Drones can fly only within the line of sight of the operator and upto a maximum height of 400ft. This restricts their movement in farfetched difficult locations for assessment.
Privacy is a big concern with drone as it can infringe into the personal space of the individual. Flying a drone in public space without taking prior approval can result in inviting unwanted litigations.
There is a possibility of crash landing of drone and resulting into casualty to life and property. This crash landing could be because of poor internet communication signals between the operator and the drone or also by a deliberate attempt by a hacker via spoofing sending wrong signals to the drones.
Drones are an expensive affairs and it is still in a nascent stage. Drone installation as well as management both requires capital investment. Many insurance companies otherwise ties up with different drone companies for taking their service rather than buying their own drones. With more intermediaries, valuable data stored in drone could be at risk to cyber attack and thereby resulting in a bigger mess.
As per a Deloitte report, drones will play a very significant role in the coming future because of below four points-
- With well developed regulatory framework, there will be more transparency in using drone technology for claim and risk assessment.
- There is increased demand for high quality data. Drones being equipped with photogrammetry and geospatial analysis, will push more insurers to go for drone technology for data collection
- Increased importance for data-driven decision making. Drones make data available in more scientific way anywhere and anytime. With lesser human intervention, chances of human error are also low, further more advocating for the use of drone technology.
- Lighter drones having advance technologies like “autonomous avoidance system” will result in more proliferation of drones across the industry.
With the coming time, more and more insurance companies will start using drones. So there is a dire need to work on the roadblocks impacting the working of drones. Well developed regulatory guidelines need to be in placed which should be flexible with the changing dynamics. Also Indulging in such high quality drones which are equipped with artificial intelligence, IOT will definitely help in better decision making.
Read in detail about “How is AI disrupting insurance industry?” in the linked article.
Click this link to get a list of the leading drone startup companies in India: Drone Startups in India [2022]
