The existence of new drone regulations hasn’t dampened the appetite of prospective drone users for commercial purposes. There’s a ground swell of commercial users looking to get permission for drone use in areas as diverse as retail deliveries, agriculture crop spraying, real-estate sales, commercial photography and filmmaking, search and rescue operations, and oil spill monitoring and an abundance of other sectors.
Governments’ approval is seen as a first step in unleashing a potentially multibillion dollar industry that so far has been largely limited to military and law enforcement applications and more recently monitoring of pipelines along Alaska’s northern shore and energy lines of the National Grid in the UK.
As regulations are clarified and ratified one industry that has seen early adoption of drones is the Insurance sector. In a recent report by PwC, the global audit and consulting firm estimates:
The addressable market of drone powered solutions in the insurance industry at US$ 6.8 billion.
There are three areas where drone operations can enhance an insurer’s procedures: risk monitoring, risk assessment and claims management
After a natural catastrophe, a drone could reach a remote scene much faster than a claims adjuster.
The largest insurance loss event globally in 2015, of both natural and man-made disasters, was the two explosions at the Port of Tianjin in China, which triggered property claims of between US$ 2.5 to US$ 3.5 billion according to reinsurance company Swiss Re. This was also the largest man-made insured loss event in Asia ever recorded.
The Tianjin explosions have presented insurers with a number of challenges, not least lack of access to the affected area to assess the full extent of damage and resulting insurance claims.
According to a report from insurer Swiss Re:
Drone and satellite imagery have helped loss assessment (at the Port of Tianjin). Drones were sent in to take pictures of the disaster site immediately after the explosions.
These images were compared with satellite images of the site taken prior to the event.
The comparison provided a view of the extent of destruction, and also of the high number of vehicles and containers on the site at the time of the explosion. Initial loss assessments have been based on this information.
This would not have been possible without drones because of the 3 kilometers (1.86 miles) radius exclusion zone enforced at the site. The alternative would have been to wait until the exclusion zone was relaxed and use manned aircraft to take pictures after the event from high altitude, which would have been more expensive and may not have produced the same quality images.
Drones have the advantage of being small, low-cost and able to closely survey and photograph large areas more efficiently. Damaged areas such as Tianjin may not be visible by satellites and manned aircraft, for example due to dust cover, or may be inaccessible for first-hand human inspection due to contamination or transport outages after a disaster event.
Another example of where drones are now being deployed to areas unreachable by claims adjusters is in a flood zone. In December 2015, drones were used to take pictures over Cumbria in the UK after large areas were flooded due to Storm Desmond. The images allowed for better response planning, and loss adjusters used them to identify the worst- affected areas and properties for which claims were reported, which in turn facilitated initial claims reserving.
Significant cost savings
AXA Group, the world’s largest insurer with revenues approaching US$ 100 billion and a recently released strategy to become a leader in digital and technological insurance is carrying out trials of drones in France and Belgium. The company says:
Drones fly over inaccessible damaged areas to gather images or videos, which are immediately sent to remote claims adjusters so they can update clients on the loss, trigger communication and potentially advance payments to clients. Using drones can therefore increase trust and transparency and improve the customer experience.
Besides the speed of deploying resources and payments to those insured, the cost savings to insurers could be significant. No longer must underwriters travel in person to inspect the exterior of a building or property. Details of a risk could be validated without incurring travel costs or costs to make in-person inspections.
After a claim is filed, an adjuster could dispatch a drone to investigate the claim. Instead of climbing a ladder to inspect an icy patch of a damaged roof, a claims adjuster could dispatch a drone to conduct the inspection.
Drones can also survey objects from the side rather than just from above, and can facilitate 3D reconstruction of an environment using stereoscopic cameras. These are valuable inputs for improved damage assessment.
Drones could certainly save insurance carriers the costs associated with claims’ adjusters’ worker’s compensation claims.
Drones provide underwriters and claims personnel with a safe, cost-effective alternative to physical inspections.
There are many obstacles still to overcome, privacy issues, data protection, nuisance, physical or bodily harm. These obstacles present a new opportunity to insurers – as individuals and companies obtain Certificate of Authority to fly drones, to become drone pilots, these individuals and companies will also require insurance coverage for their drone activities. A study commissioned by the European Commission found that drone operations do carry the potential to generate liability claims requiring lengthy and complex legal proceedings.
While insurance company use of, and indeed insurance coverage for, commercial drones is “up in the air,” there’s no question that the drone market is a key growth area.
 PwC Global, Clarity from Above May 2016 (https://www.pwc.pl/pl/pdf/clarity-from-above-pwc.pdf) Last accessed July 5th, 2016
 Swiss Re, Sigma Number 1/2016 “Natural catastrophes and man-made disasters in 2015”
 “Drones will transform loss adjusting”, Insurance Day, January 2nd, 2016 (https://www.insuranceday.com/news_analysis/special_reports/drones-will-transform-loss-adjusting.htm) last accessed July 5th, 2016
Axa Drones Start-in 2016 (https://www.axa.com/en/newsroom/news/start-in-2016. Last accessed July 5th, 2016
 Steer Davies Gleave for European Commission, 2014. Study on the Third-Party Liability and Insurance Requirements of Remotely Piloted Aircraft Systems (RPAS) (https://www.eurocontrol.int/sites/default/files/ec_rpas_final_report_nov14_steer_davies.pdf) Last accessed July 5th, 2016
Picture credit Brian Moore Draws Creative Commons