Drones are essentially unmanned aircraft, formally known as Unmanned Aerial Vehicles (UAVs). Advanced pieces of equipment that combine aeronautics, robotics and electronics, they may be remotely controlled. Many can fly autonomously through software-controlled flight plans embedded in their systems, in combination with a GPS. Drones are increasingly being considered for use in civilian commerce such as in agriculture, movie making, real estate and insurance. Led by companies, universities and various industry groups, the idea of using drones in daily life has gained momentum.
Through this paper, we articulate different types of drones available today, what they can do, and how they may be used. We surmise their potential for use in the insurance domain for various functions, current usage, regulatory challenges and finally the next steps insurers need to gain the competitive advantage.
Drone adoption: current usage and challenges
Drone technology is still in its nascent stages and automatic navigation systems will need to further mature to ensure reliability and safety. Aviation regulators like Federal Aviation Administration (FAA) in US, CASA in Australia and drone manufacturers are coming up with safety standards like how the drone beacons should be lit during night time flying, remote pilot certifications for operating drones and many others.
In addition, the highly sophisticated cameras on drones that can capture and record images of personal property, cars and user behavior, have raised privacy concerns. Being a novel technology, consumer acceptance is not a given. The FAA is tasked with weighing the commercial benefits of drones against privacy and safety concerns, especially around airports and large groups of people in the US. The FAA has been cautious in creating regulation governing the use of commercial drones and plans to release the earliest set of rules for safe integration of UAV only in September 2015. A legal framework governing their use is needed before commercial adoption can take place.
Next Steps for insurers
- Understanding the legal boundaries: It is imperative that the insurer depending on its line of business and geographical region of operation, must first understand the legal rules governing the use of drones in those regions and the conditions for use. We need to understand that the subject of drones is continually evolving and the boundaries are constantly changing, the insurer should keep monitoring this field for new developments.
- Selecting the use case for field trial: To understand the use of drones, the benefits and their limitations, an insurer should select one or two use cases for conducting field trials.
- Finding the right drone: Based on the use case, the insurance company should choose the right type of drone and technology partner to customize the drone to meet the use case requirements. Selected drones and their operations should comply with the safety standards set by Aviation Regulators.
- Feedback from customers, agents, and employees: Feedback from field trials should be combined with the comfort level of employees, customers and agents to find better use cases until drones can become a key innovative factor or differentiator for the insurer.
While the use of drones in other industries is not immediately obvious, it may not be that farfetched to state that the widespread use of drones in the insurance industry is very likely in the future. There are many opportunities and applications for using drones and a few of these have even been prototyped.
Drones can help the insurance industry monitor and mitigate risks, accurately assess risk, respond quicker in distress situations and reduce fraudulent claims. They can make life a lot safer for a number of people. It is not too farfetched to imagine that drones will be here to stay very soon.