Comment & Analysis

Putting eyes in the sky: the impact of drones on the insurance industry

By Assaf Tayar, managing director and WESA regional lead at BCG Platinion

The insurance industry, like most industries, has experienced a tumultuous 12 months. Not
only has the pandemic forced insurers to adapt to an entirely new way of working, but in the
wake of disruptions to travel, business continuity and our day-to-day lives the financial
impact is yet to be fully realised.

More than ever, insurance companies are relying on technology and digital solutions to help
them boost efficiencies and streamline previously laborious or time-intensive jobs. In fact,
digital and analytics has the potential to add incredible value across the entire claims
handling process. And while the sector has traditionally been slow to adopt new
technologies, compared to other industries like retail or banking, according to Willis Towers
Watson global insurtech funding is at an all-time high, with $7.12bn (£5.15bn) invested in 2020.

Clearly, the industry is clamouring for innovation; and one that is already having a significant
impact is drone technology.

A bird’s eye view

While drones have been playing a role in insurance for some time now, the increasing
sophistication of artificial intelligence (AI) technology and analytics capabilities is extending
their value and impact.

By combining drones, AI, and analytics, insurers can optimise their operations across the
entire value chain and gain a far greater understanding of their operations both pre-loss and
post-loss. Not only can the trifecta of technologies help to automate the task of assessing
images and footage captured through drones, but they can also create far more
comprehensive risk models and accurate data sets upon which to base insurance policies
and premiums.

Looking to the areas where drones are having a real impact, there are three key benefits for

1. Making claims more efficient

For insurers, the task of surveying a property and providing an accurate policy cost can be
cumbersome, especially when we’re talking about large commercial properties such as
manufacturing plants, industrial sites, distribution hubs or power stations.

Boiler inspections are a great example of how drones can make a real difference,
considering that commercial boilers can often be several stories high; making them difficult
to inspect because of their size and the fact that they’re completely dark inside. Using
drones, insurance companies can far more easily capture images and evaluate the inside of the boiler area to make safe, informed and precise assessments; and deliver settlements far
more efficiently for customers, should a claim need to be made.

2. Personalising the premiums

Using a drone to develop a complete 360° view of a property – whether that is a home or a
business – means individual factors can be taken into account. Rather than insurers relying
on a blanket approach to insurance policies based on ‘typical’ buildings, they can understand
the unique features of a property and offer a premium that takes into account any specific
risks or benefits that might have otherwise gone unnoticed.

3. Lowering the cost of fraud

The aerial images that drones can capture provide insurers a wealth of high-quality data that
is invaluable in the event of wide-spread damage, when multiple claimants may seek
compensation. For example, following a storm, an earthquake or other natural disaster.

By using before and after drone footage, insurers can assess claims accurately and identify
when certain damages are being claimed for that, in fact, never existed before the event
happened. With fraud costing the UK insurance industry upwards of £1.2 billion each year,
the ability to stop fraudulent claims in their tracks using drone images and footage is a
significant benefit for insurers.

Reaping long-term benefits

While drones may be only one small part in the larger picture of how technology can benefit
insurers, their immediate impact is two-fold: providing better risk management – improving
data collection and analysis, and providing actionable insights – as well as reducing
operational costs – improving the process of assessing and processing claims, and making
the customer experience smoother and more enjoyable.

2021 is the year that insurers must embrace, and prioritise, digital technology – and drones
should have a firm place in the digital transformation roadmap.

Assaf Tayar is managing director and WESA regional lead at BCG Platinion

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