Although the use of Unmanned Aerial Vehicles (UAV) is still relatively new, the military has been using various forms of drone technology for more than a century. Commercial applications, however, are still in their infancy.
New as it is, drone technology holds great promise for revolutionizing multiple industries, the insurance sector among them. For insurers, the use of drones can transform several processes — including claims adjustment, underwriting, risk calculation and loss prevention — potentially upending business models and rewriting business operations.
Insurers have a dual role to play with regard to this new technology. In their role as underwriters, they can assess the risks of commercial drone usage to develop new products and risk models that can create a whole new market segment and fuel business growth. In their second role as consumers of drone technology, they can leverage drones to improve the services they provide, reimagining their business processes to obtain next-generation efficiency and effectiveness.
AS UNDERWRITERS
There are myriad regulatory and legal challenges related to commercial drone adoption that will call for complex risk evaluation. There are also liabilities and physical damage risks associated with the insuring of commercial drones. As these evolve over the next few years and innovative commercial uses for drones emerge, insurers will have to demonstrate agility in adapting their risk and pricing models to remain competitive and provide attractive options to their customers.
AS CONSUMERS
The immediate use cases for drone adoption will be in the area of claims. Drones can significantly improve the efficiency and productivity of the claims adjustment process, especially in the event of storms and catastrophes. For instance, rather than risk injury by climbing up to a roof to inspect damage following a hailstorm, a claims adjuster can make use of a drone. A couple of insurance companies have already applied to the Federal Aviation Administration (FAA), seeking permission to test drones for such purposes.
In the long run, drones can improve underwriting effectiveness and efficiency. It will no longer be necessary to submit long applications, followed by site visits and reports. Drones can transmit pictures and sensor data from the damage site in real time to underwriters, who will then be able to assess the risk instantly. Drones can make complex risk underwriting a real-time process, converting it from a workflow to a real-time collaborative task, with minimal or no time lag. Loss prevention will be another long-term use case. Insights gained from the accurate and real-time data submitted by drones can help insurance companies proactively reach out to and alert their customers before calamity strikes. This can potentially reduce the extent of loss, driving down claims costs, while increasing customer satisfaction.
WINNING WITH DRONES
Reimagine: Drone technology is a perfect example of the combines impact of emerging digital technologies, integrating robotics, unrestricted mobility and big data. However, insurers should not merely try to apply the new technology on top of their existing processes and hope to reap the benefits; rather, they should reimagine their existing business processes. For example, instead of just adding drones to the claim adjuster’s toolkit, insurers can revamp the process entirely, using data from drones to settle claims in a straight-through process and bypassing the claims adjuster.
Integrate: For insurers to successfully adopt drone technology in both their roles — as underwriters and as consumers — they must evaluate how the new risk models, business processes and data will work their existing IT environment. Enabling seamless data integration using API technologies, overlaying this data on internal policy data, and focusing on the effective use and analytical insights gleaned from this data will help insurers realize the true business value of this new technology.
Partner: Drone technology will continue to evolve and mature over the next few years. Instead of investing in the technology themselves, insurers should consider partnering in a greater “drone ecosystem, focusing on how to optimize insurance business processes and use the data generated by drones, leaving the headache of maintaining the drones, and keeping up with regulations, to someone else.
Communicate: Successful adoption of drone technology will also hinge on good Organization Change Management (OCM) processes. Given the disruptive nature of this technology, all stakeholders, including customers and employees, should be provided with enough information to ensure there is clarity on how exactly drone technology will be used and what information will be captured. Insurers will have to train their employees in drone usage, the information, business processes and the customer concerns they generate.
Measure: Instead of jumping on the bandwagon in a “me-too” fashion, insurers should define up front a set of business metrics and objectives they wish to achieve, so they can measure the success of their drone initiatives. It’s important that insurers have clearly articulated business value and core business objectives, and that these are not an afterthought.
Interest in drone technology is growing, and the potential uses are steadily mounting. Insurers who are able to use drone technology to reimagine their business processes and the products and services they offer to reduce risk, drive operational efficiency and enhance customer satisfaction will stay ahead in the game.
Arunashish Majumdar is chief architect and head of insurance technology practices for North America at Tata Consultancy Services.
