The use of unmanned aircraft systems (UAS or “drones”) by individuals and industry con- tinuestogrow. Accordingtothe
Federal Aviation Administration (FAA)
drone sales are expected to grow from 2.5
million units in 2016 to 7 million in 2020.
PWC Global has calculated that the over-
all emerging global market for business
services using unmanned aircraft is over
$127 billion. The impact on the insurance
industry is expected to be $6.8 billion.
Insurance companies, quick to recognize
this potential impact, have taken their
first tentative steps toward drone implementation. AIG, the Hartford, Erie, State
Farm, Allstate, USAA and Cincinnati Insurance Company, among others, have
Eyes in the Sky
EVALUATION AND MITIGATION OF
By James E. Mackler
all begun limited use of drones for claims
and underwriting purposes.
This initial enthusiasm is understandable. A 2014 JD Power study found that
the length of time spent in each stage of
processing a homeowner’s claim (cycle
time) was the single most important metric that drove customers to stay with their
existing carrier or seek a new one. Drone
use has the potential to reduce the time to
inspect a loss and allow more inspections
per day after a major event. This directly
impacts the speed with which customers
are able to receive settlements.
The efficiency of performing inspections with drones may also lead to entirely new practices that can help insurers with calculating premiums and risk
mitigation. Drones make it possible to
preemptively inspect insured properties before a hurricane or at the start
of hail season. Similarly, this technology makes it possible to conduct more
detailed and accurate underwriting on
Many other industries also use drones,
which are deployed by construction companies, utilities, agribusiness, videogra-phers and surveyors to name a few. As more
companies and individuals fly drones, the
risks will increase and, consequently, the
likelihood of insurance claims.
This article is divided into three broad
categories of drone-related risks: legal
risk, reputational or brand risk, and risk
to people and property. Each risk must be
viewed differently depending on whether
the drone is being operated by an insurance company or another entity.
Most discussions of legal risk have focused on compliance with FAA regulations. While these regulations are certainly important, drone operators must
also be aware of local, state and federal
laws that may directly or indirectly impact the use of drones. These may include
laws limiting where drones may be flown
as well as laws addressing privacy, trespass and reckless endangerment.