How Drones Will Impact the Insurance Industry?

The military application of drones is well known across the entire world. However, of late, civilian and commercial applications of drones have also started growing by leaps and bounds.

For instance, Jeff Bezos, the founder of Amazon has been very vocal about his desire to use drones for order fulfillment. Similarly, there are many other companies which are willing to use drones for business purposes. Some of these companies are also in the insurance business.

The proliferation of drones is likely to have a wide-ranging impact on the insurance industry:

  1. Firstly, insurance companies will have to start covering drones for their clients who plan to extensively use them in their day to day operations.

  2. Secondly, drones can also be deployed within the insurance industry in order to help make insurance more efficient.

In this article, we will list down the ways in which drones are likely to impact the insurance industry.

Quick Deployment

When customers file for an insurance claim, time is of the essence. For instance, if the insurance company were to somehow reach the site of a car accident minutes after the accident had occurred, they would be able to easily ascertain the party at fault and apportion liability accordingly. When an accident or any other insurance-related event occurs, time is of the essence. As more time passes after the event, facts start to become blurry.

This is where insurance companies falter as of now. If insurance events happen at remote locations, they are unable to deploy people in a short amount of time. Even if they happen within close geographical regions, the cost of urgently deploying personnel is very high.

This is where drones come in handy. Insurance companies can quickly deploy drones to reach the accident site and record evidence. Drones act like the eyes and ears of the insurance company and are able to reach the accident spot in no time at an economical cost.

Fraudulent Disability Claims

Insurance companies have recently started using technology in order to identify fraudulent disability claims. It has been observed that many times customers file fake insurance claims when in fact they have not suffered any disability. Up until now, these facts were difficult to verify. However, insurance companies started deploying surveillance vans in order to unearth the truth.

Drones are faster, cheaper and better equipped than surveillance vans. Also, since they are unmanned, they can be operated for longer hours.

Many insurance companies have already started using drones to spy on people making disability claims. The usage of drones has led to an increase in the number of lawsuits alleging invasion of privacy. However, these lawsuits were also common when surveillance vans were used.

Drone Malfunction

At the end of the day, drones are also machines. Hence, they are likely to malfunction at some point of time or another. The problem is that a clear cause cannot be found when a drone malfunctions. Hence, instead of liability being apportioned to the concerned party, there is a lot of finger pointing which takes place.

For instance, a drone malfunction could be because of faulty software. It could also be because of a faulty electrical system which caused disruptions in power supply.

It is also possible that the person operating the drone made an error which led to its crash. In each of these cases, a different party becomes liable to pay damages. Hence, until conclusive evidence is found, these parties keep bickering, trying to pass on the buck to the other in order to avoid paying the damages.

Also, the monetary impact of a drone accident can be huge. For instance, if drones drop stuff that they were supposed to be carrying, they could end up injuring or even killing a pedestrian.

Similarly, it is also possible that the drone itself might crash causing grievous harm to unsuspecting civilians and exposing clients to humungous lawsuits which will ultimately have to be borne by the insurance company.

The good news is that insurance companies will generate more business as a result of drones. As more and more businesses start using drones, they will have to buy insurance to cover themselves and their workers against such claims. This will lead to increased premiums for insurance companies.

Reduced Workman Compensation Claims

Insurance executives have to work in hazardous situations. For instance, if there is damage to the roof of the house, insurance executives have to verify the same by going on the roof.

Insurance companies have to buy specialized equipment like harnesses in order to enable their employees to perform these hazardous tasks. Often, these tasks are outsourced to third-party contractors, but the risk still remains.

Many times workers get injured while performing their duty. This is when insurance companies have to pay out huge sums as workman insurance claims. This can be prevented by using drones instead of humans.

The bottom line is that drones are likely to change the insurance industry forever. These devices help insurance companies protect themselves against fraudulent claims. They also help make the process more efficient and cost-effective.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to and the content page url.

Risk Management