R110 - Risk Management Principles and Practices

Assignment #1: Technology and Insurance

Drones – Also known as unmanned aerial vehicles (UAV)
1. Briefly describe how the technology works.
It looks like our 21st century is going to be the century of robots, with tons of buzz concerning a
rapidly growing subfamily of those machines called drones.
Drones are widely perceived gadgets that are send to the airspace to capture aerial photographs, high-
definition video etc. They have multiple options available including but not limited to, auto-follow to
fixate on a moving person or object, automated flight features, ultra high-definition video resolution,
obstacle avoidance sensors, infrared technology to detect leaks etc. They also have outstanding Geo-
spatial analysis capabilities.
With their 24/7 surveillance capability, drones can quickly recognize threats from natural disasters,
such as earthquakes, storms, volcanic eruptions, floods etc. This surveillance data can then be used
promptly to provide disaster advisories and alerts to pretentious areas.
Drones can be the ultimate business tool as they come with highly efficient and smart payloads.
While its most common use is for entertainment, use of drones has grown potentially across various
industries, business and can be expected to grow enormously in future.
It acts as a fastest, cheapest, safest mode of data collection.
Drones can help reduce operational costs by providing greater accuracy in processing inquiry and
ultimately providing customer satisfaction.
2. For the technology you have selected, select three (3) specific product, process, or service
changes that have resulted from the development of this technology (see list below for
suggestions). Then, for each change:
a. Briefly describe each change.
Risk Management Process – Insurance is a business of preventing and mitigating risks. Insurers often
search for predominant information about the assets they insure. Detailed data can provide insurers
with the ability to calculate risk considering a bigger picture.
For e.g., when assessing a structure, determining how much it might cost to provide an insurance
policy, evaluating what destruction happened, or, in the best possible place, limiting claims from
occurring. Using drones to collect photographs, video, and data of a property represents a significant
technological advancement in this procedure.
UAV’s have enhanced data harvesting and work analytics that can add benefits to risk mitigation.
Drones can be significantly used for design mitigation and data gathering. By using images captured by
drone, both prior to and after the event, they can help us check the validity of the claim.
In the forthcoming future, we will be able to reduce fraudulent claims by using drone and its ability to
swiftly collect vast data across the landscape.
Insurance Coverages – Customers choose their insurance coverage by determining the type of
coverage, services insurer offers and the price at which those are offered. Insurance premiums are
established on the type/level of risk, each feature a property/vehicle have, that reduces risk and
enable the insurer to gauge precise customized premiums.
Drones can be utilized by the insurance companies to collect information about a property/vehicle
prior to a disaster, in order to map out the best premium for that property/vehicle.
For example, a house located in an area which is susceptible to severe weather, and if a customer
claims that they have installed storm shutters, drone inspection can help detect this feature and hence
help customer to lower their premium. Additionally, drone inspection can be useful when a property
owner falsely admits having a specific feature.
Insurance Claims Process – Drones can be used instead of people in hazardous situations so that work
injuries can be prevented. The cost-effectiveness of an aerial drone could benefit insurer following a
disaster, as well as save their money. Insurers can process claims more quickly by capturing loss data
using drones and hence delivering prompt claims process and ultimately satisfying their policy
holders.
Drones are commonly used to inspect rooftops. There is nothing more dangerous then inspecting a
steep roof after suffering a disaster/fire damage. Drones can provide detailed pictures of the entire
roof, even for parts that aren’t accessible to humans, without having to climb on roofs. This saves
adjuster’s time and lowers hazards.
Major disasters such as floods, earthquakes, can be inspected briefly using drones. In addition to the
satellite images, high – resolution drone images can provide detailed footage of affected areas, while
satellite images will display the breadth of the damage, drone images will allow organizations to
assess individual sites at a micro-level. With a combination of satellites and drone’s images, our team
can get a clearer picture of the extent of any severe damage and can predict it ahead of time.
Crop insurer may also use drone to check on farms for damage. Some situations may be more easily
spotted from the air then from ground level. Special lenses can be attached to a drone's camera to
make it detect problems; humans can't see.
b. Describe one (1) positive impact and one (1) negative impact that each change has caused for the
P&C insurance industry. In total, you will describe six impacts: three negatives and three positives.
Risk Management Process – Positive Impact
Instant Access to Data and its Benefits – Data analysis and processing capabilities are instantly
available with drone technology.
By using drones, insurers can react quickly to damage stages and also benefit from aerial assessments,
to detect risk areas as soon as possible. For example, in the event of a natural disaster drones can be
established over a landscape that is not accessible by normal course. By doing so, finance and other
resources can be better managed.
Drones have the potential to disrupt and revolutionize everything from healthcare to insurance, so
those entities should recognize the game-changing potential of drones and revise their drone-friendly
regulations.
UAVs in Property and casualty insurance help processes to be streamlined and optimized, resulting in
a far greater competitive landscape for customers and more satisfying customer experience
Risk Management Process – Negative Impact
Uneconomical and Easy to Hack– Some public is still afraid of drones, despite their many advantages.
Furthermore, the legal regulations regarding their use are complex to understand.
It is difficult to make a drone operate for you without experienced assistance. Pricing is another issue.
Drones also have installation and administration issues.
On the one hand, an insurance firm needs a lot of money to deploy a drone, and the current
technology can't handle the years of data required for factor modelling.
Another significant disadvantage of the advancement of drone technology is its vulnerability. Hackers
may rapidly infiltrate a drone's central control system and take over as the original controller. The core
control system contains critical knowledge that hackers can exploit without the initial operator's
knowledge.
Insurance Coverages – Positive Impact
Fraud Awareness – Insurance fraud is a frequent problem and preventing it may save businesses huge
amounts of capital. Insurance fraud impacts both insurers and customers, since revenues are
frequently compensated by higher rates, demonstrating that this challenge not only impacts insurers
in terms of time and resources invested reviewing every incident, but also all of us when our house
and auto insurance costs rise.
For e.g., once a catastrophic event occurs, some policyholders attempt to claim loss that occurred
beforehand to the tragedy. Leveraging drones to collect photos of insured premises prior to a major
incident can assist insurance firms in combating such forgery.
Drones can be extremely useful in identifying possible fraud, particularly in instances where claim
rates spike, perhaps after a storm or flood.
Insurance Coverages – Negative Impact
Privacy Breach and Loss of Property - Drones pose a serious threat to confidentiality and privacy and a
serious problem for insurance companies due to their potential to capture massive amounts of
unwanted data. A drone, for example, can take unintentional photographs or movies of anybody
without their authorization.
The most visible of these hazards are property damage and third-party liabilities. Using drones is still
inconvenient these days owing to the possibility of being sued if you damage someone or anything.
For instance, during a survey, if a drone destroys someone's property due to a drone mishap or
malfunction. This adds to the issues.
Insurance Claims Process – Positive Impact
Assessing Damage and Evaluating - Adjusters can utilize camera-equipped drones to photograph or
film damaged property, which can subsequently be used to process claims.
Civil authorities may limit access to catastrophe regions over several days, or the location may simply
be too unsafe for adjusters to reach. There are several things that may go wrong while examining a
catastrophe scene in person, from litter to biological hazards, moisture, and maybe even wildlife.
Drones allow the adjuster to remain in a safe place throughout the investigation, reducing their
visibility to potentially hazardous situations.
For example, following a huge storm, several dwellings and industries may sustain damage, and it is
very difficult for an individual to check each facility, specifically those which have tall roofs, peaked
towers, and other complex structures. A drone can check these types of properties in a matter of
hours, eliminating the need for aerial work platforms, hanging ropes, and other items, which greatly
reduces concerns about safety. Customers might also be provided with proof of these pictures, if
asked.
Drones might also be preferred to detect insurance fraud. For example, an insurance may release a
drone to photograph an accident spot. It might then utilize the information gathered to validate the
information provided by the insured in a claim.
Insurance Claims Process – Negative Impact
Expensive Setup – Drones help in saving insurers a lot of money but, moving to this technology is still
expensive. Even though they are known as unmanned aerial vehicles (UAV), they are indeed operated
by humans and require internal regulations, complete registration, and mentoring for our employees
to begin utilizing drones, analyzing the form of drone used, determining if its function will pose a
hazard to person’s property/safety, guaranteeing there are tracking guidelines for any mistakes or
errors, and having a disaster recovery plan in place.