Catastrophe Claims

Bird’s Eye View of Hurricane Damage

The use of drones allowed insurance companies to speed up the claims process and improve safety for their staff.
By: | October 27, 2016 • 4 min read

Hurricane Matthew, which battered the East Coast and the Caribbean in October, was the first major U.S. event where insurers used drones to inspect damage and help process claims.

With estimated losses from the Category 4 storm expected to reach $4 billion to $8 billion, according to industry sources, the need for the quick processing and settlement of claims has never been greater.

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Already more than 90,000 claims totaling almost $550 million have been filed in Florida, according to the state’s Office of Insurance Regulation, while in North Carolina that figure stands at $1.5 billion.

Allstate’s communications manager, Justin Herndon, said the use of drones had the potential to double the amount of properties a claims adjuster could look at in one day.

Just weeks before Hurricane Matthew struck, the Federal Aviation Administration (FAA) introduced new regulations governing the use of commercial drones that made it easier for insurers to use them to inspect and assess property damage after a disaster.

As a result, insurance companies were able to enlist drones for the first time to speed up the claims process and improve safety for their staff after the storm blew back out to sea.

Justin Herndon, communications manager, Allstate

Justin Herndon, communications manager, Allstate

“Drones are absolutely speeding up the process,” Herndon said. “Where an adjuster now might be able to take measurements and photos and look at individual damage in a couple of hours, a simple 15-minute drone flight can capture everything that’s needed and immediately upload it to the cloud for our review.

“Where an adjuster and a ladder might be able to look at three to four homes in a day, an adjuster with a drone could potentially inspect six to eight homes in a day, if not more.”

So far, more than a dozen insurance companies have received approval to operate drones in the U.S., including Travelers.

Jim Wucherpfennig, vice president of claim property at Travelers, said that a team of 20 claims professionals trained to pilot drones were deployed to assess residential and commercial property damage in the five states primarily hit by the hurricane.

So far, he said, more than 125 drone inspections were carried out at affected sites, taking “days” out of the claims process.

“It definitely speeds up the processing of claims,” he said. “With the use of a drone we’re able to do everything in one visit; analyze the damage, get all the measurements down, write the property estimate and give the customer payment for covered losses.

“The anecdotal feedback we get is this is cutting down the time to payment and/or claim rejection.” — John Geisen, senior vice president, aviation practice, Aon

“That enables the repairs process to begin much more quickly.

“It definitely takes days out of the process in terms of eliminating multiple site visits and the scheduling of contractors, and helps the customer get back on their feet more quickly.”

The company launched its training program last Spring in anticipation of the FAA rules and to date it has 60 FAA-certified professionals, with hundreds more being trained in the next several months.

Herndon of Allstate said that the drones assisted in the inspection of around 25 homes, opening the door to more wide-scale use of the technology in the future.

Allstate had previously tested the drones, which can capture 4K-resolution images, enabling adjusters to zoom in with much greater detail, in Texas after a hailstorm.

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“To be able to use drones with our customers who have actual storm damage is a big step forward,” said Allstate’s chief claims officer Glenn Shapiro.

Lockton doubled its use of drones during Hurricane Matthew from previous smaller events, said Sheri Wilson, senior vice president and national property claims director.

“My sense is that Matthew was still more of a test op for many insurers than widespread deployment, but it clearly is trending to greater use,” said John Geisen, senior vice president with Aon’s aviation practice.

“The anecdotal feedback we get is this is cutting down the time to payment and/or claim rejection. If faced with a large count of claims, you might not have the time to scrutinize each as deeply so the ability to quickly assess for damage and focus attention, has value.”

Jim Wucherpfennig, vice president of claim property, Travelers

Jim Wucherpfennig, vice president of claim property, Travelers

Josh Spencer, in catastrophe operations for Zurich North America said that the company used imagery from the National Oceanic and Atmospheric Association as well as data from its call centers and its staff on the ground to assess damage.

The use of drones had also improved the safety of claims professionals by removing the need to climb ladders to inspect roofs and other structures, Wucherpfennig said.

Herndon said: “Safety is a major concern for any adjuster getting on a roof today. There can be steep inclines, slippery/wet surfaces or weak areas from damage where a tree fell, for example.

“A drone evaluation takes all of those concerns away and so we see the future use of drones as a great way to improve safety for our claims professionals.”

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2017 RIMS

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.
By: | April 26, 2017 • 3 min read

As insurers become increasingly concerned about the aggregation of cyber risk exposures in their portfolios, new tools are being developed to help them better assess and manage those exposures.

One of those tools, a comprehensive cyber risk modeling application for the insurance and reinsurance markets, was announced on April 24 by AIR Worldwide.

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Last year at RIMS, AIR announced the release of the industry’s first open source deterministic cyber risk scenario, subsequently releasing a series of scenarios throughout the year, and offering the service to insurers on a consulting basis.

Its latest release, ARC– Analytics of Risk from Cyber — continues that work by offering the modeling platform for license to insurance clients for internal use rather than on a consulting basis. ARC is separate from AIR’s Touchstone platform, allowing for more flexibility in the rapidly changing cyber environment.

ARC allows insurers to get a better picture of their exposures across an entire book of business, with the help of a comprehensive industry exposure database that combines data from multiple public and commercial sources.

Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

The recent attacks on Dyn and Amazon Web Services (AWS) provide perfect examples of how the ARC platform can be used to enhance the industry’s resilience, said Scott Stransky, assistant vice president and principal scientist for AIR Worldwide.

Stransky noted that insurers don’t necessarily have visibility into which of their insureds use Dyn, Amazon Web Services, Rackspace, or other common internet services providers.

In the Dyn and AWS events, there was little insured loss because the downtime fell largely just under policy waiting periods.

But,” said Stransky, “it got our clients thinking, well it happened for a few hours – could it happen for longer? And what does that do to us if it does? … This is really where our model can be very helpful.”

The purpose of having this model is to make the world more resilient … that’s really the goal.” Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

AIR has run the Dyn incident through its model, with the parameters of a single day of downtime impacting the Fortune 1000. Then it did the same with the AWS event.

When we run Fortune 1000 for Dyn for one day, we get a half a billion dollars of loss,” said Stransky. “Taking it one step further – we’ve run the same exercise for AWS for one day, through the Fortune 1000 only, and the losses are about $3 billion.”

So once you expand it out to millions of businesses, the losses would be much higher,” he added.

The ARC platform allows insurers to assess cyber exposures including “silent cyber,” across the spectrum of business, be it D&O, E&O, general liability or property. There are 18 scenarios that can be modeled, with the capability to adjust variables broadly for a better handle on events of varying severity and scope.

Looking ahead, AIR is taking a closer look at what Stransky calls “silent silent cyber,” the complex indirect and difficult to assess or insure potential impacts of any given cyber event.

Stransky cites the 2014 hack of the National Weather Service website as an example. For several days after the hack, no satellite weather imagery was available to be fed into weather models.

Imagine there was a hurricane happening during the time there was no weather service imagery,” he said. “[So] the models wouldn’t have been as accurate; people wouldn’t have had as much advance warning; they wouldn’t have evacuated as quickly or boarded up their homes.”

It’s possible that the losses would be significantly higher in such a scenario, but there would be no way to quantify how much of it could be attributed to the cyber attack and how much was strictly the result of the hurricane itself.

It’s very, very indirect,” said Stransky, citing the recent hack of the Dallas tornado sirens as another example. Not only did the situation jam up the 911 system, potentially exacerbating any number of crisis events, but such a false alarm could lead to increased losses in the future.

The next time if there’s a real tornado, people make think, ‘Oh, its just some hack,’ ” he said. “So if there’s a real tornado, who knows what’s going to happen.”

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Modeling for “silent silent cyber” remains elusive. But platforms like ARC are a step in the right direction for ensuring the continued health and strength of the insurance industry in the face of the ever-changing specter of cyber exposure.

Because we have this model, insurers are now able to manage the risks better, to be more resilient against cyber attacks, to really understand their portfolios,” said Stransky. “So when it does happen, they’ll be able to respond, they’ll be able to pay out the claims properly, they’ll be prepared.

The purpose of having this model is to make the world more resilient … that’s really the goal.”

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]