Catastrophe Claims

Technology to the Rescue

Cutting-edge technology such as drones, satellites and 3D imaging allow for quicker, safer and more efficient claims handling.
By: | April 28, 2016 • 5 min read

The growing scale and severity of natural and man-made catastrophes makes it increasingly difficult for insurance companies and claims handlers to access affected disaster sites. It can take weeks or even months for loss adjusters to see the true extent of damage caused by events on the scale of Hurricanes Andrew and Katrina.

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But that’s changing with the development of technology such as drones, satellites and 3D imaging, which allow insurers to gather data and images quickly and efficiently, ultimately better protecting their clients against future risks.

There are still hurdles for insurers to overcome, starting with Federal Aviation Administration requirements for operating drones in U.S. airspace, as well as privacy issues, and the potential for property damage or civilian death in the event of a crash.

But uptake is still rising because of affordable hardware as well as increasing onboard instrumentation and offline data processing improvement.

“A lot of this new technology is great at assessing and understanding potential risks in a pre-loss scenario, as well as when an event happens,” said Sheri Wilson, national property claims director at Lockton.

“In some cases, there will always be the need for boots on the ground before the check is written, but this technology can certainly be used to get a more complete picture of what’s going on.”

Rise of the Drones

Jimmy Johnson, assistant vice president of commercial property claims at Zurich North America, said the main advantage of drones is the ability to provide access to difficult-to-reach disaster sites, allowing insurers and their customers to understand losses in greater detail.

“Being able to obtain information almost in real time, whether it’s taking pictures or communicating those losses, is a huge advantage not only to the insurer, but to their clients as well,” he said.

“The app allows them to record and send pictures and videos to the insurer to show them the extent of the damage and it is then uploaded to their server for them to assess.” — Andreas Shell, global claims executive of new technologies, Allianz Global Corporate & Specialty

Helen Thompson, director of commercial marketing at Esri, a geographic information system provider, said that another benefit is the speed of response, as well as use in hazardous situations, such as the port of Tianjin explosion last year.

“Drones are able to quickly assess large areas and identify, with human observation, the scope and scale of the disaster,” she said.

The main sticking point remains that only a handful of insurers, including State Farm, USAA and AIG, have obtained FAA approval to test drones for commercial use.

Gary Sullivan, vice president of property and subrogation claims at Erie Insurance, which was granted a license by the FAA last year to use drones for claims and in catastrophe situations, said that the biggest advantage is safety, as well as the time and cost efficiencies gained.

Andreas Shell, global claims executive of new technologies, Allianz Global Corporate & Specialty

Andreas Shell, global claims executive of new technologies, Allianz Global Corporate & Specialty

“It means the difference between keeping our employees on the ground versus the time and risk associated with having them climb a ladder to get onto a roof, and, ultimately, the imagery we obtain from a drone is just as good, if not better than we would otherwise be able to take,” he said.

Among the disadvantages, he said, were the need for a pilot’s license and having to get clearance to fly in no-go zones, for example, near airports and military bases.

Andreas Shell, global claims executive of new technologies at Allianz Global Corporate & Specialty, said one problem is that drones can only be used if the operator is in close proximity and maintains visual contact.

On top of that, he said, there are a host of legal and regulatory requirements.

“Right now, government agencies are tightening up these requirements more than ever due to the number of private operators currently out there,” he said.

Varying Image Formats

Video technology such as Skype and FaceTime has allowed insurers to develop smartphone apps that can be used to record property damage.

R5-16p38-39_5Damage3.indd“In effect, they allow the customer to become a part of the claims process,” said Shell of Allianz.

“[They can] send pictures and videos to the insurer to show them the extent of the damage.”

Such technology could be used in low value cases where sending out a loss adjuster may be more costly than paying the claim.

David Passman, national director of property claims for North America at Willis Towers Watson, said that when it comes to assessing wide areas of damage, satellites are often the best technology because they can capture a lot of data quickly.

The downside, he said, is that the picture quality may not be as good as a drone or 3D imaging.

“It enables you to take pictures before and after the event, and compare them side by side to determine not only what has happened to the property concerned, but also to the terrain around it,” he said.

“This can also help clients to put into action their business interruption or continuity plan, for example, by knowing what transport routes are open and putting in place an appropriate logistics strategy.”

Future of Technology

Thomas Haun, vice president of strategy for PrecisionHawk, an aerial data provider, said that as with all of these technologies, being able to quickly quantify the extent of damage and understand how safe something is, is critical in the response effort.

“Drones give you that ability to respond quickly and effectively to these types of disaster, but also to prevent or mitigate against future events,” he said.

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However, Bud Trice, vice president of catastrophe services at Crawford, warned that despite the many advantages, the biggest challenge with this type of technology is fragmentation, with the possibility of each insurer deciding to go its own way with a different solution, many of which may be incompatible with one another.

Randall Ishikawa, vice president of property risk solutions at EagleView, a 3D imaging company, said that in the long run, technology could help expedite claims handling and reduce operational and claims costs for insurers.

“At the end of the day it can save money for the insurance carriers, and from an underwriting perspective it can determine the viability of the risk concerned as to what action needs to be taken at renewal,” he said.

Erie’s Sullivan added that the potential benefits are huge.

“From an industry standpoint there’s enormous potential because in the future you might be able to fly the drones much more often and to assess the risks on your books in order to identify potential hazards before they happen,” he said. &

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.

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

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.

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.”

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]