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Drones coming to a natural disaster near you?
Insurance industry watchers are buzzing about a trend they see on the horizon: the use of drones to assess property damage for insurance adjusters.
With the exception of those owned by the military, drones are primarily used to support public safety efforts, environmental studies and agricultural projects, but some insurance industry insiders say the use of drones for claims work should be added to the list.
Two insurance applications with huge potential for drones include aerial surveys of damage to insured roofs and to assess property damage after natural disasters, according to Denise Johnson's reporting for the sUAS (Small Unmanned Aircraft Systems) News website.
While it's too soon to tell exactly how the process would work, it's possible that information captured by drones could be downloaded to insurance adjusters' tablets or computers, expediting the claims process and allowing more claims to be handled more quickly.
Lyle Donan, president and CEO of Donan, a forensic investigation firm, spoke this week at the Enservio Property Innovation Summit in Boston about using drones to assess property damage. He believes in some instances, for example after natural disasters and when evaluating large commercial properties, drones can gather data in hours that would take a person weeks of multiple site inspections to gather, resulting in "speed, savings and safety" when inspecting insured property.
"A drone can be deployed within minutes or hours following a severe weather event. No need to dispatch aerial photography aircraft or wait for satellite imagery. Imagery can be analyzed within hours thereafter from anywhere," Donan told ClaimsJournal.com.
He also says that data gathered by drones can better prepare insurance adjusters handling catastrophic events.
"GEO codes embedded in the data can be used to create maps. That means easy queries by address or latitude and longitude. High resolution translates to the ability to zoom focus to within inches of the investigated area. That means damage assessments can be done remotely," says Donan. "A CAT manager could know which properties are total losses and which are rebuilds before their teams put boots on the ground."
He says the benefits delivered by drones will help ensure more accurate claim payments, reduce homeowners insurance rates and lead to reductions in fraud.
Advocates of using drones for a variety of claims and underwriting tasks predict the industry will be deploying them within five years, according to Johnson, but for now a host of legal, logistical and privacy issues are being hammered out.
The Federal Aviation Administration (FAA) plans to have regulations in place by 2015 for drones to begin using commercial airspace and is currently testing drones at six sites. The goal is to implement the FAA's "comprehensive plan to safely accelerate the integration of civil unmanned aircraft systems into the national airspace system," according to the FAA website. Part of this plan is to require the remote drone operators to be certified, among other provisions.
Of the 25 proposals from 24 states, the following six sites were selected by the FAA for drone testing:
- University of Alaska
- State of Nevada
- New York’s Griffiss International Airport.
- North Dakota Department of Commerce
- Texas A&M University – Corpus Christi
- Virginia Polytechnic Institute and Virginia State University (Virginia Tech)
Daybreak jolt in L.A. sounds alarm for earthquake insurance
The St. Patrick's Day earthquake in the Los Angeles area woke up residents with a 4.4-magnitude rumble, and though no injuries or severe damage were reported, the jolt also serves as a wake-up call for the importance of having 'quake coverage.
Standard homeowners insurance doesn't cover property damage caused by shaking earth movement, but you don't need the luck of the Irish to score a discount on earthquake insurance if you live in Southern California.
The California Earthquake Authority (CEA), California Insurance Commissioner Dave Jones and the Automobile Club of Southern California (AAA) recently announced a new multi-policy discount for qualifying homeowners that includes earthquake coverage. The CEA is a privately funded, publicly managed organization that offers earthquake insurance through participating insurers.
Under the agreement that went into effect Jan. 1, Auto Club members who insure single-family homes through the club's affiliate insurer and also buy or renew a CEA earthquake policy get a home insurance discount of up to 7 percent.
News of the bundle discount comes at a time when only 12 percent of California homeowners have earthquake insurance, either from a private insurance company or the CEA, according to the Insurance Information Network of California.
"Efforts such as this first-of-its kind discount are important incentives to encourage more homeowners to protect themselves against the potential for devastating loss," Jones said in a written statement. "In California, it's not a question of if, but rather when the next big earthquake will strike. Living in earthquake country means taking steps to protect your biggest asset from damage and loss."
CEA policies from participating insurers typically carry deductibles of 10 percent to 15 percent, provide personal property coverage from $5,000 to $100,000 and loss of use coverage from $1,500 to $25,000. Private insurers in California may offer different coverage limits. The CEA website has a coverage calculator that lets you figure out estimates of what your CEA policy will cost.
Noncompliant health plans get extra time
If you have health coverage that doesn't meet federal minimum requirements you can keep it for two years before upgrading to a plan that complies with Obamacare standards.
The Affordable Care Act, or Obamacare, mandates that everyone – with a few exceptions – have health insurance in 2014 and that policies meet minimum coverage requirements. This means insurance companies were supposed to discontinue noncompliant plans and that those covered under these plans would have to buy new policies. That's changed now that the Department of Health and Human Services (HHS) announced a two-year extension for noncompliant plans.
Two-year reprieve for noncompliant health insurance plans
The two-year reprieve comes in the wake of controversy following reports last fall that 3.5 million people received cancellation notices from their health insurers because their policies failed to meet Obamacare minimum coverage requirements. The administration first responded by allowing insurers to renew noncompliant plans for one year.
Now the HHS says that renewal option will be extended for another year. Transitional policies will be allowed until January 2016, according to a bulletin issued by the Centers for Medicare & Medicaid Services. Health insurance companies renewing noncompliant plans must notify policyholders about other medical insurance options and explain that their current policy excludes coverage and protections included in compliant plans.
Obamacare's criteria for essential health benefits
Uniform minimum coverage criteria created under health reform is designed, in part, to eliminate so-called junk policies that carried low premiums but provided very limited coverage. In addition, Obamacare plans have caps on out-of-pocket costs and don't set limits on annual or lifetime care.
Under health reform, all plans must include coverage for the following, among others:
- Maternity coverage
- Chronic disease management
- Rehabilitative services and devices
- Prescription drug coverage
- Mental health and substance abuse treatment
- Preventive and wellness services
- Pediatric vision and dental services
- Certain cancer screenings
Health insurance options beyond exchanges
Regardless of what type of plan you prefer, Obamacare requires that the uninsured have coverage by the March 31 deadline or pay a penalty. The fine in 2014 is $95 or 1 percent of an individual's taxable income, whichever is higher. Next year, the fine is $325 and it jumps to $695 by 2016.
Keep in mind that open enrollment dates have been set for purchasing individual health plans for this year. The open enrollment period for 2014 health plans ends March 31. If you miss the deadline you have to wait for next year's open enrollment – Nov. 15, 2014 to Jan. 15, 2015 for a 2015 health plan. Note that people who get married, have a child, lose their insurance, move to an area with different health plans or experience a household change affecting their financial ability to buy coverage may sign up for policies outside the open enrollment period.
You can shop for coverage through the government-run exchange in your state, which lists plans sold by private insurers, or you can buy health insurance directly from a health insurance company.
United Healthcare, Humana, Aetna, Cigna and Coventry aren't participating at most of the exchanges but are still selling individual health insurance. You can shop for an individual plan by working with an insurance agent or by contacting one of the companies directly. Plans sold off the exchange may have a wider variety of options for benefits and in-network doctors than those on the exchanges, which offer more standardized coverage.
Trend watch: Buying life insurance at retail
Your trip to the store may soon include buying life insurance along with your gas and groceries if insurance companies embrace the new trend of using retail outlets to reach potential customers and boost stagnant sales.
Nearly one in five consumers (17 percent) would be willing to buy life insurance from a store, according to findings from the 2013 Insurance Barometer Study. It was conducted by the LIFE Foundation, a non-profit public education group funded by insurers, and LIMRA, a global research and consulting firm that tracks the life insurance industry.
Here is the breakdown by retail type, according to the percentage of consumers who said they'd buy life coverage in a store:
- Warehouse club stores – 11 percent
- Superstore – 7 percent
- Drug stores – 5 percent
- Supermarkets – 3 percent
- Convenience stores – 1 percent
Those consumers who were willing to purchase at a superstore cited perceptions such as "reasonable cost" (63 percent), "simple process" (44 percent), "convenient" (43 percent) and "no pressure to buy" (42) as reasons for their interest.
"Although the percentage of consumers is not large, it may not need to be so in order to be a viable niche market for companies to pursue," says the report. "The growth of distribution-related strategic alliances between insurance companies and nontraditional industry participants will be a growing trend."
Insurers already sell health plans at warehouse club stores such as Costco, and pilots are in place for life insurance sales at select Wal-Mart stores.
Life insurance sales remain flat
Despite the burgeoning retail trend, purchasing life insurance in-person from a financial professional is still the most preferred way to buy for over half of consumers (53 percent), according to the report. The problem is that most people are not buying life insurance at all -- in-person or at stores -- even though they are aware of the need for it.
Consumers continue to acknowledge the need for life insurance, yet 95 million don't have coverage and just one-third of Americans have individually-owned life policies -- the lowest level in 50 years, according to the report.
"Life insurance has never been as inexpensive or easy to buy -- especially with the anticipated growth of online and nontraditional purchasing channels – yet millions of consumers continue to put off the decision," Marvin H. Feldman, president and CEO of the LIFE Foundation, said in a written statement.
The reasons for not buying life insurance haven’t changed over the past three years of studies — perceived expense, other financial priorities, being unsure of the type or amount to buy, and simple procrastination all still top the list of barriers to purchasing coverage.
LIMRA data show that consumers often estimate the average yearly price of insurance to be double that of actual costs.
Life insurance research and purchase tips
For those who are in the market for life insurance, the Internet plays a prominent role both in research and purchasing. Over 8 in 10 consumers would use the Internet to conduct research about purchasing life insurance. Nearly 1 in 4 would prefer to purchase online as well, if given the option.
If you are unsure about how to buy life insurance, follow these tips:
- Analyze the financial needs of dependents that would be left behind. Consider income for your surviving family members, mortgage, auto and credit card debts and college tuition expenses that would need to be paid, in addition to funeral costs.
- Decide which type of policy best suits your needs. There are two basic types of life insurance policies -- term and permanent. Term life provides a death benefit without any investment or "cash value" component, is typically the least expensive and expires after the term -- typically 10, 20 or 30 years -- is over. Permanent life insurance does not have a set end-date, is more expensive and comes with a "cash value" account that typically involves a return-on-investment component that is not guaranteed.
- Gather life insurance quotes to compare rates as price can differ significantly for identical coverage offered by different insurance companies.
- Research the company's solvency by checking its financial stability rating with a ratings company such as A.M. Best. The rating indicates the insurer's ability to pay claims.
Michelle Megna has worked as a reporter and editor for many daily newspapers, magazines and websites covering government, education, technology and lifestyles during her 20 years as a journalist. She joined Insurance.com as managing editor in October 2011.