Best's Review


Risk Adviser
Drones, Telematics and Sensors Help Insurers Manage Risks

Now more than ever, innovative risk management practices demonstrate the unique value that carriers and independent agents deliver to their customers.
  • Dick Lavey
  • March 2021
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From the liabilities associated with the COVID-19 pandemic to cyberattacks and the use of robotics in the workplace, there is little doubt that business risks continue to evolve at a rapid pace. At the same time, traditional perils, such as extreme weather and auto exposures, remain prevalent and ever-increasing.

These realities have spurred successful carriers to leverage innovation to create a distinctive risk management experience. Across our industry, we are seeing the introduction of technology-enabled tools and services to help businesses minimize risk and maximize safety. For example, the use of drones, data analytics, telematics and water detection tools are becoming commonplace. This is only the beginning.

An increase in risk management innovation couldn't come at a better time, as loss pressures continue to mount. Take property losses, for example. According to Verisk/ISO, fire historically makes up 35% to 40% of loss costs and water damage comprises 10% to 15%. As we manage through the COVID-19 pandemic, these loss trends are essentially holding steady at their historic averages, and in some cases increasing. Couple those loss trends with an increase in industry catastrophe losses and it is becoming even more important to find new ways to mitigate losses.

The emergence of the internet of things (IoT) has been instrumental in this regard. IoT has enabled the industry to expand policyholder offerings to provide discounts for the use of tools that can help reduce claim severity related to freezing and water damage, benefiting residential and commercial customers. With this new capability, a contractor can install technology to detect water intrusion and stop an incident before it escalates, preventing massive losses. We've seen significant benefits from this new tool in our business.

And it goes well beyond just sensors. Carriers are making vast improvements in the area of employee safety, as well. For instance, companies are now completing ergonomic evaluations using artificial intelligence and wearables while evaluating the impact of exoskeletons to reduce ergonomic risk or to support an injured employee in returning to work.

When it comes to managing claims and assessing risk, drone technology and thermography continue to present new opportunities. While drones have been used for some time now to assess claims, their use offers a significant opportunity to improve the pre-loss and risk assessment processes. The benefits of thermography include the detection of heat-related problems in electrical equipment, as well as identification of mechanical issues. Studies have shown that for every dollar spent on a thermography survey, five dollars in cost avoidance is identified on the damage. Furthermore, by combining drone use with thermography, surfaces can be scanned to detect issues that aren't visible to the eye, enabling carriers to identify and highlight potential problems long before they become major losses.

Given the rapid pace of change in our industry, it is to risk managers' advantage to work closely with their independent agents to understand how carriers are investing in innovation, what new and evolving capabilities they believe are most critical in the market and the advancements in the area of risk management. Ultimately, engaging in frequent conversations regarding risk management innovation is the best way for risk managers and agents to understand emerging capabilities and other investments across the value chain. This insight will enable agents to partner with carriers that are committed to an exceptional customer experience focused on mitigating risk and delivering quality protection and services.

Best’s Review columnist Dick Lavey is president, Agency Markets at The Hanover Insurance Group. He can be reached at

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