“Innovation is defined simply as a “new idea, device, or method”. However, innovation is often also viewed as the application of better solutions that meet new requirements, unarticulated needs, or existing market needs.”
The new UAS market is expanding so fast and in so many different directions that it is nearly impossible for most insurance companies and brokers to focus on ways to meet the new demands of the UAS industry before jumping in with both feet. That lack of focus and understanding is leading to near epidemic levels of “bone in mouth” disease. Bone in mouth disease is when a dog looks into a pond, sees his reflection, and drops the bone he has for the reflection of the bone in the pond. The result is that the dog loses the only bone he has. That reactionary approach to business development is also leading to higher insurance costs, without added value or coverage, resulting from bureaucratic intertia and an inability to innovate.
Above is an excerpt from a recent insurance quotation illustrating the costs associated with bureaucratic inertia, lack of focus and the inability or unwillingness to innovate. Rather than innovate a path to profitability, the broker simply added an additional $250.00 fee to the quotation that already included a 15% commission paid to the broker by the insurance company. That equates to a hallucinogenic 35.9% fee+commission going to the broker and the additional cost passed along to the UAS insurance consumer. Ultimately the $1,194 annual premium quoted by the insurance company was raised by the broker to $1,444 and passed along to the consumer. Presumably, the added fee was necessary to cover the broker’s costs and ensure profitability.
That is just one reason why innovation in the UAS insurance industry is needed, and why it is needed now.
To be clear, this is a business practice that Transport Risk Management neither endorses nor subscribes to and have never done so in our nearly 14 years in business. Instead, we have chosen innovation as the path to profitability and sustainable premium levels and we know it can be done without the need to add fees to commissions.
When Transport Risk Management began insuring UAS more than six years ago, we quickly realized that we had a lot to learn. Indeed, this new and disruptive technology represents a completely new market opportunity but at what cost and how could we succeed without raising premiums to unsustainable levels or without first going broke?
Our first realization was that service levels associated with UAS insurance policies are about ten times those of established aviation industry policies. Those escalated services levels are the result of several factors including lack of underwriter knowledge, lack of knowledge on the part of the consumer and the time involved with educating both parties. It’s important to understand that as a middleman, each time a policy is changed or a question is posed, the broker must ” touch” the policy at least four times. UAS operators and insurance underwriters tend to make a lot of changes and ask a lot of questions therefore the costs associated with those elevated levels of “touch” are substantial.
Our second realization was that premium levels associated with drone policies would not provide the revenue necessary to properly service the accounts and reach profitability. As a broker, we are paid a commission averaging about 10% to 15% of the total annual premium earned under the policy. If the policy is cancelled, we must return the unearned portion of the commission to the client. If the policy suffers a loss, we must service the claim and if the loss is a total, we must also cancel the policy and return the unearned portion of the commission while continuing to service the claim.
Our third realization was that if we are going to be successful in our commitment to develop the UAS insurance market, we will have to innovate. Existing systems simply didn’t envision the volume, velocity, and variety of services required by this disruptive new technology. Because we are committed to the industry we are leading the way to the future through technology development and innovation.
We started with the creation of our Unmanned Risk Management brand and our evolutionary quote submission suite which can be seen at www.UAVAssure.com. The success of our submission suite has paved to the way to our new backend technology development that will allow 24/7 access to our clients, our underwriters and our retail agency partners. That development is ongoing and will be launched within the next 45 days. But those systems, while necessary for fundamental industry change, are only technology solutions that improve efficiency within the current insurance industry’s way of doing things. To change the entire unmanned insurance industry will require digital technologies that will allow the consumer to buy what they want, when and where they want and with the ability to buy it at the best price. Developing that level of technology takes a completely different level of commitment and it is one we have made.
Transport Risk Management has entered beta testing of our Dromatics™ usage based telematics insurance system. We anticipate that upon successful completion of testing, consumers and insurance companies alike will see the value our digital technology. Adoption of digital technologies means new opportunities for higher levels of service and lower cost to consumers, improved customer experience, better risk selection, boosting loss prevention and increased professionalism across the UAS industry through the use of telematic feedback.
The UAS industry will not stand by or support an insurance industry that simply raises prices to compensate for inefficiency. The insurance industry must innovate and it must innovate now if it hopes to survive in a market where customers demand to interface digitally with their insurers.