Navarro Issues Bulletin on Insurers’ Drone Usage
Addresses increased use of aerial imagery in industry activities
The Delaware Department of Insurance recently issued a bulletin to carriers recognizing increased use of unmanned aircraft systems and aerial imagery, and offering regulatory guidance, Insurance Commissioner Trinidad Navarro announced today. Insurers have adopted aerial photography use to improve efficiency in claim processing, loss assessments, and underwriting by reducing costs associated with traditional inspections. However, insurers must balance these innovations with a commitment to fair consumer treatment, regulatory compliance, ethical standards, and aerial imagery must be utilized in a transparent manner.
“Insurance is an ever-changing industry, but change has accelerated at an extreme rate in recent years. Much like our recent AI guidance, this bulletin does not aim to prohibit use of new technology that may offer cost and consumer benefits. Instead, it sets forward clear guidance as to how carriers are to safeguard consumers, prevent unfair business practices, and ensure underwriting decisions are made with appropriate evidence and are not solely based on the cosmetic factors of a property,” Commissioner Navarro explained.
Aerial imagery, while useful, has inherent limitations such as the potential for image distortion and an inability to identify fine details, or light and weather interference.
Unmanned aircraft systems such as drones have been increasingly used by property insurers, including for reviews of policyholders’ roof conditions. Roof discoloration and streaking has been cited by carriers as a reason for policy nonrenewal or cancellation, but the guidance makes clear that cosmetic issues are not a valid ground for cancellation. Insurers must provide clear evidence of significant degradation or damage that increases the risk of loss substantially.
Bulletin No. 150 specifies that carriers must continue to follow the Insurance Code relating to policy activities, and that policyholders must be given proper notice and a clear explanation of the specific reasoning for any policy cancellation or nonrenewal, including when aerial imagery contributes to the determination. Nonspecific reasons, such as “claims experience,” “underwriting judgement,” or “increase in hazard” are unacceptable as they do not provide the Delawarean sufficient notice to address the underlying issue and make any necessary repairs.
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