The proliferation of drone technology has put more eyes in the sky to assist insurance companies in underwriting. But what happens when those eyes need glasses?
In February, New Hampshire became the latest state to remind insurers to be careful when using aerial imagery in determining whether to cut off coverage for a property.
In a Feb. 19 bulletin, state Insurance Commissioner D.J. Bettencourt said his agency had received a number of complaints regarding non-renewal of homeowners policies based on faulty aerial identification of poor roof conditions. He noted that property insurers, under recognized underwriting guidelines, can deny coverage in cases of “clear evidence of property degradation or damage.” But that does not extend to discoloration or other cosmetic changes to the roof that do not undermine its structural integrity, he added.
Aerial imagery can be taken by means such as drones, airplanes, and helicopters, says Andrew Demers, communications director for the New Hampshire Insurance Department. A records search from Jan. 1, 2022, to Feb. 19, 2024, identified six complaints with the department on Use of Aerial Imagery in Property Insurance Underwriting. In one case, the imagery was of an entirely different house than the insured’s. Engagement with the companies led to corrective measures.
“The Department does not seek to inhibit the use of aerial imagery. Insurers can freely employ this technology to evaluate a property’s condition,” Bettencourt wrote in his bulletin, addressed to all property and casualty insurance companies operating in the state. “Yet, insurers must understand that aerial imagery, while useful, is not infallible and has its limitations. To safeguard consumers against unsupported underwriting decisions, insurers must implement appropriate checks and balances when using aerial imagery.”
If that imagery does not clearly show the property in question has sustained degradation or damage sufficient to refuse coverage or non-renew a policy, insurers in New Hampshire are required to follow up with a physical inspection. Any formal objection by an applicant or client to findings based on aerial imagery, no matter how conclusive, also then requires a physical inspection.
This has been a growing concern in the past couple of years across multiple states, according to the National Association of Insurance Commissioners (NAIC), which says it is monitoring the issue.
The NAIC pointed to similar notices issued in 2024 by the Insurance Departments of Connecticut and Pennsylvania. Those documents correspond closely both to the language used in the New Hampshire bulletin and to the key topics raised—complaints of policy non-renewals or cancellations based on questionable aerial imagery, the agencies’ general disinterest in preventing insurers from applying aerial imagery to underwriting, and emphasizing that cosmetic damage is not sufficient reason to cut off a policy.
Pennsylvania added that it had received complaints regarding insurers failing to provide a notice of cancellation or nonrenewal that specifies the cause and allows the insured to challenge the findings, which would violate state law.
“This notice reminds insurers of their responsibilities in administering homeowners’ policies consistent with state law. The Department supports and encourages innovative ways to identify risk and deliver a better insurance product to Pennsylvanians. That said, such innovation needs to be reasonable,” Pennsylvania Insurance Commissioner Michael Humphreys said in a May 2024 press release. “Some of the aerial images that we’ve seen used to take adverse actions against policyholders barely identify the structure of the home, much less the detailed condition of the roof and whether it needs to be repaired or replaced.”
