(This version of the August 30 story corrects the 13th paragraph to show that Farmers Insurance is not part of Zurich Insurance Group)
By Tim McLaughlin and Karl Plume
BOSTON/CHICAGO (Reuters) - Fleets of commercial drones are primed to hover over the destruction from Tropical Storm Harvey in an unprecedented test of unmanned aircraft’s ability to assess billions of dollars in damage for the insurance industry and accelerate payouts for harried policyholders.
“Harvey is an opportunity to see whose drones are capable and whose are merely toys,” said George Mathew, chairman and chief executive of Kespry, a drone company based in Menlo Park, California. “Harvey is a seminal moment for the industry.”
Harvey marks the second major hurricane since the Federal Aviation Administration (FAA) loosened restrictions on drones last June, allowing greater use for filming, inspecting facilities and other commercial activities.
Thousands of people have since obtained FAA certificates allowing them to fly drones commercially, and more than 770,000 drones have been registered with the FAA to fly in U.S. airspace.
AT&T Inc (T.N) said on Wednesday that it had begun using a fleet of 25 drones to look at cellphone towers in southeastern Texas, including Corpus Christi, that were hit by the hurricane.
High-definition cameras on the drones allow AT&T engineers to look at damage to antennas and cables in areas where cell towers may not be reachable because of flooding, the company said.
Allstate Corp (ALL.N), the second-largest property insurer in Texas behind State Farm, expects its drone fleet to make at least thousands of flights a week in the damaged areas once its claims processing becomes fully operational, company spokesman Justin Herndon said.
Some commercial drone launches have been delayed, however, because the FAA has restricted the airspace in and around Houston to rescue aircraft. Harvey has triggered catastrophic flooding in the city.
Once the airspace is cleared, the sky is expected to buzz with activity and potential danger as commercial users and hobbyists converge.
“It is legal, so many more people are flying them commercially,” said Mark McKinnon, a partner at law firm Dentons US LLP.
AT&T said it was complying with all federal guidelines for safe and legal flight in the disaster area.
Obstacle avoidance technology in the newest drones and the ability to set exact flight parameters with global positioning, known as GEO-fencing, should minimize crashes that may have been unavoidable a few years ago, said Ryan Baker, CEO of Houston-based drone company Arch Aerial LLC. Goldman Sachs has estimated that industries such as construction, agriculture and insurance will spend $13 billion on commercial drones between 2016 and 2020.
Farmers Insurance, the third-largest property insurer in Texas, plans to use Kespry drones to assess damage in a joint effort with on-the-ground claims adjusters. Kespry drones fit in a suitcase-size carrying case packed in the trunk of a claims adjuster’s car.
Once on site, claims adjusters unpack the fully assembled drones and, using their iPads, launch them. Each drone has to remain in the line of sight of a claims adjuster while flying below 400 feet (120 meters), according to FAA rules.
About five minutes later, the data collected by the drone is scanned and ready to be processed by the insurance company, Kespry’s Mathew said. Kespry is equipping nearly 10 insurance companies with drones in the areas ravaged by Harvey to help gather information to process claims.
Farmers Insurance said a drone could help a claims adjuster process three houses in an hour. Without a drone, only about three houses could be processed in a day.
“Our fleet of drones and the claims professionals who will be operating them are currently on standby and ready to deploy when conditions make it safe to do so,” Tim Murray, a property claims executive at Farmers Insurance, said in a statement.
After being hunkered down in the immediate aftermath of the storm, business and property owners are eager to get a look at the damage.
“The phone has been ringing off the hook with people looking to get eyes on their property and their assets,” Arch Aerial’s Baker said. “I’ve got enough work to get all of our pilots out in the field for a long time. But right now, nobody can get anywhere, so we’re waiting for the water to go down. After that obstacle clears, we’ll probably be bringing on quite a few people.”
Reporting by Tim McLaughlin in Boston and Karl Plume in Chicago; Additional reporting by Alwyn Scott in New York; Editing by Peter Cooney and Steve Orlofsky