Drone Footage of Roofs Isn’t Enough to Justify Dropping Home Policies, PA Regulators Say | Insurify

Pennsylvania insurance regulators recently reminded insurers that aerial imagery isn't sufficient evidence for canceling or non-renewing home insurance policies.

The Pennsylvania Insurance Department (PID) received multiple complaints from consumers who said home insurers cited drone footage of roofs to cancel or non-renew policies. But the department found that sometimes the images didn't clearly show significant roof damage or degradation. Some images just showed discoloration, streaking, or cosmetic issues on the targeted roofs.

"The department supports and encourages innovative ways to identify risk and deliver a better insurance product to Pennsylvanians," said Pennsylvania Insurance Commissioner Michael Humphreys in a release. "That said, such innovation needs to be reasonable."

In-person inspections better validate damage

The PID issued an official bulletin, May 25, advising insurers of the department's concern. The bulletin also reminds insurers to allow residents to challenge the results or fix the damage before canceling or non-renewing a policy.

Pennsylvania is among the cheaper states for home insurance, with an average annual premium of $1,306, according to Insurify data. Roof replacement costs vary depending on size and materials, but range from $13,000 to $24,000 for an asphalt roof, according to William Penn Roofing.

"This notice reminds insurers of their responsibilities in administering homeowners' policies consistent with state law," said Humphreys. "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."

Pennsylvania does not unilaterally prevent insurers from taking drone footage or using aerial imagery to affect policies. The bulletin specifically states the department doesn't "seek to broadly restrict" its use, but notes it would be "prudent" for insurers to validate damage with a physical inspection in "the absence of unequivocal and material damage shown."

The department also reported consumer complaints of insurers not providing appropriate notice or opportunity to challenge results or correct damage and reminded insurers of their legal obligations.

Reminding insurers to use AI responsibly

A month before, the PID announced guidance for insurers on using artificial intelligence (AI) based on a bulletin the National Association of Insurance Commissioners (NAIC) issued in December. Pennsylvania is the eighth state to adopt the NAIC bulletin.

The notice essentially reminds insurers that any decisions they make using AI must comply with state regulations.

"Technology is always evolving and is a great tool to help streamline processes," said Humphreys. "AI is no exception. This notice provides insurers with the guidance to help ensure accurate and fair outcomes for Pennsylvanians when using AI."

As with aerial imagery, the department is not prohibiting insurers from using AI. The bulletin does note AI can present unique risks to consumers, like inaccuracy and lack of transparency, so insurers should work to minimize risks.

What's next: Other states face similar practices

Other states are working to navigate the path of aerial imagery in insurance as well. The Massachusetts Division of Insurance issued guidance in March aimed at helping residents understand the state's regulations around aerial imagery, including a detailed list of rights for both consumers and insurers. And the Connecticut Insurance Department warned home insurance companies in March that they can't rely on aerial images of cosmetic roof conditions, like streaking or discoloration, as justification for refusing to renew a home insurance policy.

Insurers in California are also using drones and other technology to survey properties. Some San Diego residents received letters notifying them their policy was being canceled or non-renewed, citing aerial images of moss, roof damage, debris, and more. Another California woman told the Wall Street Journal her insurer dropped her policy because her roof had "lived its life expectancy," though an independent inspection found it had another 10 years.

"The goal isn't to eliminate customers," Insurance Information Institute Director Mark Friedlander told WINK news. "It is to assess risk and make sure that the home meets the underwriting guidelines of your insurance company. They want to write the best risk."