The View from Up There-Insurers Embrace Space Age Technologies

The key witness in a recent crop fraud case turned out to be a camera.

In June 2001, a U.S. District judge in Arkansas ruled against several farmers accused of filing false crop insurance claims totaling approximately $244,000. Key evidence in the lawsuit—filed on behalf of the U.S. Department of Agriculture and the agency that audits the federal crop insurance program—came in the form of infrared satellite images demonstrating that crops alleged to have been destroyed by bad weather had in fact never existed.

While an attorney for the defense in this case objected to the use of what he termed “Star Wars-type” testimony, there has been a growing tendency within the insurance industry toward the use of high tech tools, broadly included under the umbrella of geospacial technologies, for a wide variety of applications.

“A property/casualty company can see the effects of a hurricane and start to predict where they may have customers that incurred damage so they can dispatch resources,” said Dave Schuler, director of sales and marketing for Overland Park, Kansas-based Fireman’s Fund AgriBusiness, which several years ago adapted satellite technology into an all-terrain vehicle (ATV) mobile mapping system. “We use the geographic systems to mine our data and show us relationships, opportunities, challenges and problems. We’re growing beyond what growth has been in the crop insurance industry…because we’re differentiating with these technologies. It’s having an impact on our competitors. They’re having to seek an opportunity to respond.”

Exploring geomatics
The arena of geospacial technologies, or geomatics, has been defined as “the gathering, analyzing, interpreting, distributing and applying [of] geographical information” and the integration of that information “from maps, satellite images and other data sources, using specialized computer software and systems.”

It includes such diverse innovations as satellite global positioning and remote sensing, geographic information systems (GIS), global positioning systems (GPS) and aerial imagery. The applications for the images and other data collected are quite broad, reaching across an extremely wide range of industries—including insurance.

Kodak gets the tools
Several months ago, Eastman Kodak Co. announced the formation of its new Kodak Global Imaging (KGI) business, a division of the company’s Commercial and Government Systems Unit.

To this end, Kodak had acquired from Groupe Hauts-Monts Inc., the Canada-based company’s earth image processing, GIS and mapping businesses. Groupe Hauts-Monts is a global provider of remote sensing imagery services to commercial customers. Kodak cited a recent study by the marketing consulting company, Frost & Sullivan, which predicted that within the next four years, “the market for information extracted from earth imagery will reach $6.5 billion.” Among the industries expected to be major end users of the imagery is the insurance industry.

Nate Boyer, director of worldwide sales for Kodak Earth Imaging, described how the imagery and data is gathered, as well as some of the major applications for that information when the end user is an insurance company. The data is gathered from an airplane flown at 10,800 ft., which has two forms of highly accurate positioning tools: an inertial navigation system and a GPS service.

“These are both tools that give a highly precise location of where the plane is over the earth’s surface as well as where the target, building or piece of ground being observed is,” Boyer said. “The system can determine up to centimeter-level the accuracy of an image taken. One of the processes we do, orthorectification, assigns a unique set of geographic coordinates so that every pixel in the image has a specific, highly accurate latitude and longitude associated with it. From 10,800 ft. in the air, there’s an accuracy of plus or minus a few feet.”

Assessing the damage
Boyer noted that one of the most utilized applications of aerial imagery by insurers, especially in Florida, is an application called catastrophic damage assessment, which can be used when a major natural disaster or catastrophe occurs in a specific geographic region. For insurers, many logistical issues are associated with these events, and companies must deploy resources to perform such tasks as claims verification.

For example, in the case of a hurricane strike, Boyer noted that right down the center of that hurricane’s path, it’s very clear that there’s 100 percent damage. But towards the periphery of the hurricane, it can be a bit more difficult to determine whether damage is a direct result of the hurricane or was pre-existing to the hurricane. This can create a difficult call for a claims adjuster.

“Companies go out and use airplanes to assess the damage and then compare the damage with what the area looked like before the damage occurred,” Boyer said. “You have a much better understanding of what it looked like before, what it looked like after and what actually occurred during the hurricane.”

Boyer explained that aerial photography provides the ability to capture and store imagery in a very high-resolution format. “On a computer screen, you can actually see whether there was some pre-existing damage to a particular residential or commercial structure,” he said. “Then you can do post-flight analysis as well if you need to. The combination of that aerial imagery and software and some type of electronic storage mechanism provides for the potential to do claims verification from a desk top.”

Boyer added that if a false claim is submitted, an insurance company could also use the imagery as a tool in its litigation support efforts.

The lay of the land
Another major application of the data is used for what is termed parcel management. “One of the things you can with the digital aerial photography is overlay other types of information on it,” Boyer explained. “That’s typically used in the context of what’s called the GIS. Basically, you could use a county tax appraiser’s or public records data and overlay that on this imagery to see where the boundaries of properties are. By overlaying those types of information, you can see whether there’s been some type of an infringement or how a particular geographic area has grown or shrunk over a period of time. All those things have an impact of insurance rates and the types of insurance that are involved.”

Other insurance applications include flood plain analysis and flood plain mapping, with which companies can base premium rates based on a structure’s geographic location in relation to major bodies of water; property verification, to determine if a property actually exists and, if so, what is located on the property; and visualization, a whole series of tools that allow the broker, the claims adjuster or litigation support manager, to view from a desktop a specific geographic area and get a certain amount of information without having to physically go to that particular property.

Boyer went on to explain that while Groupe Hauts-Monts maintains a fleet of planes, Kodak “did not acquire the planes part of the business. Suffice to say we own the exclusive rights to the data that’s acquired by those planes.” He added that KGI has already captured the top 50+ metropolitan statistical areas in the U.S., and by the end of year, expects to have captured the top 95 metropolitan statistical areas.

Boyer added that Kodak understands that many of its customers may have requirements that fall outside its “initial capture area,” and if those customers have a specific interest, “We will contract through KGI, go out and fly those on demand.” continued on page 56

And while Kodak is certainly not the only player in this emerging marketplace, Boyer said he currently could not name either competitors or major customers. “Geospacial data is so highly proprietary that typically the insurance company or government entity will contract with a third party separate from Kodak to buy the data,” he explained.

However, Boyer did affirm that there are a number of major insurers that currently, have in the past, and or will in the future use the data for the applications already described, adding that Kodak is bundling the various technologies together to make offerings to both the insurance companies and the companies’ consulting firms.

“Often aerial information by itself may not have all of the answers,” Boyer concluded. “But because you can add additional information to this aerial data, it helps give the ultimate decision maker more information so that they can make more accurate decisions.”

Fireman’s Fund goes geospacial
An example of a major insurer who has been working with geospacial technologies for a number of years now is Fireman’s Fund, which bought a company with a GIS Division (then headed by Schuler). Around 1997, Fireman’s Fund decided it would transform the resource to focus on supporting its customers.

“In this office, I think we’ve processed approaching 200 million acres of imagery,” Schuler said. “About 130 million of it is from satellite imagery…that we use for boundary delineation. In other words, we can see field boundaries, we produce that for our insurance agents, and supply the agents with an application we wrote so they can pull that information up and trace the field boundaries.

“We evolved from that process to the GPS for delineating boundaries,” Schuler continued. “We’re providing the service for a number of reasons. One is the satellite imagery was just too difficult to interpret…It just did not have the resolution, the accuracy that we needed. Then there were a number of difficult issues in obtaining the data in a timely fashion.”

Agents currently utilizing Fireman’s Fund AgriBusiness (FFAB) Precision Mapping system drive an ATV around the perimeters of growers’ fields to obtain highly accurate, computer-generated maps of particular agricultural areas.

“We provide a turnkey operation for the agent to get into this system,” Schuler said. “This is a service that we license to the agent to provide to their Fireman’s Fund customers.”

If agents choose to provide the service, the company provides the equipment and comes out to install it and show agents how to operate it. “Very importantly, we teach how to market themselves with the equipment,” Schuler said. “Agents are not selling this service—they’re selling policies, providing the service for free to their policyholders. But we teach them how to leverage that advantage.”

High tech ‘Etch-a-Sketch’
Schuler also clarified the difference between the GPS and the satellite imagery. The GPS unit’s data is gathered by 24 satellites operated by the U.S. Department of Defense. “We just have this radio receiver that sits on the ATV we supply to the agent, hooked up to a software program on a palm device,” he explained. “It’s receiving signals from these 24 satellites. We’re not receiving imagery information though—we’re receiving datapoints.” Schuler made a comparison to the way images are formed on the computer screen to an “Etch-a-Sketch” or video game, as the ATV drives around the field and the drawing appears on the screen.

“We also use the [satellite] imagery now as a backdrop for our GPS mapping,” Schuler added. In other words, an agent will use an ATV with a GPS and software to map each of the fields for the farmers. That brings it into the company’s Internet system, where an image, either aerial photography or satellite imagery, can be underlaid, enhancing the value of the picture for the agent, his customer and the loss adjusters.

Schuler emphasized that by creating a precise, visual representation of a farm, interactions between the insurer and insured are greatly simplified since all the farmer has to do is identify on a field-by-field basis what was planted and harvested. “We’re able to cut down the amount of time it takes to collect the acreage and production data that’s required by the policy to one-third the time it’s taken in the past,” Schuler said.

In addition, the farmer is provided with information heretofore unobtainable.

“How many acres are really in the field? In over 90 percent of the cases, we’re finding fewer acres than the farmers thought were in the field,” Schuler noted. “They pay for the insurance product by the acre—we’re able to save them money. We’re also able to ensure they’re getting the right coverage, because we’ve accurately measured what’s growing in those fields.”

Schuler noted that the vast majority of what Fireman’s Fund Agribusiness is doing now is the GPS; whereas in the past, satellite imagery coming from a satellite or group of satellites equipped with cameras was used a lot more.

“When we use satellite imagery now, we buy it from one of a number of sources,” Schuler continued. “We’ll then outsource that depending on the accuracy we’re needing…The higher the resolution, the better the quality, the higher the cost.”

The satellite imagery will be used to augment a map created so that such things as ravines, structures and access roads can be more easily seen. Second, if there is a remote area that’s too far for an agent to drive to with the ATV and mapping equipment, the company may buy an aerial photograph or satellite image so the agent can pull that up in his/her system and trace the boundary.

Commitment pays off
“We’ve got the process down now,” Schuler said. “Fifty percent of the premium with Fireman’s Fund AgriBusiness, our crop insurance premium, is now with agents who are providing mapping services to their customers.”

And while it requires a commitment on the part of the agents, Schuler maintained that commitment—providing a valuable service to growers—eventually pays dividends. But the most important benefit, according to Schuler, is, “If they’re committed to it, our mapping agents who aggressively use this technology are growing their agencies.”

In reference to the recent Arkansas court decision, Schuler said that while his company is not currently using such “multi-spectral analysis,” they are definitely moving toward that type of analysis for future use.

“The challenge is how to use these technologies to create real value for us and for our customers,” Schuler said. “The challenge for companies who want to look at these geospacial technologies…[is] to set their goals as specifically as they can and focus on bringing value.”

Topics Catastrophe Carriers USA Agencies Claims InsurTech Agribusiness Property Hurricane Market