Policyholders often have limited rights to view the specific data used against them, but they can contest denied claims and take steps like home upgrades and comparing quotes to mitigate premium hikes and policy cancellations.
It is common for insurance companies to inspect properties for damage in an attempt to mitigate future losses. But over the last few years, there has been a significant shift in exactly how those inspections are done.
In the past, a human inspector would look at the property in person. Today, insurers are replacing inspection agents with drones, satellites and artificial intelligence systems to review footage and determine whether a policy should be canceled.
The consequence for homeowners? Higher premiums, nonrenewals and coverage issues based on remote evaluations have increased.
Insurers are currently using AI in a variety of ways, including claims settlement, risk assessment, risk mitigation and investigating covered homeowners insurance claims following a loss, according to the American Property Casualty Insurance Association's response to a request for drafting an AI model law. Insurance companies are also using AI to model the potential for catastrophic weather events and assess the likelihood of a policyholder sustaining losses from catastrophes, such as hurricanes, wildfires and earthquakes.
Insurers are using these AI-driven underwriting models to save time and reduce expenses, according to Chip Merlin, founder and president of Merlin Law Group, a national insurance claim litigation firm that handles property insurance claims. But some companies are using different terminology to sidestep regulations, he wrote in an email. "Many insurers are intentionally avoiding the term 'AI' to avoid regulatory scrutiny, relying on external vendors rather than building their own software. Regulators are starting to make strides toward transparency and accountability ... but the laws are still behind on this technology."
Eberl, an independent adjusting firm, reports that certified pilots now use advanced drone technology to capture high-resolution data from the ground. These inspections often take less than 20 minutes, with real-time information delivered to adjusters for immediate action. Insurance companies may choose to use drone-based roof inspections because they cost significantly less than traditional, labor-intensive methods.
In addition to drones, insurance companies are also taking advantage of other forms of technology, such as AI and satellite imagery, to help set rates, process claims and identify fraud. Adopting these technologies can help speed up the application and claims processes, but some of these processes are already falling by the wayside as we continue to see technology advance, according to Merlin. "We're seeing drone use becoming less common as insurers shift to satellite imagery and AI-driven underwriting models that can generate a premium bid for a specific property within minutes," he says.
If your insurer finds damage to your roof or spots other hazards using drones or satellites, it may send you a notice that your policy will be canceled if you don't address the issue within a certain time frame. For example, you may be told you have 30 days to cut down a dying tree in your yard to prevent it from blowing onto your roof in a storm.
If you don't address the issue in the given time frame or if the damage goes beyond your insurer's risk level, your policy may be canceled altogether. Cancellations are more common in high-risk areas because of natural disasters, like wildfires or hurricanes.
A policyholder's legal rights to view specific data points or other information used to deny coverage are murky at best, according to Merlin. "This is the area where transparency is weakest, and policyholders are most vulnerable. Most policyholders have limited rights to view specific data or vendor models used to determine a claim."
Like most insurance issues, however, this varies by state based on local laws. Policyholders who have concerns about aerial inspections should review the laws in their state and work with an insurance expert to determine exactly how to access and review the information their insurance company is using to deny claims or cancel their policy.
When it comes to denied claims or canceled policies, Merlin explains that policyholders have a right to contest anything they think is inappropriately denied. "A policyholder can file a complaint with their state insurance department or pursue a claim directly against the insurer if they feel they are being wrongly denied or terminated."
If your homeowners insurance policy was canceled due to an AI inspection, you'll need to take steps to reinstate or replace your coverage right away. First, confirm when your current policy expires and ask for an extension. You may be granted an additional 30- or 60-day extension while you make repairs or upgrades.
Gather any evidence you'll need to make a case to your insurer and file an appeal right away to minimize the amount of time you are forced to go without insurance. If your request for extensions and appeals is denied, your best option is to work with a local agent or broker to find a new policy that can start as soon as possible.
If your insurer uses an AI inspection to justify raising your rates, there are a few steps you can take to help lower your homeowners insurance premiums:
