Louis Ziskin thinks insurance is doing claims all wrong. The DropIn founder believes misaligned incentives and dubious practices have sent claims costs spiralling.
Ziskin set up DropIn in 2015, when he realised that the advent of smartphones and the gig economy could revolutionise the way insurance claims are adjusted.
His company now employs thousands of drone pilots and taxi drivers as ad hoc insurance inspectors and loss adjusters.
The technique is now being used to do everything from cheap on-site inspections during a commercial insurance underwriting process to adjusting auto or property catastrophe claims.
DropIn has three years’ experience of operating in natural catastrophe zones.
In November 2018, the Woolsey fire in Los Angeles provided the ideal testing ground for DropIn’s video streaming technology.
An insurer contacted the company to say that two clients had homes in the Malibu area threatened by the fire.
In a bid to get eyes on scene, DropIn COO Ian Wilson strapped a drone in a waterproof box to a jet-ski and rode to his parents’ beach house in Malibu, an area cut off by the flames. A drone pilot went with him on the back of the jet-ski.
Wilson beached the vessel and the drone was launched, filming the fire. It was able to take imagery of the insured homes, feeding the pictures back live to the family whose home was threatened. One house suffered minor damage and the other was fine – the insured family were able to see pictures of their undamaged home in real time, while they sat in a rescue shelter.
“The insurer had one very happy client – they are probably going to renew with that company forever,” Ziskin explained.
Once the checks on the insured property had been completed the pilot stayed on the beach, taking live footage for the fire department.
The use of live imagery on a drone, rather than bringing a drone back to ground, plugging it in and downloading the footage, gives insurers immediate information about what is happening.
The technology also allows an insured to use their own phone to stream footage straight to an insurer.
DropIn has a partnership with ride-hailing app Lyft, with drivers able to pull in a new income stream serving insurers with instant claims images.
Ziskin also works with numerous freelance drone operators.
DropIn has attracted interest from Lloyd’s, which picked the company as one of the inaugural members of the Lloyd’s Lab.
Ziskin has an unusual background for a CEO. He spent 12 years in a California prison for trafficking 700lbs (318kg) of ecstasy into the US. When he was caught in 2000, it was the largest haul of the drugs ever detected by the US authorities.
Ziskin said his background makes it easier for him to see structural problems with the way the industry adjusts claims.
“I did what I did when I was younger, I was a drug trafficker, I was around criminals, I was around scammers,” he told The Insurance Insider.
“I’ve heard every scam there is, you can smell ’em, and then spending 12 years in prison hearing even more scams – I mean, you can just tell right away.”
He says that the auto loss adjusting process has misaligned incentives that lead repair shops to inflate claims costs.
“Insurers are overpaying on bodyshop work and vendor work.”
Ziskin argues that if insurers get accurate imagery of an accident from the day of the crash, rows between customers and carriers over the extent and cost of damage can be avoided.
Ziskin is a vociferous critic of his biggest rivals: the incumbent third-party administrators (TPAs) that dominate the claims business.
“TPAs are taking too much money out of the game,” he argued.
“Why are insurers paying high-value dollars to adjust low-value claims? It takes the same amount of money to adjust a $3,000 claim as it does to adjust a $30,000 claim.”
His main criticism is that traditional TPAs take far too long to send an adjuster out on site. Following a cat event, it can take weeks for a claim to be adjusted.
He said that one of the “ten commandments” of insurance is “the sooner you have eyes on scene, the lower the claim”.
He said that the “only people who benefit” from longer waits are TPAs and ambulance-chasing lawyers.
Under the conventional loss adjusting model, adjusters in the US spend hours on the clock driving from claim to claim. Ziskin said that Lyft drivers know the local roads and are more emotionally invested in the area hit by a hurricane than employees of big adjusting companies.
DropIn adjusted 900 claims in days after Hurricane Florence last year.
The aftermath of Irma in 2017 is an example of what can go wrong if claims are not adjusted quickly. Many insureds were still waiting for loss adjusters when contractors arrived, saying they’d fix the roof for free if they’d sign some paperwork handing over their right to indemnity.
Instead of a customer who just wanted their roof fixed as quickly as possible, insurers were faced with litigious contractors and their lawyers, hell-bent on claim inflation.
Such assignment of benefits (AOB) fraud has proved hugely costly for the industry. Florida carrier United Insurance Holdings, for example, said in February that claims Irma claims had crept by 44.5 percent since 2018 to $900mn.
Florida has now passed an AOB law that is set to be bring claims costs under control, but only after litigation costs spiralled out of control for what should have been easily handled property claims from Irma.
As well as reducing the cost of loss adjusting, DropIn claims to be a good way of separating honest claimants from fraudsters.
“We send you a text saying we may be able to get you a vendor in today [to fix the problem].
“Our unique proposition is that the bad actor is self-identifying. A good actor will let someone stream using their phone,” explained Ziskin.
“The really interesting thing is that the bad actor isn’t going to want any of that.”