Use of Aerial Imagery by Property & Casualty Insurers

STATE OF VERMONT DEPARTMENT OF FINANCIAL REGULATION 89 Main Street Montpelier, VT 05620-3101 For consumer assistance: [Banking] 888-568-4547 [Insurance] 800-964- 1784 [Securities] 877-550-3907 dfr.vermont.gov Insurance Bulletin #241 Use of Aerial Imagery by Property & Casualty Insurers August 21, 2026 The Department of Financial Regulation is aware that property insurers have been using aerial images of insured properties to evaluate the condition of properties including but not limited to roofs, siding, and tree overhang. Insurers have been using these aerial images in underwriting, pricing, and likely in claims handling. For example, insurers have issued non-renewals if an aerial image appears to indicate that a roof is damaged, degraded, or shows discoloration and/or cosmetic damage. Insurers have also used aerial images to determine a roof score for a property and then used that score in pricing the premium for property coverage. The Department reminds insurers that 8 V.S.A. § 4681(5) provides that one of the purposes of the Property & Casualty Insurance Rate Regulation is “to promote availability, fairness, and reliability of insurance;” and 8 V.S.A. § 4724(7) provides that “Unfair discrimination; arbitrary underwriting action” are unfair methods of competition or unfair or deceptive acts or practices in the business of insurance, including: (A) Making or permitting any unfair discrimination between insureds of the same class and equal risk in the rates charged for any contract of insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contracts. Further, 8 V.S.A. § 4724(9) provides that “Unfair claim settlement practices" are unfair methods of competition or unfair or deceptive acts or practices in the business of insurance. The Department is concerned that an aerial image may not always provide a true and accurate representation of the condition of a roof or other aspects of a property. If an insurer is using aerial images in underwriting or claims handling, please follow these guidelines to ensure accuracy, transparency, and compliance with Vermont statutes:

1. An insurer must supplement an aerial image with an on-site inspection or other sources of information, if the aerial images are inconclusive. For example, if the images are out-of-focus, low resolution, blurry, or old, an insurer should acquire recent, unambiguous information through an on-site inspection or other reliable sources. The Department believes, in most cases, images older than 24 months Docusign Envelope ID: 8DE14BC2-9F73-8854-8332-B4104F2B6809

DFR Insurance Bulletin #241 Page 2 of 2 are inappropriate to rely upon for decisions that are impactful to the consumer and if used, may result in unfair trade practices. The Department understands that there may be instances in which it is appropriate to use recent images with older images for comparison purposes. 2) Aerial images that show cosmetic damage such as discoloration or streaking are insufficient to support underwriting actions such as non-renewals. Natural discoloration and streaking do not indicate that a property is functionally compromised. In order to use condition to non-renew a policy, an insurer must supplement an aerial image with other sources of information which might include an on-site inspection to confirm that there is material damage to the roof. 3) The department understands that an on-site inspection may include the use of drones. 4) It is best practice for an insurer to notify an insured whenever aerial images have been relied upon to non-renew or cancel a policy in order to provide the insured with an opportunity to dispute the property’s condition. If there is a dispute about the non-renewal or cancellation, an insurer must conduct a timely review of any evidence and documentation provided by an insured. An insurer must provide insureds with a copy of images if requested and an opportunity to correct or update information about their property. For example, the insured may have replaced a roof after the aerial image was obtained, and the aerial image does not reflect the current condition. Notification of an issue will also provide insureds with an opportunity to make the necessary repairs and possibly avoid nonrenewal. 5) Prior to making a claims decision, an insurer must conduct a reasonable investigation and timely review of any evidence and documentation based upon all available information, including information provided by the insured. If there is a dispute related to a claim settlement, an insurer must provide an insured with a copy of images if requested. Please refer to 8 VSA, § 4724, Regulation 79-2 (Fair Claims Practices), and Regulation 99-1 (Records Retention). 6) The requirements described above relating to on-site inspections are waived for claims investigations following extreme weather events when access to the property is limited or substantially delayed. Questions regarding this Bulletin or related filings with the Insurance Division should be directed to the Director of Rates and Forms for Property and Casualty Insurance. Kaj Samsom, Commissioner Date Docusign Envelope ID: 8DE14BC2-9F73-8854-8332-B4104F2B6809 8/27/2026