Recently, I was approached by a client who wants to use drones (also referred to as an Unmanned Aviation System (UAS)) in his business activities, and being a smart client he checked with us to see if his liability policy would cover this activity. My immediate reaction was absolutely not (after all it is an aircraft which is indeed excluded by most General Liability policies) but it did spur me on to do some serious research as drones, in many different types of businesses, are starting to become quite common and usual.
As technology evolves more and more, industries are becoming aware of how a drone can improve their business and how it helps with risky jobs thus protecting human lives at the same time. Studies and analytical projects are realized more economically and much quicker than relying on individual man hours. In some situations, the gathering of certain data has been impossible to secure, but drones are changing things.
The use of drones for commercial and industrial purposes is regulated by the Aviation Authorities, so before a client embarks on this new activity and before their broker goes out to market, it is best to understand the requirements. The insurers that do offer this product will need comfort in knowing the client has met those requirements, which includes being a licensed operator; having trained through an industry approved license academy. This will ensure the public is safe, property is safe, that the client is able to react to a difficult situation that might arise while piloting a drone and is being notified of regulation changes.
My research shows me that all industries are getting involved in the drone world, including Insurance Companies. State Farm was the first insurer in the US to be granted permission to use drones for outdoor research and development, including using imagery and analytics in underwriting, catastrophe response, roof inspections and claim resolutions settings. Ultimately one of the most important uses State Farm and other insurers would have for drones may be in evaluating property damage from and responding to natural disasters.
While this may sound like sci-fi, it’s becoming reality, and with the expected growth over the next ten years the insurance industry has had to respond. While there were only a smattering of insurers prepared to look at covering this activity, there are now more insurers offering products and not only from the Aviation Insurers’ side. It is still precarious as there is no historical data to allow proper underwriting. The two key concerns, of course, are invasion of privacy and personal injury.
As far as insuring drones, carriers will want to know such things as its function or intent, its takeoff and landing locations, whether it will be operating over a populated area, and its flying altitude.
In addition, with the ability to collect massive amounts of unsolicited data, drones present an enormous threat to individual privacy and a significant challenge for insurance carriers. In underwriting policies, it is crucial for carriers to know how such information will be used.
It has been reported that over the next ten years, spending in this area could reach close to 89 billion, so we all need to get prepared to live in a world where drones are prevalent and to deal with the risks and challenges their presence will bring.
For any questions on this matter, do not hesitate to contact one of our experts.