An agile and flexible response by all parties is needed in light of the new and little-understood risks expected to emerge with the anticipated increase in drone activity over the next few years, SCOR experts write in a recent technical newsletter.
“Sales of drones for private use have exploded in the last few years but now, in addition, commercial drone activity is growing exponentially,” notes , Drones and Insurance: New technologies allow new capabilities and require new risk management, written by SCOR co-authors Hans Kubli, senior underwriter, Aviation & Space Treaties, and Andrea Sommerlad, chief underwriting officer, Aviation & Space Treaties.
Current uses of drones include disaster relief, inspecting and exploring inaccessible places, precision agriculture, claims handling and logistics.
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Kubli and Sommerlad emphasize the need for a safety-first approach by drone operators. “To guarantee safe operation, authorities and drone manufacturers must respond fast to changes due to the rapid development of capabilities and the ever-increasing air traffic at low altitude,” they write.
Pointing out that a very limited history of operation, reliability and actual claims is currently available, the newsletter notes, “insurers have taken a proactive approach to fill the gaps in knowledge and to offer a comprehensive cover for all stakeholders. They will play a vital role in making drones a prominent part of our future.”
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Since drone-related accidents involving bodily injury and/or property could provoke legal action, the authors write, “drones for both private and commercial use should have legal liability insurance to cover third-party damage (bodily injury and property damage), despite such cover only being compulsory in a few countries.”
Bodily injury losses “have the potential to be substantial and even to exceed the usually modest sums insured,” the newsletter notes. “A drone used for agricultural purposes in the Midwest of the U.S. has a completely different risk profile to a similar-sized drone used for taking spectacular videos during a crowded sports event.”
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Other additional covers to consider include the following:
- liability cover for lawsuits involving the invasion of privacy;
- product liability insurance to protect drone manufacturers, parts and software suppliers and maintenance providers from lawsuits in the event that products fail or contribute to a loss; and
- hull insurance – rates for which tend to be higher than for manned aviation – for the vehicle, payload and ground equipment.
That said, with no uniform regulation currently existing for drones, “insurance has to be tailored around diverse national regulations, whilst being flexible enough to adapt to the frequent changes made.”