Drone, or unmanned aerial vehicles (UAV) have made a huge splash in the news over the last year. Amazon has discussed using them for local delivery, one landed on the White House lawn, as well as, their war time use in the Middle East. The commercial uses for drones are seem almost endless as people imagine how they can be utilized. Hollywood has won approval to use them for filming movies, farmers believe they can be used to check on crops, as well as administer fertilizer and insecticides more efficiently and utility companies want to use them to check power lines. Insurance companies are planning to use drones in disaster response situations.
There are two groups sprinting to keep up with the potential commercial uses of drones, the Federal Aviation Administration (FAA) and commercial insurance companies. The FAA is scrambling to come up with a cohesive and implementable policy for drone use. They estimate 7,500 drones will be flying in the US within 5 years. When compared with the number of US commercial airlines, the combined fleet of all carriers consists of 4,728 planes, they have their work cut out.
The biggest issue facing the FAA is how to keep US airspace safe. In order to do so, they will determine the requirements for drone pilots (they may be required to have a pilot license), and operations guidelines for drones weighing less than 55 pounds. These guidelines will most likely address where they can be flown, altitude, and potentially their uses.
The other group seeking to keep up with the technology are commercial insurance companies. According to the Insurance Journal, the market for done insurance is predicted to take off in the next 5 years. While many insurance companies have yet to release drone insurance policies, a few have done so in the last few months as early adopters have sought insurance coverage now.
After talking with underwriters in the companies who do offer this coverage, there are 2 items worth noting (keep in mind this is still a fluid environment that is subject to change in the coming months).
- Drone and UAV insurance coverage is currently a separate policy
- It is most likely not covered under a commercial general liability policy and I expect most general liability policies to eventually be updated to exclude coverage for drone operation
The information required to quote and write a drone insurance policy includes traditional information similar to a commercial vehicle policy such as make, model, serial number, specifications, and value of the UAV, as well as the support system equipment. Underwriters want a copy of the certificate or waiver to operate a drone from the FAA, and will want to know hours operated, annual hours of operation, speed, means of control, payloads carried, how close to the public it will be flown, pilot name and experience, and more. All of these items will be used to determine the cost of these policies.
To keep the cost of drone insurance affordable, companies should have clear, written usage guidelines, have implemented training and safety programs, use licensed pilots to fly them, and not rent or lease them to third parties. Do you anticipate using drones or UAVs commercially? Share how you anticipate using them along with any questions, comments, and concerns you may have with me on our Google +, Facebook, and LinkedIn pages. I’d love to hear from you!
