US insurance carriers are bracing for as many as 30,000 commercial and civil drones in need of coverage by 2020, as the Federal Aviation Administration gears up to release rules allowing for the private and commercial use of unmanned aircraft.
The demand for drones is at an all-time high, as the robotic planes and helicopters cut out paid workers and accomplish tasks with less cost and less physical risk. The drones will deliver packages for retailers, inspect rooftops for construction workers and take flyover shots for those in the entertainment business.
Of course, all of these activities still carry some liability and the insurance industry must be ready with a range of products to cover those risks. In some states, such as New Jersey, legislative bodies are even passing commercial drone insurance requirements.
These laws would compel drone operators to maintain liability insurance on the unmanned aircraft and register it with the state transportation department. Some insurance services offices have also developed standard forms for drone insurance that underwriters will use to create the needed coverage.
Some carriers, such as
AIG and
Zurich, are already in the market and are preparing to underwrite billions of dollars in liability coverage for drones.
AIG’s policies are offered through the company’s subsidiary
Lexington Insurance Company and bear many similarities to auto insurance plans, covering both “broad physical damage” and “third party liability coverage.” However, as they are written especially for drones, the policies also cover drone “operators” and on-ground crew members, as well as electronic malfunctions and component failure.
The coverage excludes problems such as hijacking, unlawful seizure, hacking or “spoofing.”
The move to offer drone coverage comes just one month after a
Fortune magazine report suggested that lack of viable insurance options could threaten the entire industry. And as it is already predicted to generate billions of dollars in economic impact over the next 10 years, it’s important that market players come forward soon.
Previously, insurers have cited significantly liability and a lack of regulatory guidelines as making it difficult for underwriters to craft well-rounded products for drone manufacturers and operators.
UK insurance house Lloyd’s has even gone on record saying risk pricing for drones is extremely difficult in view of their emerging status and inherent issues like third-party liability for physical damage, to say nothing of a lack of meaningful data and risk metrics.
Others in the industry agree.
“Unfortunately, there are big questions and not enough answers,” Tom Karol, a general counsel for the National Association of Mutual Insurance Companies, told
Fortune. “There needs to be more clarity on how people will use these, and what will be allowed and won’t be allowed is a big issue.”
