These are the greatest risks associated with drones: Allianz

A new report underlines the urgency of insuring the more than 600,000 commercial drones estimated to be flying over the US by the end of 2016

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More than 600,000 commercial drones are expected to be whirring across the US by the end of 2016, presenting insurance professionals with one of the greatest emerging opportunities in commercial property and liability insurance.

Commercial application of drone technology is expected to hit $127 billion by 2020 – up from $2 billion today, according to a new study from Allianz Global Corporate & Specialty released Tuesday. The commensurate prospects for insurance markets are also good. In “Rise of the Drones: Managing the Unique Risks Associated with Unmanned Aircraft Systems,” Allianz suggests that the US drone insurance market could reach more than $500 million by 2020.

Globally, that value could be approaching $1 billion.

To cash in, though, producers need to be aware of the greatest risks associated with drone use. The Allianz report suggests several.

From a safety standpoint, the firm identified mid-air collisions and the loss of control as two of the most pressing risk concerns.

“A collision can occur if the pilot cannot see and avoid manned aircraft in time,” the report said. “Most at risk are manned aircraft which fly below 500 feet, such as helicopters, agricultural planes and aircraft landing or departing from airports. A collision involving a UAS striking the engine of an airliner could cause $10 million in physical damage alone.”

Loss of control, meanwhile, can result from system failure or flying beyond signal range – a scenario that has already caused several injuries, the report noted.

A potential terrorist threat from drones targeting critical infrastructure is another of the most troubling aspects of the new technology. Hackers “spoofing” a drone radio signal and the theft of valuable recorded data are also important risks to consider.

There are also many public concerns around privacy, trespassing and nuisance complaints.
Overall, Allianz suggests $1 million as the minimum amount of insurance coverage required for commercial operators to protect against these and other risk exposures.

When it comes to selecting coverage, producers should be able to tap into a growing market. By estimates from Allianz’s James Van Meter, aviation practice leader, there are roughly a dozen companies writing commercial drone coverage. While policies vary from carrier to carrier, most offer hull and liability coverage, third-party liability exposure for business interruption and first-party property damage for the drone itself.

Already there has been a wide spread of interest in Allianz’s drone coverage from all industries and markets, Van Meter told Insurance Business America in an earlier interview.

“We get submissions from startups all the way up to Fortune 100 companies with a fleet of drones across the country,” he said. “Their needs vary – some are using more sophisticated equipment with bigger sensors and better cameras – but we see a huge diversity of purchases.”

Van Meter recommends producers seek out as much education as possible to ensure their success.

“You can find the information through professional groups. A lot of insurance organizations and associations are either holding CE courses or they’ve put out some documents to guide agents in placing the insurance,” he said. “There’s a robust marketplace writing this business, and insurers are especially excited with these new rules in place.”


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