Drones come in a variety of sizes and types, from model aircraft for personal use, to large fixed wing aircraft used by the military. The commercialization of drone technology is just getting started and it appears to have enormous potential. Insurance coverage for drone operation is essential for that progress to take place.
The definition of a drone varies by law, regulation and nature of use. Drones are used for numerous private and commercial applications. These include use of drones for crop management, disaster management, insurance underwriting and claims, filmmaking, journalism, and a large number of other applications. Laws usually distinguish recreational use of model aircraft from commercial use of drones, with model aircraft being largely unregulated.
Both recreational and commercial operators face a number of potential legal issues when they fly their drones. Invasion of privacy is a big concern, followed by physical damage and bodily injury in case of, for example, a drone crash. There are also concerns about drones creating liability arising from trespass, nuisance and potential abuse by law enforcement.
These potential legal issues, combined with the uncertain regulatory atmosphere, make insurance underwriting for drone liability a challenging endeavor. A wide range of insurance coverage types may unintentionally be triggered depending on how an operator uses its drone. This includes drone coverage by property insurance, commercial general liability insurance, business owners insurance, farm owners insurance and homeowners insurance among others. Underwriting consideration must also be given to potential aviation liability, workers compensation, directors’ and officers’ liability and the feasibility of writing stand-alone drone liability insurance policies.
Underwriting drones is a very new undertaking for insurance companies. Looking closely at the use and features of this new technology will be critical to properly assess and underwrite the risk. In the near future, as regulation of drone use becomes clearer and insurers become more comfortable with this unfamiliar territory, the capacity to underwrite drone liability is expected to increase.
At this conference, we will explore the practical and legal implications of developments and uses of drones, to help Swiss Re's casualty and aviation reinsurance clients better assess and underwrite the risks posed by the use of drones.