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Sep 22, 2015

Agents and brokers should educate themselves about the emerging opportunities in the commercial use of drones.

The use of unmanned aircraft systems or unmanned aerial vehicles, more commonly referred to as drones, is exploding across the country. Drones have been in use by the military for years but commercial use of drones is taking off. It makes sense; drones can go where people can’t easily or safely go. Commercial applications are practically limitless.  Drones are in use by filmmakers to get better camera angles, by realtors to showcase properties or potential building sites, by the oil industry to inspect pipelines, by engineers to inspect bridges, by farmers to improve crops and by firefighters to determine the best way to fight a fire.

The Federal Aviation Administration  has been tasked with establishing rules and regulations to govern the use of drones but the development and implementation of regulations over commercial use remains in process, partly because the industry is expanding and the issues are emerging. The FAA reports that drone use is currently the fastest growing sector in aviation and is issuing permits for commercial use at the rate of approximately 250 per month.

Drone use touches the insurance industry in two ways:

Use of drones by the insurance industry–Drones can improve the process of underwriting and the adjusting pf insurance claims by performing tasks that are risky to people, such as building inspections after a catastrophe. Drones can also help accelerate the claims handling process after a major storm event. Several large insurance carriers have received FAA approval to use unmanned aircraft in certain scenarios.

Insuring of drones–Writing insurance coverages for commercial use of drones is an emerging market filled with opportunity. In a recent survey of insurance professionals conducted by RKH Specialty, a London-based broker, drones were identified among the top three emerging casualty risks, along with cyber security and product recall. Large companies are already making plans for full-scale implementation of drone, including Amazon, UPS and even Domino’s Pizza.

Effective underwriting of drone coverages requires some understanding of the industry and its risks.  Perhaps the biggest risk associated with drone use is personal injury liability. For example, a woman was recently knocked unconscious by a drone during a parade in Seattle. Other risks include damage to the drone hull itself -- most damage is the result of pilot error -- privacy issues, and other complex liability and coverage issues. Another cautionary example is a recent incident in California in which drones interfered with firefighting efforts. Drone mishaps could also trigger workers’ compensation claims.

Brokers and agents can begin to educate themselves about drones. First, understand how the insured plans to use the drone in its business, who will operate it and the operator’s qualifications. Learn about drones, their uses and trends from organizations such as the Association for Unmanned Vehicle Systems International, or Small UAV Coalition. Subscribers to ISO can review recently issued general liability exposure endorsements relating to drones. Other alternatives include consider partnering or collaborating with an aviation or wholesale broker with experience in this area, or talk to carriers to determine if they are writing these coverages and can provide training. 

FAA estimates that 30,000 drones may come into use in the next decade. This is a trend that is likely here to stay.


The FAA reports that drone use is currently the fastest growing sector in aviation and is issuing permits for commercial use at the rate of approximately 250 per month.

¬Best’s Review: September 2015
Copyrighted A.M. Best Company, Inc. 2015 All Rights Reserved, Reprinted with PermissionWorkers’ Compensation Insurance 1009

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