Insurers must grapple with the challenges of insuring drones

As the use of drones for a variety of purposes in the world grows, insurers will need to work out how best to insure them and where the risk sits, said William Mauro, director of commercial lines at ISO Solutions, a Verisk Analytics business.

For example, the liability could change significantly if a drone were operated within the visual line of sight of a pilot versus beyond this line, and may change an insurer’s underwriting focus, Mauro said.

“While the focus for drones operated within the visual line of sight is likely to be on the pilot’s skills, in autonomous, beyond-line-of-sight operations, the underwriting focus may be more on the technology,” Mauro suggested.

If a drone is operated within a visual line of sight, an insurer might want to inquire if the pilot had completed training for drone operations, if he or she had been vetted by a third party, or how many hours of flying drones the operator had logged, Mauro explained.

“In case of a drone being used beyond the line of sight of the operator, an important factor may be if the drone is pilot-operated or autonomous. That is, is it flying on a predetermined programmed route with crash detection and avoidance technology?”

He pointed out that the latter scenario might raise a host of questions, such as what kind of operating system the drone is using, if it is using the latest and most secure software or if there has been any loss experience for autonomous drones in similar operations, from either software malfunction or other external factors.

Additional questions may address the maintenance protocol for the software, such as whether it is adequately secure from cyber attacks that could lead to potential bodily injury or property damage in the event of a successful hack of the operating system.

“More generally, an insurer might want to consider the expected operations of the drone, and where it will be used,” Mauro said.

“For example, if it is used by a farmer to spray pesticides there might be an increased risk of collision with overhead power lines. If used by a photographer at an outdoor festival in London there might be an increased risk of causing bodily injury if the drone malfunctions and crashes.”

He added that the insurer might also want to consider the drone’s payload and modifications. Will the drone be carrying expensive equipment, such as a photographer’s camera and lenses? Will the drone be holding heavy canisters of pesticides for the farmer—and has it been sufficiently modified to carry burdensome payloads and equipment or peripherals? “Other questions may focus on the maintenance protocol for the drone and its peripherals and how often these are being serviced,” he concluded.