In the United States, Allianz Global Corporate & Specialty has been writing coverage for drones, or UAS' (unmanned aircraft systems), as they are more technically called, since 2006.
They began by writing aviation products liability coverage for UAS manufacturers and component manufacturers. This coverage was for those creating or manufacturing blades, motors, electronics and other component parts, as well as products liability for the entire aircraft system.
As the industry evolved and the civilian drone market began rapidly growing, Allianz created new policies and coverages to meet the needs of this growing industry. Allianz focused on the use of civilian consumer drones for commercial use and now insures thousands of unmanned aircraft.
Recently, the editors of FC&S sat down with James Van Meter, Aviation Practice leader at Allianz, to talk about drones and the insurance industry. Van Meter has been underwriting aviation risks for over a decade, and is an FAA licensed unmanned aircraft operator and a manned commercial pilot.
Related: Evaluation and mitigation of drone-related risks
|Who is currently seeking drone coverage?
Van Meter said the types of industries seeking insurance for commercial drones are varied. For instance, some companies, such as news stations, seek coverage for drone-assisted film production. It is more cost effective for a news station to purchase a drone rather than renting or maintaining a helicopter to capture newsworthy footage.
Other industries looking for drone coverage fall under the umbrella of aerial data collection, which encompasses most other drone uses including the inspection of industrial sites, crops, cell phone towers and municipal infrastructure such as roadways and bridges.
Engineering firms as well as forensic engineers are using drones for inspections of projects and losses. Consider Yamaha in Japan, which has been using drones for non-commercial crop surveying for over 20 years. Plots are often smaller and on hillsides in harder to reach areas and drones were a natural way to view crops. It is not anticipated that drones will be used in the U.S. for crop surveys in the near future due to individual state licensing requirements and the need to comply with both FAA requirements under Part 337 and Part 107 as well as state pesticide regulations.
|How are drones being used in claims adjusting?
With the recent severity of the hurricane season, the use of drones removes the hazards of sending personnel onto damaged rooftops or into other severally-impacted areas.
Van Meter said that more carriers are training their adjusters to fly drones. But others are hiring outside pilots to accumulate data, rather than investing in equipment and training.
It is relatively easy to get a commercial drone pilot license and meet the FAA Part 107 exception, as it is a self-study course with a written exam only. There are roughly 60,000 Part 107 pilots in the country now. While carriers are training adjusters and putting drones to use, it is still experimental in many ways due to the newness of technology and development of abilities.
Related: Game of drones: Liability and insurance coverage issues coming
|How does drone coverage compare to standard aviation risk?
Coverages for drones are similar to coverages for regular aviation risks, said Van Meter. While coverages differ by carrier and drone use, Allianz drone coverage includes hull physical damage for the drone, cameras, sensors and control stations; and liability, including aviation products liability, war, TRIA, third party general liability for BI and PD, lost or stolen drones, non-owned aviation liability, and privacy injury. Additional coverages are available for third-party legal liability for drones and additional hull insurance for aerial systems, remote control, and additional equipment.
Some pilots may also need cyber coverage, professional liability or other commercial coverages. Allianz also insures other insurers who are using drones in their operations.
Van Meter said this company's targeted Part 107 drone insureds are professional, conscientious pilots who seek additional education to become certified. He accredits Allianz's success in providing drone coverage to this underwriting selection.
Benoit Leroux, drone pilot at DPD Geopost in France, demonstrates the use of a package delivery drone. GeoDrone completed its first successful automated package delivery flight more than two years ago. (AP Photo/Claude Paris)
|How does Allianz approach delivery drones?
Van Meter said that because the FAA's main goal is to protect the public, the United States has not advanced as far as other countries regarding using drones for deliveries.
Rwanda, for instance, has been using drones to deliver blood, medications and other supplies to remote areas, and can verify that such actions have saved lives.
But the FAA moves very methodically in order to keep the public safe. So it is taking longer to get drones approved for flying beyond visual line of sight and night flying. The FAA sees infrastructure inspection as the number 1 use of drones.
Related: Evaluation and mitigation of drone-related risks
|What about coverage for hobbyists versus commercial pilots?
Hobbyists can find coverage for their drones through the Academy of Model Aeronautics (AMA); it provides umbrella coverage in excess of their underlying homeowners policy with limits up to $2.5 million.
Small commercial pilots can find coverage through www.allianzdrone.com. Policies have $1 million limits with annual premium less than $1,000 for a single drone. Coverage includes property damage to the drone, war, TRIA, and hull.
Van Meter said the company has seen a little of everything in hull claims from equipment malfunction, operator error, theft from vehicles, crashes into trees, water and other objects. Through their policies, Allianz is trying to fill any gaps for a drone pilot. Allianz has not had any losses where drones have crashed into a manned aircraft, like the incident with the Black Hawk in NY; and no losses from a drone being shot down. The commercial drone pilot may need standard GL and professional liability such as E&O, but as far as property damage to the drone, recovery, war, privacy, TRIA and other coverages are available. Cyber coverage for the drones is not yet available from standard aviation carriers. A commercial drone pilot does not need to purchase insurance however if they are not using their drone for hire.
Related: Drone insurance: Are your clients covered?
|How concerned is Allianz about drone adherence to flight restrictions?
When asked what keeps drones from flying into restricted areas, Van Meter explained that most drones are have GPS and geofencing built into the aircraft. These help keep drones from flying in restricted airspace or operating outside of the rules. Most drones show the location of the drone on a map image. Once the drone is turned on, it knows where it is and what areas it should not cross. This was developed after the man flew the drone onto the White House Lawn.
|What emerging drone threats does Allianz track?
There is of course the potential for terrorist actions or illegal activity, such as flying contraband over the prison fence or flying drugs over the border. This leads to the need for detection and deterrent technology. Deterrent technology is still in the works, but being able to identify a drone that is engaging in unauthorized activity and either blocking the signal, locating the pilot or even taking down the drone are all things to be considered.
|What can brokers do to address gaps in drone coverage?
Van Meter perceives a need for brokers to become more knowledgeable about where they can go to get questions answered so that they are able to select the right policies for their insureds. Brokers need to be informed about the widespread use of drones in various industries, know the FAA regulations, and the broad coverages and sources that are available to cover drones.
See also:
Christine G. Barlow, CPCU, ([email protected]) is managing editor with FC&S, the premier resource for insurance coverage analysis. She has an extensive background in insurance underwriting. For additional information on FC&S Online, visit www.NationalUnderwriter.com.
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Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.
