No winging it: insurance and the rise of the drones

With drones set to become more widely used, insurers should be aware of the implications. We examine these in Insurance and the rise of the drones.

It’s hard to imagine the first drones were balloons; one actually flew surveillance for  US President Abraham Lincoln’s troops in the Civil War. Today, drones are widely used in armed conflict, for intelligence gathering and law enforcement and by businesses of every stripe - from insurance to real estate to energy to filmmaking.

One estimate shows annual spending on commercial and military drones will reach $11.6 billion by 2023. In the US alone the design, manufacture and operation of drones could create up to 70,000 new jobs.

A pervasive risk in the air and on the ground

Regardless of their design or use, drones present challenges and opportunities for insurers. Safeguarding these critical assets and protecting the balance sheets of their owners can be a risk worth assuming so long as underwriters get a firm grasp on their uses and the potential consequences.

Swiss Re is keeping close watch on claims and underwriting developments to help our clients make informed decisions. The report Insurance and the rise of drones was written by property and casualty underwriters along with claims and legal experts. It describes the growing use of drones and examines how various policies may respond in a variety of scenarios, with a particular eye to exclusions.

Things to consider

The list of insurance policy forms likely to be affected is extensive: everything from Property and General Liability to Aviation Liability, Professional Liability and D&O. So far the case law is limited, yet we can expect a myriad of legal issues to come up, including privacy, physical damage, personal injury, trespass and nuisance. In many cases, existing tort law will apply.

The list of “what ifs” is long, and growing:

  • What if a drone crashes into people or property on the ground, or into another aircraft?
  • What if a person’s photo is taken from a drone and that photo is used for commercial purposes?
  • What if a surveyor uses a drone when surveying a customer's property and in the course of operating it causes bodily harm? When does the surveyor's insurance provide coverage? When doesn't it?
  • If an insured operates a neighbor’s drone for the insured’s benefit without compensation, would the non-owned aircraft exception to an exclusion apply?
  • When defining a personal property exclusion on aircraft not carrying cargo, is a camera considered cargo?

No doubt this exercise can stretch the imagination, but where drones are concerned a curious mind is a prerequisite for contemplating all of the likely ramifications between takeoff and landing.

Clearly this is not a time to wing it.

Published 19 January 2015


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