Insurance Industry Addresses Drone Risks

The insurance industry’s leading risk management consultants recently released new recommendations for commercial drone insurance issues.

ISO has introduced new suggested coverage and exclusion options which the firm says will “address the growing liability exposures of commercial drones, which have already developed a wide range of potential and reported uses, including package delivery, crop protection, and aerial photography.”

Six insurance options would be available for insurers to offer that will seek to mitigate potential exposures to bodily injury, property damage and other drone-related liability issues. Three are optional exclusions, and three are coverage options addressing liability arising out of the ownership, maintenance, use or entrustment to others of drones. Each coverage option allows for limited coverage for designated drones, with respect to designated operations or projects.

“As more businesses introduce drones into their operations, insurers need underwriting tools available to them to address the potential wide range of exposures they’ll likely face,” said Ron Beiderman, vice president of Commercial Lines Coverage Products at ISO Insurance Programs and Analytic Services. “Our new flexible endorsement options can help insurance carriers tailor the coverage to address such exposures in ways that suit their risk tolerance.”

As drone technology and potential applications continue to expand, business firms face difficult question: “How can drones be used to grow their businesses without harming customers and bystanders?” An ISO spokesperson added that companies need to take steps to reduce the risks of drone use and protect themselves, should an accident occur.

“As always, insurance carriers need to make their own independent decisions, but we would not be surprised if some carriers are still forming their strategies to address drones,” ISO said.  “Of course, some insurance consumers looking to use, for example, a fleet of drones, may be better suited to an aviation liability policy.  But for businesses that might be looking for certain liability protection on a smaller scale, perhaps with respect to use of just one or a few drones commercially, attaching an endorsement to an existing general liability policy may be an appropriate option,” the spokesperson added.

Although details will vary among drone operators, potential insurer considerations will include the type of drone, its intended operations, and the drone operator. Questions insurers may ask would include: “What are the make, model, and year of the drone being flown? How high can it fly? How long can it remain in the air? If pressed to exceed its limits, a drone might end up malfunctioning, and then come crashing down to earth possibly colliding with a car, building, power line, or person. How much weight can the drone safely carry? Has the drone been modified after manufacture?”

“A drone delivering medicine to a rural community might encounter different risks and exposures (engine failure, for instance, in a low populated areas) than an airborne delivery of groceries within a bustling city (possibly encountering risks for collisions with cranes, telephone lines,  buildings, or even other drones in densely populated areas),” an ISO statement reported.

“When talking drones, the future is already taking shape. It may pay for businesses to recognize potential problems hovering above them — as well as know what types of coverage options are available.”

To access a drone white paper by ISO, click here.