May 14 2015
A.M. Best has released a new briefing that explores the rapidly growing drone industry and the unique risks faced by U.S. commercial lines insurers. The Best’s Briefing, titled, “Growing Market Usage for Aerial Drones,” states that drone manufacturers could face product liability issues, while inappropriate misuse of drones could also bring insurability problems.
Insurers and insureds await finalization from the Federal Aviation Administration (FAA) on proposed regulations and guidelines that were introduced in February 2015. While the FAA has been granting exemptions for drone flights to public agencies for years, waivers for certain commercial users have been granted on a case-by-case basis, with hundreds of applications still pending. The majority of policies for drones are provided through modified aircraft hull liability programs for general aviation. Currently, there are about 20 insurance companies that write this coverage. The risks posed to insurers by the commercial use of drones include the intrusion into private and commercial airspace; population safety and property damage; and security and privacy concerns. While most standard homeowners’ insurance policies exclude liability coverage for aircraft, nearly all insurers include coverage for “model or hobby aircraft,” like personal drones. Although it is impossible to determine the amount of premium derived from unmanned devices, since it is not tracked separately, it is anticipated that whatever the amount, future premium could be multiples of this once the FAA laws are passed and more waivers are granted.
In addition, the use of drones by insurance companies is providing a more effective and safer inspection alternative for claims adjusters. It also provides a mechanism for better and faster claims services to insureds.
This has resulted in a safer work environment, reduced incidences of work-related injuries, greater cost efficiencies and improved customer service for insurance companies.
Depending on how quickly this technology evolves, drone usage could become a standard operating procedure for property/casualty insurers and another way for insurers to distinguish themselves from their competitors. This in turn would ultimately compel other insurers to adopt this same technology for the benefit of the consumer and for themselves or risk being left behind.
A.M. Best anticipates that with clearer definitions from the FAA and similar regulators worldwide, operating parameters will be more measurable. With data from experience building over the near term, insurers will be able to underwrite the risks more effectively and sound risk management programs will be developed.
For the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=236767.
Source: http://www.ambest.com/