There’s no question that the use of small commercial drones can be a huge benefit to businesses of all kinds, including utilities, agriculture, real estate, retail—and insurance. U.S. companies including State Farm and USAA have already filed requests with the Federal Aviation Administration (FAA) to start testing drones, which would simplify roof inspections, claims adjusting, and more.
With more businesses weighing the advantages of using drones in their daily operations (think Amazon, Google, and someday even Mosi’s, my neighborhood food delivery service), you might think that a world with a skyful of drones is right around the corner.
But the nascent drone revolution also presents a series of challenges for businesses, especially insurers.
First, there’s the issue of regulation. Last month in the U.S., the FAA proposed safety rules for small commercial drones, requiring them to have operators within sight and banning flight over bystanders or higher than 500 feet. Other regulation is likely to come as well.
A new report by Swiss Re, “Insurance and the Rise of Drones,” explores the development and use of drones and identifies the legal and practical issues to help insurers and their clients assess and underwrite the risks involved.
The report sees two major insurance challenges presented by drones:
Underwriting challenges: Some insurers may be looking to develop policies to cover insurance exposures presented by these small unmanned aircraft, yet there is little clarity or guidance in this area as current policy wordings may not address the issue of drones. Whether intended or not, insurers may be challenged to pay for a myriad of losses that they believed were not covered under their policies.
Coverage and liability challenges: The Swiss Re report examines questions of coverage regarding drone use pursuant to ISO-issued policies. Any coverage issue or claim must be determined on the actual facts of the claim and the actual policy language in question. In some cases, the language in question may not be one issued by ISO. However, reference to an ISO policy may be instructive—for example, commercial drone usage, property insurance, commercial general liability, and homeowners insurance.
Given that the use of drones is completely new ground for the insurance industry, Swiss Re recommends that insurers work closely with their agents and brokers to ensure that they’re asking potential buyers all the right questions before placing coverage for this emerging technology.
There’s no question that the growth of drone usage will present interesting opportunities for insurers, both in their own internal operations and in placing commercial coverage for their clients. However, the industry will need to keep a close eye on emerging regulation and stay one step ahead of the potential risks involved in the growing use of this emerging technology.
Has your business had any brushes with drone use? Please share your thoughts and experiences with me on this blog.
To read the full Swiss Re report, go to:
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