Michael Reilly considers the opportunities for US insurers with the June release of the FAA commercial drone use rules.
According to industry estimates, the drone industry could generate $82 billion for the US economy and create more than 100,000 new jobs over the next 10 years, which is why the Federal Aviation Administration (FAA)’s recently released rules for commercial drone use have been so highly anticipated.
The new FAA rules, which move significantly beyond the initial pilots of the previous year, provide a foundation for businesses wanting to use drones—also known as unmanned aerial vehicles (UAVs)—in a commercial environment. The rules focus initially on drone activities such as:
- Aerial survey
- Some forms of delivery
In the pilot phase we saw drones used in most major industries—including agriculture, construction, resources (oil/gas), financial services and retail delivery—by companies ranging in size from very small commercial operations, such as small photography studios, to large industrial organizations. Under the new rules I expect to see drone use expand even further.
In the insurance industry, companies such as AIG have been leaders in this area, offering specific drone insurance policies. For other insurers wanting to take advantage of the expected growth in the drone industry, there are several questions to consider:
- What risk exposure are drones likely to create for the coverage that we provide?
- Is our existing coverage likely to respond in the event of a drone claim? Do we want it to? And how might we adjust it?
- What are the more problematic concerns around drone use, such as privacy concerns?
- Do we have processes, or need processes in place, to ensure our customers are operating drones legally?
- Are we capturing the right information, and do we have the right controls in place, to monitor our exposure so we can price our policies according to the added risks drones may bring?
The ultimate question for insurers, however, is this: Is your company positioned to get an aerial view of the risks, exposures and opportunity this new drone market will create?