Drones could soon endanger the jobs of thousands of Australian postal workers, affectionately known as posties.
“We're seeing Australia being used more and more as a test case for a lot of drone delivery piloting,” said James Crowther (pictured above), head of emerging risks at Agile Underwriting. “You're going to see more drone delivery services within urban areas, particularly on that last-mile delivery.”
Last-mile delivery is a logistics term that refers to the final stage of a product’s journey from a business to the customer.
When IB suggested this could endanger Australia’s postal workers, Crowther agreed and suggested more drone operators could start taking on the deliveries currently performed by posties on motorbikes.
The Sydney-headquartered underwriting agency recently launched a second drone product. The new, annual coverage adds to the firm’s short-term drone insurance offering and is designed for distribution through brokers. Crowther said the new offering is suited to fleets of drones.
“The growth in the commercial use of remotely piloted aircraft (RPAs) has created a thriving Australian market, but it remains underserved by the insurance industry,” Agile said in a media release announcing the offering.
Crowther offered interesting details on how the drone market is evolving. One of those areas is delivering packages.
“You’ve got this massive network of logistics, where parcels are being flown into big hubs and then going out to post offices and then comes that last mile,” he said. “Big companies such as the Alphabet Group that owns Google, for example, owns a drone delivery company called Wing.”
According to a report in The Verge, a technology news website, Wing racked up 100,000 drone deliveries more than a year ago across Australia, the US and Finland. However, somewhat surprisingly, most of those parcel deliveries – more than 50,000 according to the report – took place in the suburbs of Brisbane.
Crowther said the number of industry sectors using drones keeps expanding and now includes small gig workers or independent contractors, SMEs providing specialist services and large corporations. He said in recent years he’s also noticed particularly strong growth in the government and public sector.
“That spans everything from disaster response and management to border patrols and environmental monitoring,” said Crowther. “It's really quite fascinating, all the types of use cases.”
He said there’s also “large growth” in the use of drones in Australia’s mining sector for exploration, monitoring and surveying.
Crowther noted that, unlike a few years ago, regulations and licensing requirements have helped improve safety and reduce the risk of accidents.
“All commercial drone operators have to be accredited and they have to have their drone registered,” Crowther said. “Depending on the services or the activities of the drone operator, there are different levels of licensing and certification.”
Crowther compared the new rules to registering a motor vehicle and agreed when IB suggested that the drone regulatory space is starting to look like the car industry’s.
He said another area of growing interest is referred to as beyond visual line of sight (BVLOS).
“This is flying the drone further than the operator can see,” said Crowther. “The current licensing would be within visual line of sight, unless you are authorized by the regulator to fly BVOL and that is a highly regulated area.”
However, he said more companies are getting certified for these operations. Crowther said the insurance coverage rules are the same for both licensing types and his firm does offer the coverage but most other insurers, he said, have limited appetite for it.
Agile’s new drone insurance offering, said Crowther, is an annual policy designed for fleets of drones and their associated pieces of equipment and can cover multiple payloads under one policy.
There is also an option for ground-based public or premises liability, he said. This option covers a drone operator if someone tripped and injured themselves on any drone related luggage on the ground.
Crowther said this ground based liability option is quite novel and so is the flexibility that allows it to be removed from the policy.
“We now also have an extension for hire costs,” he said, comparing it to a courtesy car when your motor vehicle is being repaired. “Where your drone is involved in an accident and needs to be repaired or replaced, whilst that's happening, we can provide cover under our policy for the costs of hiring a drone to continue to conduct your business operations.”
There are also industry-specific extensions.
“We've included an extension for chemical liability in relation to, typically, crop-spraying activities conducted by drones and the risk of a liability claim arising from the chemical damaging or causing a loss to, for example, a neighbouring farm,” Crowther said.
There’s also optional coverage for damaged drone cargo.
Crowther said his firm’s new drone insurance offering was the result of consulting with the drone industry.
“We spoke to major retailers, wholesalers and rental organizations that we know and we work with and we asked them what the key growth areas are,” he said.
He said a significant amount of the feedback showed that drones are now more widely accepted by the agricultural sector. Other feedback, said Crowther, pointed to growth in the package delivery sector and towards their use in search and rescue operations.
Agile has offered drone insurance since 2018. However, one challenge until the launch of this new drone offering was the administrative burden around adjusting policies when drone operators made changes to their fleets, like buying new drones or retiring older ones.
“Our new drone insurance system does allow for midterm adjustments, which is the key thing which enables us to be able to service a high-volume book of business,” Crowther said. “In terms of claims, the majority that we've seen have been around system malfunction or pilot error leading to material damage to the aircraft or payload.”
He said some of the payloads carried by drones can be worth hundreds of thousands of dollars and the drones themselves can be worth a few thousand dollars.
Crowther said his firm can provide coverage for up to several hundred thousand dollars of losses.
Drone operators, said Crowther, still tend to hire drones rather than own them because the technology can become obsolete very quickly.
“We actually have a client who's pioneering a new drone as a service offering,” he said. “It's basically a subscription model so it's really good for people who don't have the capital to spend on buying the equipment needed.”
The service model, he said, is an offering that covers pilot training, licensing, drone equipment and even a job – all for a monthly subscription.
Are you a broker offering drone insurance? What’s changed in the market recently? Please tell us below.
