Drones – it’s the word on everyone’s lips this year as insurance professionals discuss the next industries likely to present opportunity to carriers, wholesalers and retail agents alike.
And with good reason. The Federal Aviation Administration approved its 1,000th commercial drone permit last month, and the industry as a whole is already predicted to generate billions of dollars in economic impact over the next 10 years.
Unfortunately, all of that could come crashing down if insurers and agents are not more proactive in their efforts to create and provide viable insurance solutions.
According to a recent Fortune magazine report, significant liability and a lack of regulatory guidelines are making it difficult for insurers to provide well-rounded products for done manufacturers and operators. UK insurance house Lloyd’s has even gone on record saying risk pricing for drones is extremely difficult in view of their emerging status and inherent issues like third-party liability for physical damage, to say nothing of a lack of meaningful data and risk metrics.
Others in the industry agree.
“Unfortunately, there are big questions and not enough answers,” Tom Karol, a general counsel for the National Association of Mutual Insurance Companies, told Fortune. “There needs to be more clarity on how people will use these, and what will be allowed and won’t be allowed is a big issue.”
Some insurance products do exist, of course. Many insurers are willing to offer aircraft liability policies or aviation CGLs for drones, says Jason Riley, vice president of aviation wholesale broker Halton Hall. It’s components coverage – often expensive – that gets tricky, as well as coverage for potential privacy violations.
Most companies currently offering insurance policies for commercial drone use exclude privacy claims due to lack of data, uncertainty over how drones work and how legislation protecting privacy from drone surveillance will behave toward violators.
Those monitoring insurer appetites, however, suggest that carriers will not begin to embrace privacy concerns as part of drone liability policies until state and federal legislation becomes clearer on expectations and legality surrounding drones.
“I’m constantly following up with my standard carriers to see if their appetite for drones has changed,” said Evan Garmon, a commercial insurance specialist with Harpenau Insurance in Louisville, Kentucky. “Until the regulation and laws in the United States surrounding the small unmanned aircraft systems industry stabilize, many standard insurance companies will stay out of the market.
“Once they do, I plan to be on top of the change to offer better policies for my clients.”
