Drones: Common sense investment or a Pandora’s box of risk?
Once the preserve of the military, Unmanned Aircraft Systems – or Drones – have seen an exponential growth in popularity outside of warfare. It’s increasingly common to see individuals operating drones for private or leisure reasons, with drones now regularly topping ‘must-have’ Christmas present lists. However, the technology’s key growth area lies in industry, where many dangerous jobs have been earmarked as potential beneficiaries of drone technology. Examples of these include search and rescue, public security and firefighting.
Commercial uses such as filming & deliveries (e.g. Amazon) are also beginning to see the benefits and even the insurance industry is getting in on the action with AIG trialling the use of drones in the US to assist in the investigation of claims (particularly in locations which would ordinarily be inaccessible or too dangerous). Indeed, anywhere that currently uses aircraft (except for those transporting people) is ripe for disruption.
However, for drones to become safe (and therefore commercially viable), it’s essential that the industry is carefully regulated. In their current form, regulations require that drones be within the line of sight of the operator at all times, which significantly restricts how they can be used. However, The European Commission currently hopes to fully integrate drones European airspace by 2028, and has established a road map towards consistent regulation across the EU.
Zurich Insurance identifies two main categories into which most risks fall.
- Manufacturers and suppliers of drones will require product liability cover in respect of product and technological failures, to insure against accidents caused by defects within the drone itself, or the failure of supporting safety technology on which the drone relies.
- Owners and operators of drones will require liability insurance which will be modelled around existing aviation policies, and is likely to be the subject of compulsory insurance. Cover will be required in respect of incidents which result in injury or property damage, in addition to other potential risks such as invasion of privacy and data protection concerns.
It also identifies the most likely claims scenarios as:
- Product failure – e.g. a failure in the drone’s electrical system, causing it to crash, leading to associated property damage and/or injury.
- User error – e.g. an error by the user operating the drone such that it collides with another airborne entity, causing it to crash, with associated property damage and/or injury.
- Communication failure – e.g. a failure in the on-board technology relating to the command and control link between the drone and the user, such that the drone flies out of the user’s control, or a failure of detect and avoid technology causing it to crash, with associated property damage and/or injury.
However, there are other issues that must also be considered. Privacy is a major concern for many and could cause potential liability that drone operators and insurers are yet unprepared for. Though it may be possible to cover this under existing policies, the new exposures resulting from remote-operated cameras may be outside the limitations of personal injury endorsements.
In summary, though the commercial use of drones seems like a slam dunk for sound risk management practices, the uncertain landscape in which this new technology works may result in greater risk exposure if not properly managed.
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