How Will The Insurance Sector Handle Aerial Drones?
Using drones to survey damage after a disaster [ Source: https://www.youtube.com/watch?v=jCkMf-hFOZo ]
Who knew a day in the park could become so complicated? Ever since man took to flying - first in large balloons, later in planes, and then even in helicopters - there have been miniature versions of these vehicles that have delighted hobbyists and flight enthusiasts for more than a century.
But hook a remote camera onto one of these devices, and you have a completely different device in your hands. At least that's what several countries and a bevy of recent laws have determined. A remote-controlled, unmanned flying device with a camera attached to it is, in many jurisdictions, considered by law to be a 'drone'. Drones are unmanned aircraft systems (UAS) with a wide range of commercial uses such as sports photography, atmospheric research or even goods delivery. Since drones do not have human pilots, they are remotely operated by using data link transmissions. They can be installed with powerful cameras, sensors or facial recognition technology. Operating a drone is a completely different ballgame, as far as the authorities are concerned. Instead of a day in the park flying a model airplane, drones might constitute trespassing or even invasion of privacy on the part of its owner.
Recently, over one of the world's busiest airports, passenger aircrafts had to delay their landings because of the jets' close calls with aerial drones. Although no major crash has been attributed to a drone as of yet (not counting military engagements), its growing popularity has opened up an uncharted territory in the insurance industry. Just what is a drone and what does its owner need to be insured against if he operates one? What about people - the innocent bystanders who might be hit or recorded while going about their business?
The commercial growth of drones is predicted to be significant over the next few years. Sectors like communications, aviation and consumer electronics could see drones accounting for a line of business worth more than $80 billion within a decade, according to experts. And this includes the insurance industry as well. Commercial lines insurers could potentially to be early adopters of drone technology. For example, a property adjuster could make use of drones to capture details of a location or building to gain insights during claims processing. The same holds true for a risk engineer who might use such information for risk assessments. Drones can actually be deployed for faster claims resolution involving catastrophes. Companies like Precisiondrone.com are already offering drone services on their website. Precisiondrone.com lists insurance as one of the markets served, apart from agriculture and public safety. USAA, a financial services company in the U.S., has sought permission from the Federal Aviation Administration (FAA) to test unmanned aircrafts. Several home and auto insurers are also considering the use of drones to improve their services.
While on one hand, insurers are looking at ways to use this technology to improve their services, they are finding it difficult to assess the risks of commercial drone use for the businesses they insure. Insuring an unmanned aircraft system poses a multitude of issues starting from personal injury to protection of privacy to data collection and aerial surveillance. Some insurers are already making a mark in this space. AIG, for instance, has a comprehensive insurance policy called 'Coverdrone' that offers protection in flight, including full cover, along with liability insurance and a host of key extra features. ProSight, a specialty insurance company, has launched a drone insurance coverage designed as a one-stop solution for drone operators. Innovative companies like Skyward uses the cloud to register drones and their operators and to confirm if they comply with regulatory and insurance requirements.
Some of the concerns for commercial users of drones involve the Federal Aviation Administration in the United States (to cite just one country's current situation). The FAA has been roundly criticized by entrepreneurs for lagging behind the boom in drone use. The FAA, they claim, does not have sufficient regulations in place to govern unmanned aerial vehicles. One report used this comparison: imagine a booming automotive industry but with no traffic lights or stop signs at intersections. We could stretch the comparison further: what if there were no roads on which to drive your car? That's not unlike the scramble for air space by drone operators who are beginning to interfere with airline companies that have navigated the skies for nearly a century. Such unchartered territory is yet another reason insurance companies want to underwrite drones and their users in such ways that they are compliant with national (and even global) regulations that are sure to evolve as quickly as the commercial applications of drones.
Recently, NASA held a conference on what some are calling the 'drone economy' in one of its laboratories, which happens to be located, curiously enough, near the world headquarters of Google in Mountain View California. Representatives of Google attended the drone conference, as did executives from Lockheed Martin, Panasonic, and Amazon.com, the last of which has openly flirted with the idea of delivering goods to customers' front doorsteps via drones. What is even more interesting is that NASA is working with private enterprises to develop some kind of drone infrastructure that could in turn be underwritten by insurance companies. Just recently, Amazon.com's founder, Jeff Bezos, suggested that he might initially use delivery via aerial drones in the U.K. because as Bezos said, "the FAA is catching up a little here in the U.S., but the U.K. has been, I'd say, a very encouraging example of good regulation. I think we like what we see there."
Drones, if regulated properly, might also be used as security devices that help insurance companies write policies for manufacturing facilities, banks, or even large corporate campuses when a stationary camera or monitor just won't perform the job as well. On the flip side, insurers might be writing policies for companies that use drones that happen to encroach on private land or record the activities of private citizens. I expect issues surrounding the right to privacy and the rise of the aerial drone to develop into some interesting legal contests in the coming decades.