Governments around the world have responded to the prevalence of the use of drones by increasing regulation and supervision.
In many countries, including Australia, there appears to be a focus on regulating the use of airspace in a manner that minimises the property damage and personal injury risks that drones present. Some insurers now offer insurance for the risks particular to the use of drones, including first and third party accidental damage. There is, however, another significant risk arising from the use of drones: their susceptibility to cyber-attack.
Drones are increasingly a target for cyber attackers. Drones use software and data, some of which may be unencrypted, to determine their location and behaviour. In one early incident, Iran state-based media said Iran had captured a large US stealth military drone unharmed, by jamming its GPS signals and feeding it incorrect GPS data, which caused the drone to believe that it was landing at a US air base in Afghanistan. More recently, media reports suggest that malware and other products have been developed to enable hackers to not only block certain data being fed to the drone – they allow the hacker to take active control of the drone or capture the drone's data or override safety controls. Similarly, the US has banned the use of a type of small surveillance drone due to concerns over "hacking vulnerabilities", while the Australian military has limited their use to "unclassified situations" due to speculation that encryption algorithms may have been made available to the Chinese government.
While the regulatory focus is presently on the risk of accidental damage to property and people arising from the use of drones, and insurance products are directed at those risks, the threat of cyber-attacks on drones is increasing. Given the prevalence and popularity of drones, we expect to see an increase in government regulation of cyber security measures for drones, and the development or enhancement of insurance covers for cyber risks associated with drone operations.