The global drone industry is forecast to be worth US$100bn by 2020, according to Goldman Sachs. Allianz Global Corporate & Specialty (AGCS) estimates the commercial drone insurance market has the potential to reach US$1bn within the same period. However, until recently, the insurance product offerings on the market have been criticised as “unfit for purpose”. That is now beginning to change with some new innovative offerings.
Today drones are used commercially in an increasingly diverse range of industries, ranging from loss adjusting, photography, television, emergency services, law enforcement, agriculture and construction to prisons. In the EU, those using drones for commercial purposes are considered aircraft operators, and so are required be compliant with EU regulation EC 785/2004 (“Insurance requirements for air carriers and aircraft operators”). However, many of the risks typically associated with drones such as collisions with buildings, people or other aircraft, and claims for nuisance, trespass and invasion of privacy are often not covered by standard aviation insurance policies. This issue has traditionally been resolved by bespoke policy endorsements, which are both time consuming and expensive.
However, a number of companies now provide drone insurance specifically for commercial drone users, such as Drone Guard (underwritten by Starr) and Icarus (underwritten by Swiss Re). Typically, such policies are EC785/2004 compliant, and provide standard cover for loss and damage, as well as third party property and injury liability. Policy extension options include cover for legal claims arising from noise complaints, invasion of privacy and trespass, ancillary equipment (such as expensive photography apparatus), and even accidents caused by the loss of control of the drone resulting from a cyber attack locking the controls.
Whilst such policies are a welcome development, perhaps the most interesting development in this area are the insure-tech products developed by companies such as Flock (underwritten by Allianz) and Coverdrone. Both companies’ products are suitable for commercial operators and hobbyists alike. Those who fly drones purely for recreational purposes are unable to purchase the commercial policies referred to above. Some household policies covered loss and damage to the drone itself, but do not cover third party liability. More and more, home insurance policies exclude drones from the cover.
These new products are apps which allow users to purchase per flight or per day cover through the app, with premium calculated on a range of factors, including weather, windspeed, and building / population density. UK-based Flock charges an average of £5 per hour of insurance, and users can even make a claim through the app. With an equivalent annual policy often running into the hundreds of pounds, the on-demand insurance model is currently unrivalled in terms of convenience and expense. Whilst such apps are still in their infancy, Coverdrone already operates in several countries across the globe, and Flock plans to expand into Europe imminently. In an age when we expect everything to be available at the tap of our smartphone, why should purchasing insurance be any different?