Marsh report: Insurance industry supports UAV flights

The rapid development of the unmanned aerial systems (UAS) industry is underpinned by the insurance market’s willingness to provide coverage for the deployment of the technology, according to a recently published report by Marsh, a global leader in insurance brokering and risk management.

The report, “Dawning of the Drones: The Evolving Risk of Unmanned Aerial Systems,” indicates that insurance capacity for UAS operations is plentiful. Insurers are actively underwriting polices to secure an early foothold in the sector, despite many regulators struggling to expedite comprehensive regulations that permit drone use, with privacy and national security concerns.

“Insurers are using their extensive experience of manned aircraft to assess the risks associated with drones and are providing insurance coverage based on size, uses and values of the aircraft,” said John Hanslip, senior vice president of Marsh’s aviation and aerospace practice. “Traditional polices for manned aircraft are being brought up to date and many only need tweaks to be usable for drone technology and deployment.”

UAS insurance coverage began in the late 1980s, which required an agreed number of flight hours to be completed by each vehicle prior to coverage being offered and a significant amount of supporting information being provided prior to underwriters’ approval, the report noted.

Marsh outlines two major categories in which risk can be covered in today’s environment: physical loss (the UAS itself, the payload, the ground station/control unit, spares and transit coverage) and liability (third parties and product liability).

While insures need to take the size and weight of the aircraft, the payload, possibility of fraud/theft and advancements in technology into consideration when providing coverage, Marsh says broad uses of UAS, variance in operator/pilot experience, privacy and cyber risks, could make coverage difficult.

“Broad uses pose an issue for the underwriting community, as insufficient knowledge of the aircraft’s risk profile and its many different uses may make it extremely difficult to accurately rate the risk against the exposure,” said Marsh.

According to the report, regulation remains the biggest barrier to the widespread adoption of UAS usage. “For UAS operations to fully realize their commercial potential, national and international aviation laws my need to be overhauled and/or a set of international regulations developed that consider drone use in a truly consistent manner.”

The report compares the U.S. UAS industry with that of the U.K. In the U.S., the Federal Aviation Administration will oversee the use of commercial UAVs on a case-by-case basis until its rules are finalized. In the U.K., UAVs will be regulated with a broad register created specifically for UAVs. The report also notes that the use of geofencing flights based on GPS coordinates is possible and that law enforcement will be given clear guidance on UAV use. End-users will also be provided guidance of the level of insurance needed for individual platforms.

“While clear and harmonized regulation is being developed, insurers are in the meantime filling this gap by providing their own safety guidance for clients, based on their experience of manned aircraft,” said Hanslip. “In the U.S. alone, several insurers are already writing policies on thousands of drones across the country. Internationally consistent regulation is required to enable start-ups to plan with certainty, public perception to improve, and entrepreneurs to expand their businesses without feeling held back by ‘red-tape.’ This, in turn, will fuel the widespread adoption of this type of aircraft.”

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