Risks to watch out for as the global drone market takes off

Canadian drone company AltoMaxx is working to search for the bodies of missing children. Drones, equipped with under-the-radar technology, search for unmarked graves in schools located on Sagkeeng First Nation land in eastern Manitoba.

Meanwhile, the US giant Amazon has unveiled plans to begin shipping drones later this year. Customers in the California town of Lockeford could soon apply to have thousands of items delivered to them by drone, although Prime Air’s pilot program is still awaiting final approval.

Read more: Non-contact drone monitoring reduces remote control issues

But as the use of drones takes off, how should insurance companies grow in proportion? Trehane Oliver (pictured above), Managing Director of loss specialist McLarens Aviation, spoke to Insurance Business about the scope of drone insurance.

“[Insurance] the things that pilots buy are the same as what a pilot would buy. There is cover for physical damage or damage to the drone, and cover the case, “said Oliver. “The main case from the user is damage to people or property on the ground. This is similar to what you would have with an airplane. “

As the risk profile of commercial drones becomes clearer, underwriters’ concerns become easier to address.

“The concern from insurers in the beginning was related to problems: UAVs fall into buildings or people or intersections. But in our experience, there are few claims that lead to a serious problem, or anything more than an accidental loss,” shared Oliver.

“Another assumption that was made early on was that there was no maintenance around the drone. It was no longer the case. Drones can usually be repaired only when they come into contact with water,” he added.

Case study: South Africa

One market that has embraced commercial drone use on a significant scale is South Africa, where applications range from mine exploration, dust removal, and anti-poaching missions. On the heels of this rapid growth, the insurance market changed rapidly, thanks to frequent negotiations between loss adjusters, brokers, and underwriters.

“Drones have taken over a lot, especially in the areas of mapping and surveillance. We are also seeing a lot of applications in agriculture and defense. I would say that these industries are the fastest growing at the moment,” Lara Vivier (pictured above), drone researcher at McLarens Aviation, told Insurance Business.

Originally from South Africa, Vivier regularly advises brokers and underwriters on drone risks. He said the most common claims involve pilot errors and software errors.

“We’ve seen a few mistakes in our driving, and it comes at times [the pilot] it is a little more intensive and may be new to the industry or to graduates. Incidents and accidents do happen. We’ve also had a number of claims where the drones have experienced loss of contact or communication,” shared Vivier.

“We have been attacked several times by birds, which you cannot stop, like airplanes. We have also had reports of engine failure, as well as piloting. “

Read more: Drone exposure poses a major headache for insurers

Both Oliver and Vivier said claims of injuries and property damage caused by drones were unusual.

“In North America, for example, it’s common now for real estate agents to have a home video. I’ve seen a story where a drone was taking video of a house that landed on its roof. But that only resulted in the insertion of four tiles; nothing more than accidental damage,” Oliver shared.

For Vivier, damage claims from drones often involve chemical spills in the field where the drone falls or damage to fences or power lines. “We have never reported an injury in a drone accident,” he said.

But as drone technology advances, so does visibility. Concerns have been growing about online hacking or privacy breaches like credit, but Oliver and Vivier said they have not encountered any claims related to that.

“The [drone] companies are very much governed by what you can and cannot do. Of course, privacy laws don’t change because there are drones. In general, drone operations are well managed, but of course, there are opportunities for misuse of the equipment,” said Vivier.

Regulatory constraints

The range of drones’ capabilities and functionality is increasing demand and creating new opportunities for commercial use. However, strict regulations may hinder the growth of the market.

For example, the US Federal Aviation Administration (FAA) does not allow drones to fly over long distances, meaning that pilots must constantly monitor their equipment, making long-distance flights impossible.

Transport Canada also prohibits drones from flying outside of public view. In 2019, the Canadian government introduced stricter regulations regarding the use of UAVs in the country’s airspace, prohibiting them from being flown near airports and emergency situations. Owners must register their drones, and users of large drones must also be certified.

But as smartphones expand and reduce barriers, governments are slowly changing their laws to improve safety and allow drone use. Last year, the FAA published new guidelines allowing the practice of small drones on people and at night in certain conditions.

Oliver sees projects like the one in South Africa spreading as people become more confident about the safety of drones.

“Usages [of drones] it is unlimited, so it is up to the countries themselves to decide what is safe or not. But the cost savings and opportunities that drones offer are immense. I think there will be a lot of problems to keep it in use,” he concluded.