Drone Insurance
OVERVIEW
IT WASN’T TOO LONG AGO THAT THE WORD “DRONE” CONJURED UP IMAGES
of stealth military strikes in war-torn countries around the globe. And while military applications still prevail—the Pentagon has an arsenal of approximately 7,000 unmanned aerial vehicles (UAVs)—commercial and personal drones are gaining in popularity.
According to a 2015 industry report by Business Insider, the market for commercial/civilian drones will increase at a compound annual growth rate (CAGR) of 19 percent between 2015 and 2020, compared to 5 percent growth on the military side. The fast-growing industry presents a number of business opportunities for companies ranging from small entrepreneurs to Fortune 500 firms, but it also opens up new risks. Consider some of these drone mishaps that made the news:
There is a multitude of exposures surrounding drones, ranging from injured bystanders to personal property damage to the invasion of privacy. To mitigate those exposures, some insurance carriers have begun offering liability coverage for drones. It’s a brand new market with tremendous growth potential: The UAV market is forecast to hit $4.8 billion by 2021, according to market research firm Radiant Insights. That translates to quite a few commercial and civil drones in need of insurance coverage.
However, while the potential to underwrite billions of dollars in liability coverage is captivating, most insurers and their customers still have more questions than answers about the burgeoning drone market. This white paper, prepared by Assurex Global in collaboration with insurance managing general agent Plus Underwriting Managers and brokerage firm Shaw Sabey & Associates, strives to shed some light on the potential for— and challenges of—drone insurance.
How the Insurance Industry Is Using Drones
Insurance companies aren’t just passive observers to the upsurge in drone use; many companies are getting in on the action. In December 2015, massive bushfires spread through several coastal communities in Victoria, Australia, destroying more than 100 homes. At least one insurance company relied on drones to assess the damage and start processing customer claims immediately. Drone usage eliminated risks associated with physical site visits, including fallen power lines, smoldering fires, smoke inhalation and landslides.
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