With traditional aviation insurance policies unlikely to address all emerging risks from the rapid jump in drone use, general liability underwriters are poised to fill the gap, according to a new report from the International Underwriting Association.
In the past, the general liability market normally has sought to exclude liabilities arising from the use of any aircraft, the report said. However, the growing use of drone technology by businesses has led to an expansion in demand for cover, and this is now often satisfied by specific policy extensions or endorsements, noted the IUA, which represents international and wholesale insurance and reinsurance companies operating in or through London.
There are, however, a number of obstacles in the way of developing a more comprehensive insurance market, according to the report, which was produced by the IUA’s Liability Underwriting Group. These include regulations struggling to keep pace with technological advancements and a lack of available information on drone usage and claims data.
“The drone market is a classic emerging risk that presents significant underwriting opportunities across a range of insurance classes. This is particularly true for general liability insurers who are expected to provide a significant proportion of policies not covered by the traditional aviation insurance market,” said Chris Jones, IUA director of legal and market services.
Discussing the challenges of underwriting this risk, Jones pointed out that the current regulatory regime for drones essentially addresses safety but not “non-aviation issues such as privacy, security and nuisance risks like trespass.”
“It is also essentially a manned aircraft regime with additional measures tacked on for unmanned aircraft,” he said.
General liability underwriters deal with a huge number of business sectors with many potential uses of drone technology, so it will be important “to establish sound policy provisions so that insurers can estimate potential liabilities and provide a product that meets client needs,” Jones continued.
Drone regulation is largely based on the weight of aircraft, with those weighing less than 20 kilograms (44 pounds) subject to much lighter supervision, the report affirmed.
As technology evolves, however, much lighter aircraft may still be able to cause considerable damage depending on how and where they are used, it said.
General liability insurers, therefore, need to be vigilant of rules in place and the potential damage that drones of all sizes can cause, the IUA’s report concludes.
The IUA report is called “Unmanned Aerial Vehicles (UAVs) – Opportunities and challenges for general liability insurers.”
Source: International Underwriting Association