THOUGH THEY CERTAINLY REPRESENT A SEGMENT OF THE MARKETPLACE, it’s a misconception to think of drone operators as kids in a park playing with remotecontrolled toys. “Make no mistake: unmanned aircraft enthusiasts are aviators,” said U.S. Transportation Secretary Anthony Foxx in a press release in December 2015. “And with that title comes a great deal of responsibility.”
Commercial drone operators in Canada have a duty to obtain a Special Flight Operations Certificate (SFOC) from Transport Canada. Transport Canada also requires a minumum of $100,000 worth of liability insurance. Best Buy, one of the largest sellers of drones, devotes a section of its online Drone Buying Guide to flying safely. The retailer refers drone operators to the Academy of Model Aeronautics, which offers general liability coverage up to $2.5 million for bodily injury and property damage.
Insurance is important for both hobbyists and commercial enterprises. “Flying a drone is not much different than driving a car or a boat,” says Karen McGee, vice president of Plus Underwriting Managers in Vancouver, British Columbia. “The exposures are immense.” They include damage to the drone and any attached equipment, such as cameras, as well as liability exposures. “If the pilot is inexperienced, loses control and the drone causes property damage or bodily injury, does he or she want to pay out of pocket?” asks McGee. Plus Underwriting Managers is a full-service managing general agent offering commercial property, liability and professional liability products. It also offers aviation general liability (AGL) insurance. The company receives approximately 100 inquiries a month on drone insurance from broker partners, including Shaw Sabey & Associates in Vancouver.
“Brokers are always going to drive demand for new products,” says Jeffrey McCann, Vice President of Digital Strategy for the Vertical Insurance Group at Shaw Sabey & Associates. “If clients come to us with new exposures, we’re obligated to take care of them.” A customer in the film industry reached out to McCann in January 2016 to insure a $4,000 drone with $25,000 worth of camera equipment. The customer uses the drone for filming, but also wants to offer drone rentals and start a drone camp for kids. He wondered about his insurance needs.
“These are questions that haven’t really been answered yet because it’s such a new market,” says McCann, who is currently working with the client to determine coverage. “It’s fascinating to see where [drone] pilots are taking these things. Regulators, the law and the insurance industry are all trying to keep up accordingly.”
Commercial drone use seems limited only by imagination. Perhaps the most publicized potential use is for package delivery. The online retailer Amazon is working on Prime Air, a future shipping system designed to deliver packages via drones within 30 minutes of ordering. But there are other innovative drone applications:
The University of Alaska Fairbanks and the National Marine Mammal Laboratory used drones to collect information on endangered Steller sea lions in 2014.
Canada Post has begun looking into the use of drones for home mail deliveries.
The Syria Airlift Project seeks to deliver food and medicine to conflict zones via drones.
A California vineyard relies on drone photography to see which sections of grapes are ripening earlier than anticipated and need to be harvested.
Applications like these are leading insurance companies to think about aviation risk management to protect their clients.