PROPERLY INSURE YOUR DRONE BUSINESS

Efficient ways to mitigate and transfer risk

- David Lazar Galic

Unmanned aircraft vehicles (UAV) or more commonly, drones, are a quickly-emerging technology that has enormous potential to spark a revolution, or at the very least increase efficiency and cost-effectiveness, across a number of industries.

Drones are rapidly becoming cheaper, smaller, more powerful, and easier to operate. As a result, the commercial drone space is currently growing at an unprecedented rate, with new solutions, models, and companies emerging every day. An average of 1,000 commercial drones is registered in the Federal Aviation Administration’s (FAA) online database every week, and their number is predicted to increase 900% by 2021.

However, as the commercial use of drones increases and continues to evolve, the potential risks of this technology need to be considered. Advances in drone technology are inevitably accompanied by a host of new and little-understood risks. As the industry continues to grow and mature, drone companies strive to find more efficient ways to manage and transfer risk.

So far, drone companies typically had to turn to traditional insurance institutions in order to manage risk and this has led to considerable challenges. Currently, the FAA defines a drone as a type of aircraft. Consequently, drones are subject to any and all aircraft insurance exclusions. Additionally, traditional insurance providers have heavily relied on manned aircraft data to create drone policies. This has led to expensive and inflexible policies, further complicating risk management efforts.

THE UNIQUE RISKS DRONE COMPANIES FACE

Let’s take a detailed look at the unique risk profile of drone companies in order to understand the potential insurance solutions that are available to them.