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The mounting demand of Drone Insurance

India’s Ministry of Civil Aviation recently unveiled the inaugural regulations to open the skies for drones to fly legally in India. “Drone Regulations 1.0” launched by the Civil Aviation Minister, Suresh Prabhu will empower companies to harness the power of drones in a wide-array of sectors such as crop insurance, infrastructure, precision agriculture, mining, disaster management etc. As per Mr. Prabhu, "The drone market in India holds the potential of hitting over $1 trillion. We plan to develop drone manufacturing not only for the domestic market but abroad as well,"

In addition, Mr. Jayant Sinha, the Minister of State for Civil Aviation expects this regulation to place India on the pedestal with the global leaders in Drone technology.  Mr. Sinha mentioned, "We want to establish a world-leading drone ecosystem. These regulations firmly place us among the global leaders. Our policy roadmap will certainly provide a strong impetus to all players in the drone ecosystem. We hope that these initiatives will enable unto create a vibrant new industry."

 

The surge of government-backed projects involving drones in transport, railway, power etc further emphasizes the drone industry’s efficacy.  With this impetus from the government, the Drone industry in India is expected to boom in the coming few years.   

 

This exceptional growth brings forward a smouldering query.

 Is the Insurance Industry ready to facilitate this upsurge in Drone ownership?

 

As per the current regulation, the drone owner should compulsorily safeguard the risk of any loss or damage to a third-party due to any accident under Third-party Liability insurance. Without this policy, the drone cannot take flight. However, there still seems to be ambiguity around which policy would adequately cover the Unmanned Aerial Vehicles (UAVs)/ Unmanned Ariel systems (UAS) or Drones as they are commonly called.

 

There is still uncertainty about household and commercial policies covering UAVs.  However, this seems improbable as aviation is a part of exclusions in most policies. The policies exclude aviation risks considering the underwriters of household and commercial policies lack awareness or expertise of aviation risks.  This knowledge gap is expected to widen with the exponential rise of the drone industry.

Therefore, there is a dire need of a specialist ‘Drone Insurance Policy’ to be underwritten which provides comprehensive and all-encompassing coverage taking into account the specific risks of UAVs.

 

Drone insurance could be relevant for commercial operators, manufacturers, distributors and repairers, flight schools and training facilities and UAS service consumers (those who hire UAV operators to fly on their behalf). Obtaining adequate insurance coverage for any unmanned aircraft operation should be a top priority in mitigating drone related risks.

 

Let’s delve deeper to understand the risks posed by Drones.

 

Drones and their operators are exposed to multiple and, at times, complex risks though drone operations and technology appear simple. Within the scope of the insurance contract, drones can be insured against almost all risks, which they may be exposed to such as:

 

  • *Flight accidents

  • *Damage by direct impact of lightning strike, landslide, earthquake, rock-fall, high water, flooding, hail, avalanches, snow pressure and storm

  • *Fire and explosion

  • *Theft, robbery and unauthorized use by persons outside the company

  • *Damage and destruction by persons outside the company
     

The insurance products for Drones/UAS can focus upon the following key areas:

  • Within General Aviation: Physical damage (hull) for the vehicle, cameras, sensors and control stations; liability

  • Within Products: Aviation commercial general liability (CGL); aviation products liability; and non-owned aviation liability
  •  

Taking into account the aforementioned risks, a Drone Insurance policy can be formulated with the following coverage:

 

  1. Aviation Third Party Legal Liability Insurance for Drones and flight models

For both privately-used flight models and commercially-used drones, third party legal liability insurance is compulsory in most countries including India. This liability insurance could also be a prerequisite for the ascent permit of the local aviation authority. Insurance products can therefore be designed keeping in view the local regulations imperative.

 

  1. Aviation Hull Insurance for Drones

For high-priced, commercially-used drones, additional hull insurance can be recommended.

Coverage would include:

 

  • *Aerial system

  • *Remote control

  • *Additional equipment (e.g. camera, surveying equipment)

 

Coming back to the latest regulation, the government states that the delay in formulating “Drone Regulations 1.0” has been due to the rapid evolution of Drone technology, India’s security environment, the fact that many countries are still experimenting with their Drone regulation, the lack of an International Civil Aviation Organization (ICAO).

 

All of these apprehensions about any UAS can be mitigated by formulation of a Drone Insurance policy which facilitates the growth of the Drone Industry and finally lets the Drones spread their wings all across India.