UP, UP AND AWAY
Don't be surprised if you find yourself heading into the Drone zone. The Federal Aviation Administration estimates more than one million drones will be sold during the upcoming holiday season. Everyone from photographers and farmers to law enforcement and hobbyists are taking flight. As drones become more affordable and available, the skies are buzzing with activity. Whether for personal or commercial use, there are a number of critical insurance issues to consider ranging from personal injury and property damage to privacy concerns.
Drones are defined as remotely piloted aircraft systems and are also known as unmanned air vehicles (UAVs). According to the Federal Aviation Administration (FAA) pilots of unmanned aircrafts have the same responsibility to fly safely as manned aircraft pilots. In addition to FAA regulations, state and municipalities may have their own laws regarding drone use. Before you take flight, first check local, state and federal laws.
Hobbyists have been flying model aircraft for decades. However, advances in technology allow drones to hover quietly and fly far from their pilot. According to the Federal Aviation Administration, by 2020 there will be 30,000 small unmanned drones used for business purposes. This does not include ones used by hobbyists.
With some drones weighing up to 55 pounds, a fall from the sky can cause significant damage to property or bystanders. The FAA has issued these guidelines for drone hobbyists:
Insurance for Private Use
Since UVAs are operated remotely, there's no risk to passengers or crew. However, drones present a significant risk to property and life on the ground in the event of an accident. Drones can crash due to faulty and inappropriate operation, mechanical defects and component failure. Losses and damages could involve bodily injury to humans and animals as well as buildings and other structures.
Obtaining insurance for your drone for personal use isn't difficult. Using a private drone as a hobby is generally covered under a homeowners insurance policy (subject to a deductible) which typically covers radio-controlled model aircraft. This also applies to a renter's insurance policy. Look at the contents section of your policy, or talk to your agent to see if your drone will be covered if it is lost, stolen or damaged. If your drone falls onto your car, damage to your car may be covered if you have a comprehensive coverage auto policy.
A larger concern is liability for an accident caused by your drone. If your drone crashes into someone else's vehicle or a person, the accident is your responsibility. If you have a homeowners or renter's policy, generally the policy will cover liability for an accident caused by your drone. Check with your agent or insurer to verify your policy contains this important coverage.
You may be excited to obtain a drone for your own use, but how would you feel about your neighbors owning and operating drones near your home? Privacy is a legitimate concern when it comes to drone use.
Drones are often equipped with on-board cameras and other data-collection capabilities which can pose a threat to privacy. Drones may capture private data that could be harmful or embarrassing if shared. Beyond intentional surveillance, drones may also unintentionally capture images during routine and unrelated flights. As a drone owner, remain mindful of privacy concerns. Insurers are developing policies to cover these liability exposures, so keep in touch with your insurer to make sure your use remains covered.
Commercial Drone Use
Currently, the commercial use of drones is largely restricted and operations are authorized on a case by case basis. The FAA has started regulating commercial drones with proposed rules such as requiring pilots to obtain special pilot certificates, staying away from bystanders and restrictions on when and where they can fly. The proposed rules also prohibit drone delivery of packages. Since final rules have not been implemented, they are not being enforced.
Future of Drone Insurance
Widespread use of drones—private and commercial—poses various risks, ranging from safety to privacy of individuals. Risks arising from the use of drones could best be managed by property and casualty insurers, but only once defined drone operational requirements and performance standards are in place. Complete and clear drone regulation, by the states and the FAA, is necessary before insurers can meet policyholder needs.
Recently, federal regulators announced that recreational drone operators will soon need to register their aircraft. This will allow authorities to trace a drone back to an owner which means it's vital that you're in compliance with laws and regulations and have the appropriate insurance coverage.
In areas like drone insurance, where requirements are evolving, it's important to check with your state insurance department for up-to-date information.
About the NAIC
The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For consumer information, visit insureUonline.org.