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As the commercial and recreational use of drones continues to expand rapidly throughout the U.S, businesses and government entities relying on them face potential liability exposures, which may not be covered under standard commercial general liability (CGL) insurance policies. Meanwhile, insurance companies are becoming increasingly concerned about aviation risks the proliferation of drones represents.

A new white paper entitled Drone Insurance: A Market On The Rise –prepared by Assurex Global in collaboration with insurance brokerage Shaw Sabey & Associates and managing general agent Plus Underwriting Managers–finds a growing number of insurance companies envision a large, robust insurance market for liability and property coverage associated with drone use. However, many insurers currently are proceeding with caution in light of uncertainty about how the drones will be used and scope of the related risks they represent for owners and operators.

The Assurex Global paper cites some key reasons for drone operators to
purchase insurance:

  • Existing policy exclusions.
  • Contractual requirements.
  • Legal environment.
  • Reputation.

According to the Assurex Global paper, the market for drones might expand significantly early on and attract many new insurers; however, it could contract dramatically following any large losses. In the event of such a scenario, underwriters already specializing in aviation risk may have the most staying power on the basis of their experience with these types of exposures.

Download the whitepaper.

This is a succinct, very thoughtful look at the challenges of insuring drone operations. Section 4 – The Future of Drone Insurance got my attention with this:
As time goes on, Jeffrey McCann, vice president of digital strategy for the Vertical Insurance Group at Shaw Sabey & Associates predicts further stratification in the drone insurance market.
“You will have your basic drone insurance for vanilla risks in one category and a more advanced, pricier option for sophisticated drones and advanced users,” he says. “It will only take a couple of big claims for the market to become segmented.”
Once there are a handful of high-profile losses in the industry, Karen McGee, vice president of Plus Underwriting Managers in Vancouver, British Columbia anticipates a shaking out of the players in drone insurance. “I think the domestic markets dabbling in providing UAV coverage will withdraw from the exposure, and we’ll see it move back toward a purely aviation risk exposure,” she says.

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