Marsh has released a new report which details the insurance industry response to the increased use of unmanned aerial systems (UAS), or drones.
With drone numbers set to sky rocket over the next decade, the international broker has said that “the insurance industry is responding to demand at its own pace,” as regulations continue to evolve across the world.
Australia is seen to be at the forefront of drone usage thanks to its early adoption of the technology and the insurance landscape globally is working well to incorporate the fledgling technology into the industry.
“While capacity remains plentiful, over-subscription is coming to the aid of the new start-ups in this class as insurers seek new ways to bolster their balance sheets,” the Marsh report, entitled
Dawning of the Drones: The Evolving Risk of Unmanned Aerial Systems, states.
“Expertise and historical data (unlike capacity) are not super-abundant; however, insurers are eagerly testing the waters of this dynamic industry. To do this, they are using their experience of the manned class to assess the risk and/or limiting their exposure by selection against size, uses, and values of the aircraft, or the type of coverage offered.”
The report notes that brokers and underwriters will have a distinct role to play in the future of the industry, with clients needing to update older aviation policies to include UAS coverage.
“Traditional coverage is being brought up to date by brokers and underwriters. Where off-the-shelf wordings for manned aircraft exist, most need only tweaks to be applicable for the latest technology or terminology: 'aircraft' would become ‘UAS,’ ‘pilot’ would become ‘operator,’ and so on.”
As regulation slowly catches up with technology, brokers and insurers would be remiss to ignore the opportunities that UAS coverage provides however there are some challenges for the industry which have yet to be cleared.
“Privacy-related claims are currently excluded by all insurers; some haphazardly, others by the use of a definitive exclusion,” the report notes.
“A market exists for this type of cover, although without a precedent having been set, sum insured and terms and conditions are likely to be considered contentious by those who feel they require it.”
The report concludes that while some sectors of the insurance industry receives a passing grade for its current attitude towards this emerging risk, the future will see great challenges to be overcome and great opportunities to be grasped.
“So far, the insurance sector has responded positively to this nascent industry, with some insurers being so proactive as to write their own safety rules to fill the gap left by regulators.
“The road ahead, however, is filled with challenges in terms of comprehension, education, and provision, both to end users and manufacturers.”
