supplier, Bregman said. “Whether a real estate broker is hiring a
plumber, or somebody to fly a drone around the house to take
pictures, it doesn’t matter to them—they want a million-dollar
policy,” he said.
As for recreational users, one misconception is that their potential drone use liability is covered by their homeowners insurance,
but that’s not always the case, Bregman said. There is an aviation
exclusion applied to drones, which are regulated by the FAA, he
noted. “If you know what these things can do, you can get a little
bit of fear into you—even if it’s in your own backyard,” he said.
Drones are “technical devices, and they can malfunction; that’s
how most crashes happen,” he said. “So even if you’re doing everything right, it could still fly away and anything can happen,” he
said, giving an example of a case in England in which a drone went
off course, resulting in a toddler losing an eye. “If that happened
in America, that’s a $10 million case,” he said.
Bregman offered the evolution of the automobile as a past lesson
for drones, citing a story of the first death from a passenger car,
when authorities said such an event would never happen again.
Auto technology evolved from being unregulated, to cars having
license plates, and to more recreational use—“the next phase after
that was mandatory insurance,” he said.
Because data on drone accidents is still relatively new, insurance
pricing “is really cutting-edge,” Bregman said. His company’s app
can see the area around the operating zone, which in turn affects
the price. If a user is operating near an airport, school, or a nu-
clear power plant, that could boost risks, leading to higher costs.
“The system will be refined with more data,” he said. “Basically,
what we’re able to do with this technology is price a new market
before the data becomes available, because it will take years before
there is enough data to price from the bottom up like that.”
Another company, Global Aerospace, has developed a drone
insurance program for members of the Association for Unmanned
Vehicle Systems International, a drone industry trade group.
“It’s an interesting environment for us as an insurance carrier to
try to understand and make sure that we’re developing appropriate
products and interacting with this user group in the appropriate
way, because it’s certainly outside of what we have typically been
used to over the past 90 years we’ve been in the insurance business,”
said Chris Proudlove, senior vice president with Global Aerospace.
“Aviation is a highly regulated environment, and aircraft have
to go through very lengthy and exhaustive processes in order
to be certified,” Proudlove said. “What is different is there is no
certification process at all right now for drones—a 55-pound
drone, which is pretty heavy, can certainly cause a lot of damage.
No regulator has had eyes or hands on that system to be able to
determine if it’s robust and has necessary safety features on it …
so it’s a different environment from that perspective.”
He noted that while traditional aircraft operate exclusively from
airports and helipads, drones can operate either “from people’s
backyards or the local football stadium. It’s certainly creating
challenges for the FAA and other regulators to try to determine the
best way to integrate drones into the airspace, but it’s also created
some issues for us as an insurance carrier in trying to determine
the best way to go about offering our products so that the right
people are insured—i.e., those that are properly certified, operat-
ing good units, and doing so in a responsible and legal fashion.”
While some companies are trying to develop businesses around
identifying issues and collecting accident data—and trying to
provide a database of information to the insurance industry,
manufacturers, user groups, and others about how different sys-
tems operate and how robust they are—“from a pure insurance
perspective, there aren’t many carriers that have a big enough
database of information at this point to be able to really perform
good actuarial studies on the data to determine exactly what the
rating should be, because it’s all still very new,” Proudlove said.
“We have as much data as anyone at this stage, and certainly
use it when we determine our prices and coverage, but compared
to auto or home insurance, we just don’t have anything like the
same kind of data,” he said. “In our experience, most commercial
drone operators are seeking out specialized insurance from the
aviation market, rather than relying on a general liability policy.”
Proudlove said that taking extreme events—citing the terrorist
attacks of Sept. 11, 2001, as an example—into consideration can
be difficult. “I don’t think there’s any actuary around who could
accurately determine how often that type of event will take place,
and how you build that type of event into your five- or 10- or 25-
year rating can be a challenge,” he said. “We’re used to dealing with
There aren’t many carriers that
have a big enough database of
information at this point to be able
to really perform good actuarial
studies on the data to determine
exactly what the rating should be,
because it’s all still very new.