In the United States, Allianz Global Corporate & Specialty hasbeen writing coverage for drones, or UAS' (unmanned aircraftsystems), as they are more technically called, since 2006.

They began by writing aviation products liability coverage forUAS manufacturers and component manufacturers. This coverage wasfor those creating or manufacturing blades, motors, electronics andother component parts, as well as products liability for the entireaircraft system.

As the industry evolved and the civilian drone market beganrapidly growing, Allianz created new policies and coverages to meetthe needs of this growing industry. Allianz focused on the use ofcivilian consumer drones for commercial use and now insuresthousands of unmanned aircraft.

Recently, the editors of FC&S sat down with James Van Meter,Aviation Practice leader at Allianz, to talk about drones and the insurance industry. Van Meterhas been underwriting aviation risks for over a decade, and is anFAA licensed unmanned aircraft operator and a manned commercialpilot.

Related: Evaluationand mitigation of drone-related risks

Who is currently seeking drone coverage?

Van Meter said the types of industries seeking insurance forcommercial drones are varied. For instance, some companies, such asnews stations, seek coverage for drone-assisted film production. Itis more cost effective for a news station to purchase a dronerather than renting or maintaining a helicopter to capturenewsworthy footage.

Other industries looking for drone coverage fall under theumbrella of aerial data collection, which encompasses most otherdrone uses including the inspection of industrial sites, crops,cell phone towers and municipal infrastructure such as roadways andbridges.

Related: 10 steps to mitigating drone risks on constructionsites

Engineering firms as well as forensic engineers are using dronesfor inspections of projects and losses. Consider Yamaha in Japan,which has been using drones for non-commercial crop surveying forover 20 years. Plots are often smaller and on hillsides in harderto reach areas and drones were a natural way to view crops. It isnot anticipated that drones will be used in the U.S. for cropsurveys in the near future due to individual state licensingrequirements and the need to comply with both FAA requirements under Part 337 and Part 107 as well as  statepesticide regulations.

How are drones being used in claims adjusting?

With the recent severity of the hurricane season, the use of drones removes the hazards of sendingpersonnel onto damaged rooftops or into other severally-impactedareas.

Van Meter said that more carriers are training their adjustersto fly drones. But others are hiring outside pilots to accumulatedata, rather than investing in equipment and training.

It is relatively easy to get a commercial drone pilot licenseand meet the FAA Part 107 exception, as it is a self-study coursewith a written exam only. There are roughly 60,000 Part 107 pilotsin the country now. While carriers are training adjusters andputting drones to use, it is still experimental in many ways due tothe newness of technology and development of abilities.

Related: Game of drones: Liability and insurance coverageissues coming

How does drone coverage compare to standard aviation risk?

Coverages for drones are similar to coverages for regularaviation risks, said Van Meter. While coverages differ by carrierand drone use, Allianz drone coverage includes hull physical damagefor the drone, cameras, sensors and control stations; andliability, including aviation products liability, war, TRIA, thirdparty general liability for BI and PD, lost or stolen drones,non-owned aviation liability, and privacyinjury. Additional coverages are available for third-partylegal liability for drones and additional hull insurance for aerialsystems, remote control, and additional equipment.

Some pilots may also need cyber coverage, professional liability or othercommercial coverages. Allianz also insures other insurers who areusing drones in their operations.

Van Meter said this company's targeted Part 107 drone insuredsare professional, conscientious pilots who seek additionaleducation to become certified. He accredits Allianz's success inproviding drone coverage to this underwriting selection.

Benoit Leroux, drone pilot at DPD Geopost in France,demonstrates the use of a package delivery drone. GeoDronecompleted its first successful automated package delivery flightmore than two years ago. (AP Photo/Claude Paris)

How does Allianz approach delivery drones?

Van Meter said that because the FAA's main goal is to protect the public,the United States has not advanced as far as other countriesregarding using drones for deliveries.

Rwanda, for instance, has been using drones to deliver blood,medications and other supplies to remote areas, and can verify thatsuch actions have saved lives.

But the FAA moves very methodically in order to keep the publicsafe. So it is taking longer to get drones approved for flyingbeyond visual line of sight and night flying. The FAA seesinfrastructure inspection as the number 1 use of drones.

Related: Evaluation and mitigation of drone-relatedrisks

What about coverage for hobbyists versus commercialpilots?

Hobbyists can find coverage for their drones through the Academyof Model Aeronautics (AMA); it provides umbrella coverage in excessof their underlying homeowners policy with limits up to $2.5million.

Small commercial pilots can find coverage through www.allianzdrone.com. Policieshave $1 million limits with annual premium less than $1,000 for asingle drone. Coverage includes property damage to the drone, war,TRIA, and hull.

Van Meter said the company has seen a little of everything inhull claims from equipment malfunction, operator error, theft fromvehicles, crashes into trees, water and other objects. Throughtheir policies, Allianz is trying to fill any gaps for a dronepilot. Allianz has not had any losses where drones have crashedinto a manned aircraft, like the incident with the Black Hawk inNY; and no losses from a drone being shot down. The commercialdrone pilot may need standard GL and professional liability such asE&O, but as far as property damage to the drone, recovery, war,privacy, TRIA and other coverages are available. Cyber coverage forthe drones is not yet available from standard aviation carriers. Acommercial drone pilot does not need to purchase insurance howeverif they are not using their drone for hire.

Related: Drone insurance: Are your clientscovered?

How concerned is Allianz about drone adherence to flightrestrictions?

When asked what keeps drones from flying into restricted areas,Van Meter explained that most drones are have GPS and geofencingbuilt into the aircraft. These help keep drones from flying inrestricted airspace or operating outside of the rules. Most dronesshow the location of the drone on a map image. Once the drone isturned on, it knows where it is and what areas it should not cross.This was developed after the man flew the drone onto the WhiteHouse Lawn.

What emerging drone threats does Allianz track?

There is of course the potential for terrorist actions or illegal activity, such asflying contraband over the prison fence or flying drugs over theborder. This leads to the need for detection and deterrenttechnology. Deterrent technology is still in the works, but beingable to identify a drone that is engaging in unauthorized activityand either blocking the signal, locating the pilot or even takingdown the drone are all things to be considered.

What can brokers do to address gaps in drone coverage?

Van Meter perceives a need for brokers to become moreknowledgeable about where they can go to get questions answered sothat they are able to select the right policies for their insureds.Brokers need to be informed about the widespread use of drones invarious industries, know the FAA regulations, and the broadcoverages and sources that are available to cover drones.

See also:

If you invade someone's privacy with a drone, yourinsurance might not cover it

21 emerging risks for the insurance industry andthe global economy

Christine G. Barlow, CPCU, ([email protected]) is managing editor withFC&S, the premier resource for insurance coverage analysis. Shehas an extensive background in insurance underwriting. Foradditional information on FC&S Online, visit www.NationalUnderwriter.com.