As the Federal Aviation Administration (FAA) continues to take steps to ease restrictions on commercial drone use, State Farm and Amazon have become the most recent household names permitted to test unmanned aerial vehicles (UAV) or unmanned aircraft systems (UAS).
State Farm, the first insurer to be granted an exemption from the current ban on the commercial use of a UAS was allowed to use the vehicles for outdoor research and development, including using imagery and analytics in underwriting, re-underwriting, catastrophe response, roof inspection, and claim resolutions settings. Ultimately one of the most important uses State Farm and other insurers would have for these vehicles may be in evaluating property damage from and responding to natural disasters.
In the retail industry, Amazon made a big splash in 2013 when it announced its Prime Air program and interest in developing UAS technology with the goal of delivering packages to customers in 30 minutes or less using small unmanned aerial vehicles. The FAA issued Amazon Logistics, Inc., an experimental airworthiness certificate to an unmanned aircraft (UAS) design that the company will use for research and development and crew training.
Although there is a ban on the commercial use of drones, businesses are interested in developing the technology and exploring the transformative role that these vehicles could have in disaster response, farming, infrastructure management, public safety, security, wildfire tracking and even traffic control to name a few areas. According to the Association for Unmanned Vehicle Systems International (AUVSI), this industry has the potential to create more than 70,000 jobs and $13.6 billion in economic impact in just the first three years after drones are integrated into U.S. airspace. However, many in the business community have been frustrated by the current commercial use ban, the approach the FAA has taken to developing rules and the process of granting exemptions to the ban.
Federal and State Government Regulation
As of mid-May nearly 400 commercial exemptions have been granted by the FAA. Firms in industries ranging from agriculture to insurance, retail to real estate, and media to utilities have received exemptions and are starting to experiment.
On the other hand the federal government recognizes the strong interest of the business community and the potential that exists, but the FAA says it is taking an incremental approach to UAS integration because the U.S. has the busiest, most complex airspace in the world. Additionally there are many concerns regarding safety, security and privacy. Consequently the FAA is using a case-by-case determination to authorize unmanned aircraft to perform commercial operations prior to the finalization of the Small UAS Rule, which is in the public comment phase and could take until 2017 to be completed.
Additionally state governments across the country have been exploring regulatory issues associated with UAS. According to the National Conference of State Legislators (NCSL), 20 states have enacted laws addressing UAS issues. Common issues addressed in the legislation include defining what a UAS, UAV or drone is, how they can be used by law enforcement or other state agencies, how they can be used by the general public, regulations for their use in hunting game and the FAA UAS test sites.
Drones in Disaster Areas
As the U.S. works through the significant regulatory issues, the evidence is mounting from around the world that these vehicles can play an important role in disaster response and recovery. An unprecedented number of unmanned aerial vehicles were used to map and aid in the response effort following Typhoon Haiyan (known in the Philippines as Typhoon Yolanda), which was one of the strongest tropical cyclones ever recorded and devastated the Philippines in November 2013. By design, these vehicles can be in the air within minutes and can help speed disaster assessment translating into faster response. This has the potential of saving lives by enabling supplies to be strategically deployed more quickly. In the insurance context drones could help with claims adjusting and jumpstarting the settlement and recovery process.
In the U.S. major events like hurricanes, tornadoes, flooding and wildfires can render many geographic areas initially inaccessible to claims adjusters. The 2013 Moore, Okla., tornado is an example of the way UAS technology could quickly help insurers assess damage after a significant weather event. The EF5 tornado that struck Moore and adjacent areas on the afternoon of May 20, 2013, had peak winds estimated at 210 mph, killing 24 people and injuring 377 others. The tornado was part of a larger weather system that had produced several other tornadoes across the Great Plains over the previous two days.
There also is great potential for these vehicles to improve safety by reducing fall injuries associated with roof inspections and by not sending people into very hazardous environments.
In the agriculture industry, property and casualty carriers insure $11.4 billion in crop multi-peril insurance and almost $3.7 billion in farmowners multi-peril insurance. The ability to use a UAS to inspect barns, farm fields, and other agricultural machinery could significantly increase safety and the ability to respond more quickly to the farming community after a severe weather event.
Significant Privacy Concerns
These are all positive uses for UAS technology, but overall the public is leery regarding their private and commercial use. An Associated Press-GfK public opinion poll found that Americans are skeptical that drones' benefits outweigh the risks to privacy and safety. By a 2-1 margin, the public opposed using drones for commercial purposes. Only 21 percent favored commercial use of drones, compared to 43 percent opposed. Another 35 percent were in the middle.
A PEW Research project also noted that although there is general optimism about the long-term impact of technological change, Americans express significant reservations about some developments such as those involving drones. These polls highlight the challenges facing commercial use of these vehicles.
As you drill down into the public's opinion, however, there is majority support for the use of UASs for dangerous jobs or in remote areas. Until the public is assured that safety, security and privacy issues are better resolved business application such as Amazon Prime Air will be facing an uphill battle.
The good news is that gaining the public acceptance and overcoming regulatory challenges may not be insurmountable. Privacy concerns must certainly be addressed head on with an understanding that there will be a significant amount of regulation to ensure that personal privacy is protected and there is due process. Emphasizing key benefits and the potential for major benefits at the local level will be important in winning over the public. First responders understand the importance of the initial hours after a disaster. Speed in getting information from an impacted area can make the difference in search-and-rescue operations. With the ability to get into a disaster area, organizations of all types are better able to make assessments of on-the-ground conditions and needs. The public will understand and show support for these uses and they will be instrumental in bolstering support for the commercial use of unmanned aircraft systems as the FAA and others seek to maintain today's outstanding level of aviation safety without placing an undue regulatory burden on an emerging industry.
Jeffrey Brewer is vice president, public affairs at Property Casualty Insurers Assn. of America (PCI). He has nearly 15 years of experience in the insurance industry.
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