Insurance: The Next Challenge

Now that the FAA has begun approving commercial exemption petitions, there remains another challenge for the commercial “drone” operator, and that is the matter of insurance. The operator is the key element.  Coverage should revolve around the risks for the operator, the largest vehicle being used and the environment it is used in.

Your local DMV requires proof of insurance. So far that is not the case with the FAA. If not required by the FAA, customers will want operators to carry liability insurance. It’s not wise to operate a business without liability insurance to begin with, especially a business that involves the kinds of risk exposure that comes with commercial drone operation.

But is the insurance world ready to adapt to this new industry? So far, many are still attempting to use a “one size fits all” approach using the same policies they sell to private pilots and airlines. Or else they think we’re flying Pumas to do real estate videos.

Here is a sample of the standard response from companies offering coverage for UAV operators:

Liability only rates run from about $1,000 to $1,200 per year for $1,000,000 liability limit for the first aircraft.  The limit follows the aircraft and each aircraft carries its own premium.

Subsequent aircraft added to a policy can received reduced rates depending upon the insurer.

The above premium indications are based upon an insurable risk in today’s aviation and aerospace insurance market.

Policies are written on all risks of ground and flight aircraft policy forms and again, coverage follows scheduled aircraft worldwide.  Policies are quoted through up to 10 different aviation and aerospace insurers with A to A++ XV AM Best ratings.

Insurability can based upon the aircraft type, flight controller type, uses of the aircraft and pilot experience and background.

There is no deductible for liability.  Deductibles only apply to hull physical damage coverage.

OK, that sets the basic framework.

This is a new industry that will require new thinking.  Squeezing coverage policies designed for general aviation into a 24 inch package simply won’t work and carriers are beginning to at least provide drone-specific information forms that don’t ask “how many passengers will typically be carried?”.  For example: the typical form asks where the “aircraft” is “hangered” (in a closet?)

What is not always clear is that working with insurance carriers involves working through an agent or broker. Once a customer receives a quote from a broker, that customer is tied to that broker. You can’t get another quote for that carrier from a different broker or from the company itself. There are probably complex legal reasons for the process, but that is the relationship as it exists in the market now.

The field of carriers offering coverage for UAVs is growing but we have so far found commercial insurance for UAVs being offered by Allianz, Star Indemnity, State National Companies, Berkley Aviation, Global Aerospace, and Houston Casualty offered variously through brokers including:

(If we have missed any, please let us know)

Some carriers may offer better (commercial operation) rates for completing a course such as this one which was recommended by Terry Miller at Some may offer discounts for covering multiple aircraft while others may not. There can be consideration of skill and experience level and other qualifications. Weight of the aircraft is another important factor.

As the industry continues to expand, there will be additional carriers adding UAV/drone coverage and prices will begin to ease…. until the first big claim when somebody plows a octocopter into an Interstate highway or a sports event.

Clearly, dealing with the FAA is not going to be the last hill in this battle.