Commercial use of drones and their risk exposures
They were the hottest selling gifts over the holidays, but did you know that the popularity of drones is growing in the commercial space as well? According to the FAA, U.S. drone registrations reached 770,000 with no end in sight in the past 15 months.
Recently, I attended a program on Errors & Omissions insurance. The topic of discussion was Emerging Technology Trends, with drones being discussed at length, particularly concerning different applications for their use in various business sectors. Some examples, both large and small: Amazon has implemented the use of drones in the U.K. to deliver packages. Drones are also used by a company in Michigan to deliver frozen yogurt to Hope College in Holland, Michigan.
What does this have to do with insurance?
Commercial drone use might not only change a company’s exposure completely, but also inadvertently change their business model at the same time. For instance, a manufacturing company that makes plastic baskets to hold strawberries recently purchased a drone. The company began using the drone to help the strawberry farmers they were selling the baskets to. How so? Well, the drone was used to scan the fields of strawberries of their current clients, allowing the manufacturing company to pinpoint certain areas of the fields that were growing better than others and give feedback on exactly where those areas were. The farmers were then able to do more research to see what they were doing differently in those areas.
This is obviously a faster, more efficient way of generating data on the production of the strawberries than just walking the fields. All of the data captured using this drone helped the farmers in the production of their strawberries.
I remind you that this was originally a manufacturing company. However, this process changed their business model from just manufacturing plastic baskets to also becoming a consultant and big data firm for the farmers. By just using one piece of new technology -- the drone -- the manufacturer now had a way to evolve into a new company and create a new source of revenue.
What does this mean for their insurance?
First, they needed to have a plan and a knowledgeable advisor. The next part was using the advisor to show what was needed in terms of different types of policies and the types of exposures that were created by using drones as part of the business. Exposures for using a drone for commercial use can include:
- Physical damage to the plant by the drone, cameras, sensors, ground station
- Aviation Commercial General Liability
- Aviation Products Liability
- Non-owned Aviation Liability
The important takeaways if you are either thinking about using a drone for your business, or are currently using one, are to follow all of the guidelines set forth by the FAA for drone use and make sure you are insured properly as well. Check with your risk advisor to identify what you should know to make informed decisions on your coverage.