Cedric Stephens | Fundamental risks for drone operators
Question: I am a professional photographer. Early in 2018, I plan to use an unmanned aerial vehicle or drone with a camera to expand the services that I offer to clients. What are some of the main risks associated with these technologies? Is insurance available locally to cover them?
- JD, Kingston 7
INSURANCE HELPLINE: "Coincidence," writes American science fiction and fantasy author Emma Bull, "is the word we use when we can't see the levers and pulleys". Those words came to mind after I read your mail. It was the same day that I reviewed a Jamaica Civil Aviation Authority (JCAA) advisory about UAVs or drones which appeared in this newspaper.
The JCAA regulates the island's air space. The notice applies to recreational and professional drone operators. Was it coincidence that I saw your two questions and JCAA's drone regulations on the same day?
The JCAA notice caught my attention because I have always been fascinated by aircraft and flying. Some readers may recall that I wrote about drones and insurance in 2015. Drone insurance is not locally available or provided under standard insurance policies. Two independent sources recently reaffirmed this.
The technical manager at Allied Insurance Brokers, Camile Coore, is familiar with the subject. She has placed coverage for local drone operators in the United Kingdom market. Much of the information used in this article was supplied by her.
Lloyd's, a group of insurers in the UK, in a 2015 Emerging Risk Report, "Drones Take Flight: Key issues for Insurance", says: "concerns around safety, security and surveillance could pose significant risks to users of this nascent technology. This is, of course, true of many emerging technologies. However, drones are expected to receive particular scrutiny because of the technology's military heritage and surveillance capabilities. Adequate insurance coverage will likely be of importance to protect users against emerging risks."
The report identified "five fundamental risks" associated with drones.
- Negligent or reckless pilots: the 'human factor' is considered to be key. For example, "operators on the ground could feel disassociated from risks occurring in the air" or could lack experience in handling these devices. Unless operators can demonstrate "responsible and safe behaviour", insurers may impose compulsory excesses (or deductibles) and charge higher premiums like they normally do for young and inexperienced drivers for motor policies.
- "Patchy (air traffic) regulatory regimes: regulation is developing but is inconsistent between international jurisdictions. A robust regulatory framework is expected to be crucial to the provision of insurance for drone operations.
- "Poor enforcement: the industry is growing too rapidly and unevenly for regulators to provide strong oversight without technological support. Tracking/monitoring technology could also help operators avoid breaking laws in the first place for example by supporting the development of 'geofencing' technology to ensure that drones do not stray into controlled airspace.
- "Vulnerability to cyberattack: drones could be vulnerable to cyberattack, with some reports suggesting that a thriving community of 'drone hackers' is already established. Cyber security measures will likely be increasingly significant for underwriters' risk assessment of commercial drone operations.
- "Privacy infringement: this is perhaps the most cited public concern about drones. Key requirements for insurance are expected to include the completion of privacy impact assessments and compliance with applicable regulations and laws."
The JCAA's assessment of the risks associated with the operation of drones is like that of insurers. Its rules apply to hobbyists and professional operators.
The authority says that professional operators must apply to the JCAA for a Special Aerial Work Permit before each flight.
All entities or persons wishing to operate a drone must apply to the JCAA in writing for approval, providing all details of the intended operation; not fly the aircraft unless written permission has been received from the authority, stating any applicable restrictions or conditions; and having received approval, the professional operator must observe and comply with all the conditions included in the permit.
SUMMARY OF COVERAGE
Drone insurance contracts are like comprehensive motor policies. One part provides coverage for the disappearance of or accidental loss or damage to the drone. The other offers protection for claims alleging negligence made against the drone operator by third parties. Insurers contract, at their option, to pay for or repair the drone less an excess.
According to Amazon, the US prices for "top selected camera drones" range from US$40 to US$400 (J$5,000 to J$50,000).
Most hobbyists and even professional operators, I suspect, would be inclined to self-insure accidental damage in view of the relatively small values at risk and buy liability coverage only.
The liability section of drone policies offers protection "for all sums, which the Insured shall become legally liable to pay, and shall pay, as compensatory damages (including costs awarded against the Insured) in respect of accidental bodily injury (fatal or otherwise) and accidental damage to property caused by the UAV or by any object falling therefrom", subject to a maximum amount.
Space constraints prevent me from listing the policy exclusions. There are many. Also, policyholders are expected to operate their devices in compliance with the rules of the responsible authority in this case, the JCAA.
Managing risks is important in any kind of business. It is my hope that this information will be of some benefit as you execute your plans for 2018.
- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: firstname.lastname@example.org