with Leighton Chenery Issue 108 - December 2015
There is little doubt that the emerging technology of Drones within the Broadcast industry is most likely to have insurance implications. As the market continues to expand and organisations enhance their activities through the use of Drones, adequate insurance coverage will be of particular importance to protect against the more complex and high value risks. Whilst insurance solutions have been developed to meet the needs of manufacturers, distributors and operators, the diversity of potential applications means significant further insight is required to sufficiently manage the risk exposure. This piece identifies the key areas that will influence the availability and pricing of future insurance solutions.
Potential exposures
Statistics on incidents involving Drones are sparse and the absence of historical data impairs the ability of insurers to accurately assess potential exposures. Human Error is a key safety consideration with the possibility of negligent or reckless operators causing particular concern. Evidence of safe operational procedures and mandatory licensing of operators with training and certification schemes will enhance insurers ability to assess the competence of those pilots with permission to use Drones commercially. The integration of Drones into busy airspace will most likely require further technology enhancements in order to reduce the threat of collisions with reports of near miss events beginning to appear.
Whilst regulation within the industry is developing, it remains inconsistent with no harmonisation of international standards and little clarity on third-party liability. The rapid growth of Drone usage undoubtedly presents a significant challenge to those seeking to install a robust framework for a regulatory system that relies heavily on responsible behaviour and is difficult to monitor. Tracking and monitoring technology could provide means to gather evidence of non-compliance and Geo-fencing technology could reduce the risk of straying into controlled airspace. An assessment of operators competency will be required and licensing initiatives have already sprung up, which is a positive development for quantifying and managing this area of uncertainty.
Increasing threats
Public Liability insurance will be especially prominent as Drones interact with a greater range and value of third party interests. Whilst incidents, such as the Australian triathlete sustaining minor injuries after a Drone fell from the sky, have been relatively small and infrequent. As the commercialisation and development of this technology continues larger damages are an increasing threat. For example, the substantial damages and legal fees will emerge if a Drone collides with a commercial passenger aircraft, causing it to crash. Insurers have recognised this fact and more and more standard exclusions, relating to the use of Drones, apply in policy wordings as a result.
Security and privacy
Drones are particularly vulnerable to cyber attacks and privacy infringements. Cyber security will be an important consideration as Drones rely on data links for command, control and navigation without encryption. Being so vulnerable to jamming, interception and manipulation it is hardly a surprise that Drone hackers are establishing and targeting this area for hostilities.
Privacy concerns are also a strong issue. Some local jurisdictions within the US debating legislation authorising individuals to shoot down Drones believed to be infringing their privacy. These considerations would drive demand for Professional Indemnity cover and require operators to perform Privacy Impact Assessments due to the inadvertent filming of individuals.
The future
Going forward, the quality and evidence of risk management that operators can provide will influence the varying terms, conditions, excess and ultimately price they will pay to secure the required coverage. Liability in the event of damage or bodily injury arising from an incident is subject to some uncertainty. Generally, a human operator would retain this liability but a technical malfunction or malicious attack outside of their ability to control could lead to claims against wider parties.
The potential of Drones within the industry remains an exciting one with the ability to enhance a number of areas. However, to ensure the technology is used safely and responsibly and the risk is managed effectively, it is important to consider the insurance implications and the coverage required to minimise your exposure.
Sutton Winson is a specialist Insurance Broker in the Broadcast & Media industry and is able to help you manage your business risks. To discuss your insurance requirements, please contact Leighton Chenery on leighton.chenery@swib.co.uk, call 07976 327 407 or visit www.suttonwinson.com
