Drone Insurance

Published in Mid-Canada Forestry & Mining, Spring 2016:

It's often been said, "Insurance is the only product that both seller and buyer hope is never actually used." That's undeniably true, but it's also true that no business should operate without insurance. Whether your business is in the highest of high technology or as low-tech as making rope and horseshoes, having that safety net of insurance is wise.

On the newer and higher end of business technology is the use of unmanned aerial vehicles (UAVs) or "drones" for photography and data gathering. Small camera-mounted flying machines can be seen surveying urban land for developers, and less visibly are out in remote areas doing valuable work for foresters, miners and mineral exploration companies.

Wherever drones are used, accidents can happen, and those mishaps can damage property and hurt people. Consider these recent incidents:

A small UAV crashed into the 40th floor of an iconic New York City landmark, the Empire State Building, on a business day in February; police charged the hobbyist operator with disorderly conduct.

A privately owned drone crashed head-on into the grill of a moving vehicle last December in Belleville, Ontario; a local police officer told CBC News it was the first crash of its kind he'd ever heard of, but "it probably won't be the last."
Camera-mounted drones were banned from World Cup ski meets after one nearly hit a slalom competitor in Italy.

And, though it's not making news, there have been drone mishaps at mining and forestry sites in North America. Nothing as newsworthy as the 2014 crash of a UAV into a conventional airplane near an Australian mine, but they're happening. The use of drones for mapping, data collection and surveillance is increasingly common in forestry and mining, and with use comes risk.

Really, there's no question that liability protection for your fixed-wing and helicopter UAVs is smart business. But – and this should come as no surprise – it's also required. Transport Canada requires no less than $100,000 in liability insurance coverage for your drone – regardless of how big or small, regardless of how you use it.

And, of course, $100,000 really is a minimum. A UAV operator would be well advised to get more coverage because, as Sumac Geomatics CEO Todd Domney says, "If you drop a UAV on somebody's head or a car, $100,000 isn't going to do much for you." His Thunder Bay-based company has insured its fleet, which includes a fixed-wing Lancaster Hawkeye and a few multi-rotor models, beyond the minimum.

Fortunately, the drone insurance market now has several competitors eager for your business. Once only through specialist aviation insurers, the market broadened in April 2015 when a big player, Zurich Canada, launched a UAV insurance package for corporate clients. "Zurich's customers in Canada will be the first ones around the world to have access to this unique insurance solution, thanks to the sophisticated regulatory environment governing the use of drones in Canada," Zurich Canada executive Urs Uhlmann said in a news release.

Another corporate goliath, AIG Insurance, introduced its drone policies a few months later. "AIG has the capability and product to handle unmanned aircraft of any size operating in a wide variety of industries," the New York-headquartered company declared on its website.

Toronto-headquartered Intact Financial Corporation launched its commercial UAV insurance in January 2016 after, according to Senior Vice-President Alain Lessard, "broker feedback and survey insights identified a growing customer demand and gap in non-specialty markets for this type of coverage."

Lawson Consulting and Surveying, headquartered in Winnipeg, acquired its first UAV (a lightweight senseFly eBee, since replaced by a larger Trimble UX5) in early 2014 – before AIG, Intact and Zurich launched their commercial UAV insurance packages.

"It was a chore to get insurance for our UAVs back then," recalls Lawson Consulting's CEO and President, Andrew Lawson. "Insurers for UAVs were hard to come by."

All that has changed greatly. There are more insurers now, premiums are lower now, and getting a UAV insured is much easier. But the assistance of Lawson's insurance broker at Crossroads Insurance in 2014 (when they insured with Lloyd's of London) and since is still greatly appreciated. "They've been a huge help," Lawson says.

"Businesses typically need at least two types of insurance to ensure they are properly protected," Hazel Tan, a spokesperson for Intact, remarks from her office in Toronto. "One is commercial property insurance, the other is liability insurance. A business needs to insure against the loss or damage of its property, including the drones, which can have price tags in the tens of thousands of dollars (or even in six figures). The firm also needs protection 'in the unlikely event that their UAV causes injury to someone else or damages the property of others,'" she adds.

Tan says Intact is unique in the Canadian market as "the only insurer to offer drone coverage under its commercial insurance policy. Other insurance companies are offering drone coverage via a separate, speciality aviation insurer.

"UAV coverage from Intact Insurance also includes the option of insuring UAV-mounted surveying, sensing and photography equipment in addition to the UAV itself," she adds. "We continue to be a strong market for the non-aviation exposures of customers that may use drones and can provide tailored solutions, coverage and claims support for commercial customers."

Tan says Intact has potential drone insurance clients complete a "a brief application form with focussed questions that allow us to capture details most relevant to setting fair-minded terms for UAV insurance. For example, we wish to see that UAV pilots have at least some training and experience, including attainment of the minimum knowledge requirements that are specified by Transport Canada."

Crossroads Insurance President T.J. McRedmond, who helped Lawson Consulting and Surveying get UAV insurance in 2014, says it's a good idea to insure your drone through a company that's familiar with aviation insurance.

"It's definitely important to know who's providing the product," he remarks from Winnipeg, adding that it helps to have someone who knows the ropes in your corner in the event of claim. "Insurance brokers have that knowledge and act as advocates for our client."

Getting insurance for UAVs is "straightforward," says Sumac's Domney. "We pretty much just filled out a questionnaire similar to one you would fill out when buying home insurance, with some drone-specific questions thrown in. It was easy. It's like anything else. You need insurance to do business, and it's just a cost of doing business."

Peter LeCouffe says getting insurance was fairly easy when Harrier Aerial Surveys got its first UAV (it now has a few). The trickiest part was that there's a bit of a Catch-22 involved: You need a Special Flight Operations Certificate (SFOC) from Transport Canada to get drone insurance, but you need insurance to get an SFOC.

Fortunately, the Nelson, BC-based company found an insurance broker to navigate those insurance/regulatory waters. "The broker does most of that work," says LeCouffe, Harrier's Operations Manager. "It wasn't too much of a hassle for us at all."

Owners, operators, insurers and brokers agree that things are looking up in the drone insurance market.

"Right now," says McRedmond, "insurance for drones is still fairly expensive because there are not a lot of insurers in the market. Competition will drive premiums down eventually. "I believe that, in the next while, more and more companies are going to be offering UAV insurance. We've been seeing more and more insurance companies starting to come out with products, as more and more uses are found for UAVs."

And the entry of more insurers will have predictably good effects on cost, he adds. "It's just like any other business: As competition comes into the market, prices will go down."