Contractors and engineers that are using drones soon may be able to buy more types of insurance coverage from a greater number of insurers.
The Insurance Services Office (ISO), which among many other services provides policy language to the industry, has recently announced that it will have up to three different endorsements adding business use drone coverage to commercial General Liability Policies by June 2015.
Specifically, the endorsements will be part of commercial general liability and commercial liability umbrella and excess programs. At this point ISO, which is part of Verisk Analytics, has not introduced any rating information related to the new drone-related endorsements
The available endorsements, according to ISO, will provide third party liability coverage, including but not limited to liability coverage for property damage.
Only about four or five insurance companies currently are offering coverage. Rates for drone coverage are declining as coverage becomes more widely written and available, says Grant Goldsmith, vice president of Avalon Risk Management and president of Overwatch.
Policies not necessarily strictly based on ISO endorsements will provide coverage for bodily injury and property damage to third parties as well as property damage or "hull damage" to the drone itself, says Goldsmith.
“This coverage therefore picks up the gap in coverage that a normal construction company would encounter in their insurance program,” Goldsmith wrote in an email reply to questions.
Among the underwriting factos that must be considered by insurers writing drone insurance are “pilot experience, drone system used, areas flow and flight operations, prior loss experience and other safety related factors,” Goldsmith wrote.
In addition to those factors, the pricing of some policies will depend on the value of the drone’s hull and payload if the coverage also includes damage to the drone.
Goldsmith wrote that $1 million in liability generally costs between $1,000 and $2,500 per year depending on safety factors, and hull damage coverage costs between 6% and 10% of the hull value and payload value to be covered.
Pat Costello, president of aviation insurer Costello Insurance Associates Inc., described in a separate email interview a similar price range for $1 million in liability coverage for non-commercial drone users such as “a construction company using their own UAVs to photograph construction sites.”
Some insurers only cover commercial drone use. By most definitions, commercial use involves any activity where the use of the drone is a contracted service.
This story was updated February 8, 2015 to clarify the difference between the ISO endorsements, on one hand, and features of the insurance policies that Mr. Goldsmith has been able to provide or anticipates providing to clients.
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