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Drones – Insurance Implications

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Presentation on theme: "Drones – Insurance Implications"— Presentation transcript:

1 Drones – Insurance Implications
March 12, 2015 – PAMIC – Nittany Lion Inn [click for next slide]

2 Agenda Part One Overview Reported and Potential Uses
Potential Exposures and Coverage Issues ISO Activity Endorsement Options Rating Considerations

3 Drones as an Emerging Issues
“By failing to prepare, you are preparing to fail.” Benjamin Franklin

4 Drones as an Emerging Issues
What is an emerging issue: New phenomenon: nature and effects are relatively unknown E.g., nanotechnology New risk: nature and effects are relatively known but involve unique characteristics E.g., hydraulic fracturing Potential Impact: May go beyond existing underwriting and risk management best practices May go beyond existing actuarial calculations

5 Drones - An Overview

6 What Are Drones The FAA Modernization and Reform Act of 2012 defines:
Unmanned Aircraft System (UAS) - an unmanned aircraft and associated elements (including communication links and the components that control the unmanned aircraft) that are required for the pilot in command to operate safely and efficiently in the national airspace system Unmanned Aircraft (UA) - an aircraft that is operated without a possibility of direct human intervention from within or on the aircraft

7 Technology And Design Types Flight Features Navigation Fixed wing
Quad rotors and octo-copters Micro air vehicles (MAVs) Flight Features Mini: low altitude, short duration Tactical: low to medium altitude, up to several hours, line-of-sight Strategic: medium to high altitude, hours to days, long- range Navigation Remote control ground station Automation systems Satellite data link Source: Source:

8 Drones – Reported & Potential Uses
“We’re not talking Internet retail giants anymore”

9 Reported And Potential Uses
Military Intelligence gathering Combat missions Law Enforcement And Security Surveillance Crime investigation Border protection Security of commercial properties Neighborhood watch Source:

10 Reported And Potential Uses
Search And Rescue Operations Search and rescue Delivery of supplies and food to disaster areas Agriculture Monitor crops Locate livestock and assess available forage Crop spraying Source: Source: https://www.faa.gov/about/office_org/field_offices/fsdo/orl/local_more/media/fy14summit/145SafetySummit_NextGenOverview_3_20_14.pdf

11 Reported And Potential Uses
Communications Movie filming Sporting events Delivery Packaged goods and other mail Photography Real-estate Weddings Inspection Insurance claims evaluation Infrastructure evaluation (e.g. bridges and dams) Underwriting inspections (e.g. roof)

12 Drones – Potential Exposures & Coverage Issues “Just to name a few”

13 Potential Exposures - Liability
Bodily Injury And Property Damage Liability Potential defect in design or manufacture Collision with persons or property Interruption in data-link transmission communication failure Personal injury Invasion of privacy Trespass and nuisance Infringement and defamation

14 Potential Coverage Issues - Liability
Provisions expressly addressing aircraft under the ISO CGL today? Coverage A An exclusion with respect to the ownership, maintenance, use or entrustment to others of aircraft Some limited exceptions may apply Coverage B No exclusion expressly addresses aircraft

15 Potential Exposures - Property
Property Exposures First-party property damage Perils of aircraft and falling objects Business interruption losses Hacking

16 Potential Coverage Issues - Property
Property Coverage Issues Under the ISO Standard Commercial Property Policy: Property not covered provisions address aircraft as property not covered if operated principally away from the described premises as well as personal property “while airborne” Specific provisions exist with respect to loss caused by physical contact of an aircraft; including caused by objects falling from an aircraft Business Interruption With respect to direct physical loss to covered drone(s), “period of restoration”? Are the “operations” new to the risk?

17 Potential Exposures and Coverage Issues
What About Other Lines of Business? Homeowners? Businessowners? Farm? Cyber? Workers Compensation?

18 Drones – ISO Activity “Endorsement options and rating considerations”

19 New ISO Liability Exclusion Endorsements
Optional exclusion endorsements – ISO GL Coverage A only Delineates existing aircraft-related exclusion Coverage B only Introduces exclusion addressing Unmanned Aircraft Coverage A and B Combines aspects of Coverage A and B options

20 New ISO Liability Exclusion Endorsements
Optional coverage endorsements – ISO GL Coverage A only Delineates existing aircraft-related exclusion Adds schedule to designate: Drones for which the exclusion will not apply The types of projects or operations the above exception will be limited to An optional designated aggregate (sub- limit) when coverage will apply

21 New ISO Liability Exclusion Endorsements
Optional coverage endorsements – ISO GL (Continued) Coverage B only Introduces exclusion addressing Unmanned Aircraft Adds schedule to designate: Drones for which the exclusion will not apply The types of projects or operations the above exception will be limited to An optional designated aggregate (sub- limit) when coverage will apply

22 New ISO Liability Exclusion Endorsements
Optional coverage endorsements - ISO GL (Continued) Coverage A and B Combines aspects of Coverage A and Coverage B only endorsements Optional designated aggregate applicable to both coverages A and B Similar options were also introduced for use with the ISO Commercial Liability Umbrella Program (sans the designated aggregate limit options)

23 Drone Rating Considerations – Liability
Limited Data on Non-military Drone Losses Crashes Bodily Injury Property Damage Will all crashes yield one or the other -- or both? Location Rural Urban Drone Characteristics Size Capabilities and Operations (photography, spraying, payload capabilities)

24 ISO Drone Activity Filed GL/CU/CX endorsements end of 2014
To become effective 6/1/2015 Reviewing topic for following LOBs Commercial Property Businessowners Farm Commercial Inland Marine

25 Questions?

26 Commercial Casualty Product Development
Contact Information William “Billy” Mauro Director Commercial Casualty Product Development ISO No part of this presentation may be copied or redistributed without the prior written consent of ISO. This material was used exclusively as an exhibit to an oral presentation. It may not be, nor should it be relied upon as reflecting, a complete record of the discussion.

27 End Slide


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