Insurers have an opportunity to shape drone regulation
This article was originally published in Insurance Day.
The recently announced Maritime and Coastguard Agency Drone Demonstration and Development Pathfinder project is an ambitious venture intended to expand the use of drones operating Beyond Visual Line of Sight (BVLOS) within UK airspace. The maritime sector has already taken significant steps to progress the use of autonomous vessels and embracing drone technology in collaborations such as these could stimulate much needed investment into a struggling aviation sector.
Implications for insurers
The widespread use of BVLOS drones in non-segregated airspace is seen by many as the next logical, and indeed necessary, step in the evolution of this growing industry. Earlier this year the UK Civil Aviation Authority published its first BVLOS guide which talked of enabling these operations with a focus on capitalising on economic opportunity. It is widely considered that such aircraft will revolutionise activities such as search and rescue and infrastructure inspection where direct human deployment is often inefficient, expensive and/or dangerous. But what are the implications of BVLOS drones for the commercial insurance industry? Should the industry see this fledgling area as an opportunity?
Barriers to progression
Drone operators in the UK must apply to the CAA for special exemptions in order to legally fly drones BVLOS. The focus on these operations is usually research and development, and this is a fairly uniform picture globally. The government-sponsored Drones Pathfinder Programmes are one such development vehicle in the UK, seeking to identify and address the barriers to rapid growth of the drone industry. Broadly speaking, the key barriers to progression are technology, public perception and regulation. Commercial insurance has a role to play in all three issues.
Innovation often brings new and unfamiliar risks. The lack of data on BVLOS drones may cause difficulty for insurers for many years to come, and it is no surprise that BVLOS pioneers have sometimes struggled to find the right insurance for their niche operations. If operators encounter difficulty in obtaining insurance, this has the potential to slow progression – a commercial operator cannot fly in the UK without a minimum level of liability cover – so availability of affordable insurance is critical to industry growth.
From an insurer perspective, being involved in this class of business from this relatively early stage will no doubt assist in understanding the risks more intimately, and enable insurer and insured to work together in identifying and managing those risks, whilst encouraging the industry to grow safely.
Regulation and legislation
Insurers are likely to have small appetite for devoting resources to shaping legislation, but there is an intrinsic link between risk from a legislators point of view, and risk from an insurer perspective. An insurer may therefore be able to gain valuable insight from the legislator, and learn something about the risks in light of the measures implemented by the law makers. Consequently, there is a tangible benefit to insurers following the development of regulation in this area.
Insurers will universally want to know that their insured’s are operating within a regulatory framework designed to promote safety and mitigate the risk of loss and damage. Indeed, compliance with local laws and regulations is usually a condition precedent to coverage, and any deviation is often grounds for denial of a claim. In the UK, the CAA requires BVLOS operators to present a safety case that includes a detailed consideration of risk factors. If new regulations are implemented, either primary legislation by way of the long-delayed Air Traffic Management and Unmanned Aircraft Bill, or by some other means, they must maintain the focus on safety, but at the same time avoid stifling this industry by imposing disproportionate restrictions upon operators. The regulation will need to be realistic as to what the technology can achieve, but flexible enough to allow development of that technology without the need to re-write the rules. That is perhaps why drone regulation has historically been achieved through secondary legislation (the Air Navigation Order) – as it is easier to change.
An interesting conundrum for BVLOS, is the significant barrier presented by integrated airspace management and the lack of mandatory “electronic conspicuity” on the vast majority of light manned aircraft (general aviation) – a transponder, in simple terms. BVLOS drone operation in non-segregated airspace requires every aircraft, manned and unmanned, to be able to see and avoid each other. The CAA appears to be moving towards mandating this technology in the future, but there will be certainly be resistance, and it will not happen quickly. It could be said that the widespread implantation of such technology, driven at least in part by the drone industry, will make aviation safer overall.
The insurers’ role
Insurance has often remained on the periphery of consideration when on the cutting edge of drone development, and insurers are rarely asked to be involved. As operations become ever more ambitious, however, and begin to operate in manned airspace, Insurance will be a significant factor in success and specialist insurance solutions will be required. The Insurance industry therefore has an important part to play in the success of BVLOS drones.