ISO Drone Insurance Coverage Options Now Available to Insurers

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ISO’s new coverage and exclusion options for commercial drones took effect this month in most ISO jurisdictions. The options were designed to provide insurers with tools to help develop insurance programs for businesses that may use drones.

The new options, effective as of June 1, address the growing liability exposures of commercial drones, which have already developed a wide range of potential and reported uses, including package delivery, crop protection, and aerial photography. Many insurers have provided coverage by writing their own safety rules as they waited on regulations by the Federal Aviation Authority, which were announced at the end of March.

The new ISO options modify coverage under ISO’s Commercial General Liability and Commercial Liability Umbrella/Excess programs. Six core options are available under each program (three optional exclusions and three limited-coverage endorsements) and can be used to address a number of potential exposures with respect to bodily injury, property damage, and other potential liability related to drones.

In a recent survey by Munich Re, risk managers predicted the use of drones could become common practice for almost 40 percent of businesses in the next five years or sooner. Those same risk managers said they would buy drone insurance even if it’s not mandated.

An estimated 30,000 commercial and civil drones could be in the skies in the U.S. by 2020, according to the Federal Aviation Administration (FAA). The Association for Unmanned Vehicle Systems International (AUVSI) estimates that between 2015 and 2025, the drone industry will create 100,000 jobs and contribute $82 billion to the U.S. economy, according to the Munich Re study.

“As more businesses introduce drones into their operations, insurers need underwriting tools available to them to address the potential wide range of exposures they’ll likely face,” said Ron Beiderman, vice president of Commercial Lines Coverage Products at ISO Insurance Programs and Analytic Services.

Beiderman said the new endorsement can help insurance carriers tailor coverage to address exposures to suit their risk tolerance.

Industry professionals looking for more information on drones and related ISO activity should visit ISO’s Emerging Issues Portal (ISOnet login required).

ISO provides statistical, actuarial, underwriting, and claims information and analytics; compliance and fraud identification tools; policy language; information about specific locations; and technical services for commercial and personal lines insurance. ISO serves insurers, reinsurers, agents and brokers, insurance regulators, risk managers, and other participants in the property/casualty insurance marketplace. ISO is a Verisk Analytics business.

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