Jeff Pearce
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Insuring drones

Ian Glenn says he stopped using the word “drone” for a while. It was “because the press could only say ‘spy drone’ and ‘killer drone,’ and that was a direct result of what the U.S. was doing in Yemen and other places. But fundamentally, Jeff Bezos and Amazon and Google X and these guys have changed the paradigm. So drones are now completely viewed differently, even in the last 12 months.”

Not that Glenn thinks drones delivering packages door to door is a particularly wise idea, but the CEO of ING Robotic Aviation knows that drones can do cool stuff. His drones do cool stuff. At the Property Casualty Underwriters Club luncheon in Toronto last month, Glenn couldn’t help getting excited over his UAVs [Unmanned Aerial Vehicles]. As a slide came up of a pressurization plant: “We know the temperature… [of] every pixel, to one twentieth of a degree Celsius. How cool is that?” A view-from-God shot looking down on polar bears in the Arctic: “From this picture here, you can actually see the paw prints of the bears in the ice.”

Drones have already been used for film production, pipeline monitoring, railroad and power line inspections, checking on habitats and wetlands, ice monitoring… Their potential as an underwriting tool is obvious, and it’s the insurance industry that now has to play catch-up.

What’s interesting is that for once, Transport Canada is ahead of the Americans’ Federal Aviation Administration on having what seems to be enlightened regulation. Want to fly a drone? Glenn says the way our regulators “grant authority in Canada is under a special flight operating certificate, which is a risk-based approach which looks at people, technology, and operation.” Inspectors “evaluate your application and say, ‘Okay, you know what you’re doing, we understand what safeguards are built into your system, and the operation you’re conducting is bounded by space and time.’ And it’s the same process they use for hot air balloons, rocketry and air shows.”

Glenn says the Americans have been working on proposed regulations that will “allow commercial operations within visual line of sight under 25 kilos, or 55 pounds. That’s them. Which is something we’ve had for a long time.” The Americans have taken their time, and the UK’s Guardian newspaper reports that Amazon grew so frustrated with Washington’s approach that it cane up to B.C. and “acquired a plot of open land lined by oak trees and firs, where it is conducting frequent experimental flights with the full blessing of the Canadian government.” And in Alberta, there’s a whole range of restricted airspace, 2400 square kilometres worth, that’s been set aside to test drones beyond line of sight. Only as we were going to press did the FAA grant speedy approvals for drone tests for certain select industries, including insurance.

But there’s still plenty to work out. Nellie Root, vice-president of casualty underwriting at Swiss Re, asked some hard questions of the audience after Glenn wowed them. And at the top of the list was: who should even insure drones? Is it something for the specialty market? Reminding everyone that the CGL-IBC 2100 hasn’t changed much since 2005, Root argued, “Everybody here thinks that aviation is excluded? Yeah, we all think it’s excluded.” But is it really? In discussing the various exemptions, Root asked if you could end up “having coverage that was unintended? Because I think if we’re going to do something, let’s commit the error. Let’s do it. But don’t have it thrust upon us, thinking, ‘Well, I don’t have to do this, because it’s excluded,’ right?”

When it comes to issues of privacy or intrusion upon seclusion, Root says there’s not a lot of precedent you can reference. “I pointed to the invasion of the right of private occupancy—there is a lot of controversy around that… Can a drone be considered a physical interference of the property?” She admitted that she had tossed out far more questions than answers, but argued, “If we’re going to use CGL-IBC 2100, let’s use it. Let’s make sure that it really gives us commercial clarity, because I know that it’s really, really tough.” The goal posts keep moving, and “some new technology comes along and throws us off our game.” It’s a fair point. Drones already crowd the skies. Without such clarity, p & c executives could have more regulators hovering over them.

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Copyright 2015 Rogers Publishing Ltd. This article first appeared in the April 2015 edition of Canadian Insurance Top Broker magazine