, one of the nation’s leading property/casualty insurance carriers, is taking on the emerging risk as more and more US retailers – including Amazon and Wal-Mart – seek and are granted FAA approval to operate drones.
In a conference Monday hosted by business software provider Oracle, AIG Chief Technology Officer Mike Brady announced that the insurer has started offering coverage for any damage caused by drones and injuries to drone operators.
“Clearly with that many drones in the airspace you run a risk, so AIG actually now offers drone insurance to our commercial customers,” Brady said.
The policies are offered through AIG’s excess and surplus subsidiary Lexington Insurance Company and bear many similarities to auto insurance plans, covering both “broad physical damage” and “third party liability coverage.” However, as they are written especially for drones, the policies also cover drone “operators” and on-ground crew members, as well as electronic malfunctions and component failure.
The coverage excludes problems such as hijacking, unlawful seizure, hacking or “spoofing.”
Drones weighing up to five pounds with a wingspan of up to three feet are covered, though pricing information is not immediately available.
The move to offer drone coverage comes just one month after a Fortune magazine report suggested that lack of viable insurance options could threaten the entire industry. And as it is already predicted to generate billions of dollars in economic impact over the next 10 years, it’s important that market players come forward soon.
Previously, insurers have cited significantly liability and a lack of regulatory guidelines as making it difficult for underwriters to craft well-rounded products for drone manufacturers and operators.
K insurance house Lloyd’s has even gone on record saying risk pricing for drones is extremely difficult in view of their emerging status and inherent issues like third-party liability for physical damage, to say nothing of a lack of meaningful data and risk metrics.
Others in the industry agree.
“Unfortunately, there are big questions and not enough answers,” Tom Karol, a general counsel for the National Association of Mutual Insurance Companies, told Fortune.“There needs to be more clarity on how people will use these, and what will be allowed and won’t be allowed is a big issue.”
Those monitoring insurer appetites, however, suggest that carriers will not begin to embrace privacy concerns as part of drone liability policies until state and federal legislation becomes clearer on expectations and legality surrounding drones.
“I’m constantly following up with my standard carriers to see if their appetite for drones has changed,” said Evan Garmon, a commercial insurance specialist with Harpenau Insurance in Louisville, Kentucky. “Until the regulation and laws in the United States surrounding the small unmanned aircraft systems industry stabilize, many standard insurance companies will stay out of the market.
“Once they do, I plan to be on top of the change to offer better policies for my clients.”
Source: Insurance Business America