Insurers have taken to the skies!  Unmanned aircraft systems, or drones, are, in the estimation of the Federal Aviation Administration, "the most dynamic growth sector within the aviation industry"—and insurers are in on the action, with some of them recently having taken steps to use drones in their business operations.

In the past month, at least four insurers—AIG, USAA, Erie Insurance Group, and ADM Crop Risk Services—have obtained approval from the FAA to operate drones to assist in their claims, risk assessment and underwriting practices, and for research and development into future deployment of the remotely controlled craft. State Farm also won such approval earlier this year.

The authorizations last for up to two years, and each comes with many conditions and limitations on the use of drones. For example, the drones may be operated only over privately controlled property with the permission of the owner. They must generally stay at least 500 feet from all "nonparticipating" persons, vessels, vehicles and structures. They can only be operated up to 400 feet above ground level, and cannot move at a speed above 50 or 100 miles per hour, depending on the drone. A drone also must remain within the visual line of sight of its operators at all times, and night flights are not permitted. The conditions appear to closely track the FAA's proposed drone regulations (which are discussed in greater detail in our colleagues' recent analysis).

In their applications, the insurers highlighted the potential utility for drones to quickly analyze emergency situations and catastrophic event sites, in some cases being able to arrive and complete an assessment before personnel on the ground (or larger and heavier manned aircraft) could safely enter the area. For example, USAA noted that in the aftermath of last year's mudslide tragedy in Oso, Washington, it worked with Roboticists Without Borders to have drones map and photograph the area to help relief workers and the community respond.

In less emergent situations, the insurers hope that drones could help review properties, especially steeply-pitched roofs and other difficult-to-reach areas, during policy placement and renewal to identify potential hazards and risk mitigation strategies. Where an insured area is expansive, such as large fields of crops, drones may be able to collect data more quickly and enable faster payment of claims.

From a policyholder's perspective, an insurer's use of drones could be beneficial for some of the same reasons. Faster claims processing and payment would be helpful, and it is possible that an insurer with access to drones could alert the policyholder to risks that may have otherwise gone undetected.

At the same time, though, the use of drones may create headaches for policyholders. While early assessment can be useful, it will be important for an insurer to remain flexible as further information comes in concerning a claim, and not to lock into a coverage-defeating position based on initial analysis conducted from several hundred feet above the site. Similarly, it will be very important for insurers to ensure that information that they obtain through the use of drones during policy placement or renewal—especially concerning potentially inaccessible spaces on the insured's property (the steep roof, for example)—is readily shared with the insured in a straightforward, timely and comprehensible manner, so that the insured can properly select the coverage needed, can take appropriate risk management steps, and can meet future disclosure requirements.

As these pilotless programs continue over the next two years, and the FAA finalizes its regulations, insurers and policyholders should both keep a careful eye on the skies.

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