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December 11, 2017

Insuring Drones – A Growing Opportunity

Summary:

Drone sales are expected to total $100 billion by 2020 -- and drone accidents are keeping pace. It’s a big opportunity for insurers.

Photo Courtesy of Pexels

Drones are flying higher than ever. A recent Goldman Sachs forecast values the overall market opportunity for drones at $100 billion between now and 2020Gartner predicts that global sales of drones for personal and commercial use will hit $6 billion this year and grow to $11.2 billion by 2020. But, as drone sales and applications grow, drone accidents are keeping pace. It’s a big opportunity for insurers.

By the end of 2020, the drone insurance market could be worth more than $500 million in the U.S. and $1 billion globally, according to Allianz.

See also: 5 Ways Drones Are Changing Insurance  

Drones have already been involved in many incidents of property damage and other mishaps. Notable examples include collisions with a nuclear power station in Cape Town, the Empire State Building in New York, the grounds of the White House in Washington, DC, a Norwegian ski hill in the middle of a World Cup slalom race and the fingers of the singer Enrique Iglesias during a concert in Mexico. The most recent statistics from the Federal Aviation Authority (FAA) reveal that drone safety violations in the U.S. are up 46% year-over-year.

It is therefore no surprise that insurers have started to offer coverage for private and commercial drone users. Some notable examples:

  • In July, a subsidiary of the German insurer Allianz announced a partnership with Flock, an insurtech startup that analyzes real-time flight-risk information to provide pay-as-you-fly insurance. Allianz and Flock plan to launch the “Flock Cover” app in the U.K. sometime in 2017, which will offer recreational and commercial coverage for up to £10 million (US$13.6 million). The app is still in development as of this writing, but enthusiasts can sign up to beta test it on Flock’s website.
  • Munich Re began offering commercial drone insurance in the U.S. in June in the wake of new regulations from the FAA. The product targets small and medium-sized businesses, including farms, that use drones. It covers injury and property damage coverage for drones that weigh as much as 55 pounds (25 kg).
  • Founded in 2015, the insurtech startup Verifly offers on-demand drone insurance for recreational and commercial flights in the U.S. Earlier this year, Verifly partnered with Loveland Innovations to offer insurance for insurance adjustors and contractors using drones. The insurance is provided through Loveland’s IMGING drone property inspection platform.
  • In May, a subsidiary of Liberty Mutual Insurance Group announced DroneInsurance.com in conjunction with the insurtech Acend. The site aims to offer a convenient place for American drone users to buy flexible insurance from brokers. As of this writing, DroneInsurance.com was still in development, though interested parties could sign up to be notified when it launches.
  • Ageas, a multinational insurer based in Brussels, includes drone coverage in the U.K. under its “Back Me Up” flexible insurance platform. Customers are covered for accidental damage, theft and loss of their drone, anywhere in the world. Coverage starts at £8 (US$11) a month.

See also: Drones + Gig Economy = Win for Insurance

As drones become more popular and profitable, insurers will create offerings similar to these examples and innovative new ways of mitigating risk. Some of these new ideas will tap into the broader potential of the Internet of Things, which I recently wrote about in another blog series, and which is becoming increasingly visible in the industrial sector.

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About the Author

Werner Rapberger is a principal director in Accenture’s distribution and marketing practice for insurance. He is responsible for various clients and projects in insurance and also leads the global offering development for connected insurance and IOT insurance.

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