Small Commercial Drones: Overcoming the Misconceptions

One of the most interesting and rapidly-growing technologies emerging for small business owners is the use of unmanned aerial vehicles, commonly known as drones. In 2019 alone, there were nearly 1.3 million registered drones in the United States and more than 116,000 registered drone operators, according to Reuters. With the number and use of drones on the rise, businesses are facing new risks and challenges.

Small Businesses’ Misconceptions

There are a number of steps business owners must take prior to being able to safely and legally fly a drone for business purposes. For small businesses, securing insurance coverage for drones has become one of the most important but overlooked steps. This is often due to misconceptions, such as thinking that drone and drone use is already covered by their insurance policy, not knowing that drone coverage is available, and the preconceived notion that drone coverage is too expensive to obtain.

It is good risk management practice for business owners to spend time with their agent or broker, taking a close look at the language in their policy and making sure that their insurance program adequately addresses their proposed use of drones. Agents and brokers are well-equipped to provide business owners with a full understanding of the coverage options available, the costs of such coverage, and the available coverage enhancements that provide exactly what’s needed for a company’s expected drone usage.

The challenges associated with small business drone use have evolved over the past few years and will continue to change as the Federal Aviation Administration (FAA) regulations shift and the potential for reputational and financial damage from the use of drones continues to grow.

Regulations

As the governing body for aviation operations in the U.S., the FAA provides clear guidance and direction around the risks involving commercial drone use and is consistently adapting regulations to ensure safety. Here are three challenges commonly overlooked by businesses:

Reputational Damages

Often overlooked are the risks businesses face in the event of a drone incident – whether this be a crash, FAA violation or invasion of privacy accusation. An incident such as this poses a large threat to a small business and could deeply damage a company’s bottom line. Beyond the direct financial impacts, there could be reputational risks, as public knowledge of a negative event could lead to a loss of customer confidence and trust.

There are a number of property and casualty insurers that are offering drone coverage to businesses. Each of these companies have varying coverage options and product offerings. CNA, for example, offers a drone endorsement, which includes options for general liability and property coverages. In addition to a drone coverage policy, business owners may also consider purchasing an umbrella policy that could help cover unexpected risks.

Looking Ahead

The opportunities that drones present to small business owners are diverse and exciting. As the market continues to evolve, new risks and challenges will emerge, and business owners and insurance carriers will need to continue to be flexible to adapt to the changes. It is essential for small business owners to understand the opportunities and risks associated with drones and stay connected to their insurance provider so that they can remain competitive, tap into new technologies, make sure their insurance program contemplates any potential commercial drone usage as well as stay compliant with regulations.

For more information on the specific regulations published by the Federal Aviation Administration, visit faa.gov/uas/commercial_operators.