Insurance Market Evolves for Drone Pilots Unwilling to Wait on Federal Regulations

One insurance broker in Colorado has already written policies on 2,600 drones, and a San Francisco-based company said it has assembled an Uber-like list of 1,000 trained operators businesses can hire to do the flying for them.

Commercial drones are photographing sporting events, monitoring construction sites and performing other aerial chores even though the Federal Aviation Administration is as many as two years away from issuing final regulations to govern their use. The FAA, which won a legal ruling in November that said it could apply existing aviation laws to drones in the meantime, says none are supposed to fly without a formal waiver — only 39 have been issued — until then.

In a Feb. 15 proposal to allow unmanned aircraft weighing less than 55 pounds (25 kilograms) to fly for hire, the FAA projected there would be 7,550 of them within five years of enactment. In reality, there are already more than that in the air now, according to insurers, aviation lobbyists and academics.

“We’ve been insuring them for going on four years,” said Terry Miller, owner and president of Transport Risk Management Inc., which had to invent safety requirements for its drone clients.

Purchasing insurance for commercial drones, which isn’t prohibited under FAA rules, doesn’t make flying them legitimate, the agency said.

Whether drone operators’ actions are legal doesn’t affect Miller’s willingness to write insurance. He said that, while he welcomes more FAA oversight, there’s no point in waiting for the rules to be completed and that the standards his company sets for insurance policies often exceed what the government has proposed.

Such a disconnect between the FAA and an industry plunging ahead without regulators’ approval raises questions about aviation safety and is testing the agency’s ability to carry out its enforcement and oversight obligations.

“There are thousands of companies already doing experimentation,” said Christian Sanz, the founder and chief executive officer of Skycatch Inc., a San Francisco-based drone mapping company for mining and construction sites. Skycatch has even taken to crafting an automated system similar to Uber Technologies Inc.’s car ride-hailing service.

For now, an education campaign by the FAA and its attempts to contact businesses to persuade them to halt unauthorized flights haven’t always successful. Turning its proposal into a formal regulation under the mandatory process of sifting through public reaction can take years; the Government Accountability Office has penciled in 2017 as the earliest date for completion.

“The FAA will investigate any reports of unsafe and unauthorized UAS operations, including incidents identified by the media,” the agency said in an e-mailed statement, referring to the more formal name for drones: unmanned aircraft systems.

The FAA said that existing aviation regulations, which apply to unmanned aircraft, give it the authority to ban commercial drone flights that haven’t received waivers to operate. The agency has issued fines against an unspecified number of drone operators, it said in the statement.

In other cases, the FAA has worked with law enforcement agencies to contact people who have operated drones that were unsafe or unauthorized, the agency said.

Harry Arnold, owner of Detroit Drone, said he’s hoping the FAA rules go into place as soon as possible. That hasn’t stopped him from running a drone photography business for the last five years, he said, and won’t stop him from continuing.

“It is not illegal,” Arnold said in an interview. “There are no rules yet.”

His website includes aerial video of real estate developments, construction sites and a car race.

Arnold, who said he doesn’t have an FAA waiver, disputes the agency’s authority over commercial drone flights with regulations still incomplete. “The FAA cannot regulate through press releases,” he said. “That’s not the way it works.”

While some drone entrepreneurs may see their wings clipped once the FAA’s new restrictions become finalized, tighter standards are good news for the sometimes chaotic, unregulated industry, Miller said.

“I’m overjoyed to see it,” he said.

Before writing an insurance policy now, Miller requires a drone flier to develop standard operating procedures, just as a traditional charter-airline company must have. He also requires clients to keep logs of flights and maintenance, and to have at least a basic understanding of FAA rules for traditional pilots.

“It’s still in its infancy obviously, but it’s becoming an industry where we’re developing an infrastructure to support it and putting in place risk and safety-based systems,” he said.

Some of his standards exceed those in the FAA proposal, which says pilots would have to pass an aviation knowledge test and could only fly below 500 feet and within sight of the operator. There would be no requirements for logs or maintenance standards.

Drone-policy businesses like Miller’s are so new that Michael Barry, a spokesman for the New York-based Insurance Information Institute, said the industry is still trying to familiarize itself with drones and the new issues they create.

For now, regulation of such businesses is up to state governments, which have oversight over insurers, not the FAA.

The demand for training drone operators, driven in part by insurance requirements, is also growing rapidly, said Alex Mirot, president of the Unmanned Safety Institute in Maitland, Florida.

While the company, formed just six months ago, has mostly trained law enforcement officers, a growing number of its clients are flying commercially, some of whom may not yet have government approval, Mirot said.

“Our position on that is that if you really do care about safety in a general, broad sense, then excluding those who are not following the rules is not going to make the skies safer,” he said.

Douglas Marshall, who studies drones at New Mexico State University’s Physical Science Laboratory, agrees with Miller and Sanz that there are far more commercial drones in the air than the 39 officially authorized to fly.

“They are out there already,” he said. “They are being used commercially daily, a lot of it under the radar.”

It ranges from Hollywood studios using custom-built drones for filming to “weekend warriors taking $75 shots for real estate agents,” said Patrick Egan, an editor at the website sUASNews.com, who participated in the industry committee that advised the FAA on the rule proposal.

While at least two companies using Skycatch drones have obtained waivers from the FAA to fly them on job sites, some companies that use its products may not have such approvals, Sanz said. Skycatch tells its clients they shouldn’t use the drones for commercial purposes without FAA permission, he said.

“What’s changing is that there are hundreds of big companies putting operating budget into it,” he said. “It’s no longer R&D.”

To help keep up with demand, Skycatch began gathering the names of drone pilots its clients could hire, according to Sanz. The pilot service, called Workmode, has 3,000 pilots around the world, including 1,000 in the U.S., he said,

Sanz said the project has been so successful Skycatch is designing an automated system similar to Uber’s service to provide drivers for hire, so companies can easily find drone pilots for specific jobs.

In the long run, people like Miller say having FAA regulations will help the industry and ensure safety.

“We don’t want to be giving credibility to pirates,” Miller said. “If we’re in this business, we want to have credibility and we want to be able to point to some rules rather than being the rule maker.”