Unmanned aerial systems are expected to grow in market value from around $2 billion in 2005 to around $100 billion in 2030, research by Marsh shows. According to the firm, the growing market comes with various concerns, from regulation to insurance. In its report, Marsh explores the challenges faced by underwriters in creating a clear risk profile for the wide range of uses, sizes and types of aerial systems springing up, which it finds is by no means an easy task.
In its recently released report, titled ‘Dawning of the Drones: The Evolving Risk of Unmanned Aerial Systems’, consulting firm Marsh researches the rise of unmanned aerial systems (UAS). As a result of the increasingly functional practical uses of UAS and the declining costs of their development, the number of such aircraft has steadily increased. The market, which had a worth of about $2 billion in 2005, has grown to $40 billion today, with market value projected to hit $100 billion in 2030.
As the market is growing rapidly, challenges surrounding the UAS are also increasing. Key challenges – according to Marsh’s research – are regulatory, insurance, familiarity and public perception, sense-and-avoid technology, training engineers and funding.
The most concerning of these for the industry is to get a regulatory framework that provides a unified space in which risks are quantifiable and benefits high. Such a regulatory space could calm down public perception on the dangers of such devices, from crashes to privacy issues. Technical challenges still affect the industry and engineers are in high demand to further develop the technology. One such technology is to enable UAS to travel independently and autonomously of an operator, with current technology limited to operators – which comes with their own risks.
Even with the challenges facing the industry, the projections remain impressive. In 10 years, it is estimated that 10% of the global civil aviation fleet will be unmanned, while annual global spending on unmanned aircraft will double to $11.5 billion by 2023, and in 2015 alone, more than 1 million UAS are projected to be operated commercially.
The report highlights that insurance on UAS and creating a risk profiles for UAS remain multi-faceted and thorny issues, for both the insurance companies and the end users.
One factor influencing insurers is the exponential cost of cover for UAS as they increase in relative size, with the EU looking to introduce regulation where aircrafts are obligated to carry minimum levels of liability insurance. However, the lower limit, <20 kg, is not covered by the legislation – and other attempts to quantify risk cover for the high number of light UAS still need to be developed. A consequence is that premiums and risks may remain divergent, with users rather than insurers bearing unrealistic prices.
Another issue is the payloads, which can be relatively expensive and changeable. Thereby quickly changing the dynamics required for the cover. The cost of insuring the devices themselves from theft is also seen as problem; as many devices are not marked with serial numbers, insurance cover is more difficult to quantify. The use of devices outside their general operation also makes for a difficult risk profile for the UAS. Furthermore, the operators themselves may create hazards if they are unable to adequately control their crafts, which adds further difficulty to developing an accurate profile.
One of the most difficult to insure elements of the UAS, however, is related to privacy. UAS have the potential to violate privacy, which, if it is a fortuitous event, is insurable. Most insurance currently excludes a privacy violation cover, with the difficulty to prove the accidental element of violation and the unknown costs of litigation cited as key reasons.
A final problem considered by the Marsh is the current experimental nature of the development of UAS. Many UAS lack the spare parts required to cost effectively repair damage after an accident, as a result of which, even relatively minor accidents result in a total loss. The rate of depreciation of the devices, as new more modern UAS are introduced, will result in users paying too much, for too little.