UAS have the potential to solve problems across numerous industries, improve the safety of thousands of workers every year and significantly reduce costs in the future. However, the technology also raises safety concerns such as risk of collision, a terrorist attack or cyber incident.
“As UAS technology penetrates further we could see a decline in workers compensation losses,” says James Van Meter, an Aviation Practice Leader at AGCS. “We will definitely see fewer injuries related to building inspections, such as employees falling off roofs. It may well be several years before the data will be sufficient enough to analyze however.”
Yet, as civilian and commercial UAS usage increases, new risk exposures will also emerge and the potential for misuse of UAS technology needs to be considered.
“There are many parallels between the beginning of aviation more than 100 years ago and UAS today,” explains Van Meter. “When Allianz started to write aviation insurance in 1915, aviation was in its infancy. Risks were high and the general public was excited, but wary of the new technology. Today, UAS technology is similar. We’re seeing the technology advance quickly and prices coming down. More and more drones are being used by neighbors, colleagues and, of course, companies."
“However, as sophisticated as the technology is, accidents happen. When anything mechanical is operated by humans, there’s always opportunity for error, injuries and property damage.”
“When you have autonomous technology there will be autonomous judgement when a situation arises,” adds Kriesmann. “Can an algorithm have intuition? Is technology fast enough to react for the UAS to respond? Going forward, there will be increasing operating risks.”
UAS raise two priority safety concerns: mid-air collisions and the loss of positive control. A UAS that cannot be controlled poses a significant risk to persons, property, or other aircraft. A mid-air collision could happen if the pilot cannot see and avoid manned aircraft in time. The manned aircraft that are most at risk are those that normally fly below 500 feet, such as helicopters, agricultural aircraft and aircraft landing or departing from airports.
Loss of control can result from a system failure and if the unit flies beyond the signal range or into an area where communication is interrupted. AGCS sees a major risk in the loss of control due to frequency interferences as there have already been such incidents, including injuries.
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Increasing use of UAS is also altering the risk profile of many industries. For example, a real estate or property broker represents little bodily injury exposure but this changes as soon as it engages UAS to take aerial photographs of property.[ii]
The liability risks associated with UAS are completely different to those posed by manned aircraft as there are no occupants onboard, and the size and weight of the aircraft are usually significantly smaller. The most common UAS used by civilians in the US are around five pounds; the lightest general aviation aircraft is around 1,400 pounds. The worst case liability claim envisioned for UAS is a collision with a manned aircraft.
Such perils pose a high risk to UAS operations. Similarly to manned aircraft, they may be used for malicious acts. There are concerns that UAS could be utilized to attack sports stadiums or other events where large crowds gather. One emerging peril is the potential terrorist threat from UAS targeting power and nuclear stations. After more than a dozen overflights of reactors, French authorities announced the expenditure of $1.1m to “detect, identify and neutralize small aerial drones” in 2014.[i]
“Spoofing” or Cyber-Attacks
Other scenarios include the prospect of hackers taking control during flight, causing a crash in the air or on the ground resulting in material damage and loss of life. The term “spoofing” refers to attempts to take control of a UAS via hacking the radio signal and sending commands to the aircraft from another control station. This is a very real risk for UAS since they are controlled by radio or Wi-Fi signals. Companies which claim to sell devices to specifically bring down or take control of UAS can be found online. Then there is the potential threat of loss or theft of data security. Valuable recorded data can be lost during the flight when the device is transmitting information to the control station. Data can also be obtained by cyber-attack when it has been stored by the company gathering the data.
There are many public concerns over UAS around such issues as privacy and trespass and nuisance. In a recent case in Germany, a private UAS operator was served with a cease and desist order including a fine of $278,000 (€250,000) if he flew over his neighbor’s estate again.
From bird strikes to UAS – the cost of aviation damage from “foreign objects”
Damage from “foreign objects” is a significant issue for the aviation sector, with it being the fifth highest generator of insurance claims over $1m (€1m) by number (see chart below).
Bird strikes are a notable cause of aviation losses and pose a significant threat to flight safety, having caused a number of accidents with human casualties. According to AGCS analysis of insurance claims[iii], bird strike losses average €16.7m ($22.8m) every year with a total of 34 incidents (27 to airlines) in the analyzed claims. Most accidents occur when the bird hits the windscreen or flies into the engines. These cause annual damages that have been estimated from $400m to as high $900m in the US alone and up to $1.2bn to commercial aircraft worldwide.
The worse case liability claim envisioned for UAS is a similar type of collision with a manned aircraft but there are many variables to consider. If a UAS was to hit an agricultural aircraft for example, the loss could be as much as $1.6m for the aircraft itself. If the pilot was injured or killed in the US, the liability claim could be many multiples of that.
Commercial aircraft are at the greatest risk of an incident during take off and landing. In the event of an incident aircraft could also be forced to make a precautionary or emergency landing, resulting in delay or cancellation, incurring significant economic loss. If a small UAS was to impact an airliner by hitting an engine, it could cost $5m to $10m in damage costs alone.
Top Causes of Loss: Aviation Claims (€1m+)
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[i] AGCS Global Risk Dialogue, Winter 2015-Spring 2016 Issue 2.
[ii] “Re:fresh Drones,” Allianz Global Reinsurance
[iii] Global Claims Review, Allianz Global Corporate & Specialty