A Working Committee of the Insurance Regulatory and Development Authority of India (Irdai) has recommended a comprehensive insurance cover for drones with a third-party liability which should be in line with aircraft or aviation liability — as is the practice in the developed nations — instead of following the Motor Vehicles Act.
While drone operators continue to have minimum levels of insurance such as third-party liability cover, the committee on remotely piloted aircraft systems/ drone technology said this may not be comprehensive enough to address the requirement of drone operators. If an accident occurs there is a risk that coverage is not comprehensive and that an injured member of the public may not be able to obtain adequate compensation, or do so easily, from the drone operator, it said.
The Irdai committee has said drone insurance coverage can be broken into three sets — physical damage or loss to drone due to various contingencies, third party liability arising due to usage of drone and any additional coverages. This insurance does not apply to any liability arising out of or connected directly or indirectly with any aircraft product or any missile or spacecraft or aerial device including any article, equipment, material, part or spare part installed or otherwise incorporated in, on or under any aircraft, missile, spacecraft or aerial device or furnished or used in connection with air or space communication, guidance or navigation system.
Present system not comprehensive
While drone operators continue to have minimum levels of insurance such as third-party liability cover, the committee on remotely piloted aircraft systems/ drone technology said this may not be comprehensive enough to address the requirement of drone operators.
The Draft UAS 2020 had suggested compensation in respect of Third-Party Liability to be on the lines of Motor Vehicles Amendment Act 2019. The Irdai committee said it is partially acceptable in situations like Section 164 of Amendment Act of 2019 (payment of compensation in case of death or grievous hurt). However, as per the committee, the unlimited liability (Section 166) and Solatium Fund appearing under MV Act is a cause of concern to develop a feasible drone insurance ecosystem in view of non-availability of claim data for drone losses and lack of re-insurance support for unlimited liability.
The Irdai Working Group has left the decision of arriving at the third-party liability limits to individual insurers as the underwriting appetite, retention, reinsurance programme devised and finally the business volume generated for the drone segment may differ. However, the drone owner/ operator should choose an appropriate third-party liability limit when flying the drones in a high value concentration zone, after a thorough assessment of potential scenarios which can lead to liability claims.
The company should pay the sum assured in the event of bodily injury resulting in death of the insured beneficiary within 12 months of such bodily injury being sustained. The company will also, in addition to the sun assured, pay up to two per cent of the sum assured or Rs 5,000 (whichever is lower) towards the cost of transporting the mortal remains of the insured/ authorised operator from the place of death to the hospital/ residence and/or cremation and/or burial ground. In the event of bodily injury resulting in permanent total disability of the insured/ authorized operator within 12 months of such Injury being sustained, the company will pay 125 per cent of the sum assured.
With the growth in the use of drones, some insurers in the country are offering drones cover through existing products and extending some covers as and when required. One insurer has launched third-party liability cover of Rs 10 lakh through one of the tech firms on “Pay as you Fly” basis where a drone operator can choose a flying option – up to four hours, one day and one Month. Some insurers are providing third-party liability in a range of Rs 10 lakh to Rs 20 lakh cover along with optional hull cover.
The report which looked into the insurance requirements of the RPA owners and operators, suggested coverages along with draft/specimen wording, factors which affect the pricing (premium) and finally the underwriting considerations.
Globally, drones are classified as an ‘aircraft’ and the aviation regulators have stepped in to regulate the sector.
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