Drones have been used in military and industrial applications for a number of years, and are slowly becoming prominent for personal and commercial use. While we may have seen a new drone being tested at the park on Christmas morning, are we ready for a sky full of them, carrying out deliveries, law enforcement and other airborne activities?

While the technology is capable, significant risks and regulatory challenges need to be addressed to ensure that we use the sky safely. We know our clients’ businesses may benefit from commercial drone flight in the future, so we’ve summarised some of the key use cases for drone technology, highlighted the core risks and looked at Australia’s current legislation, so you can understand the risks and liabilities involved.

Use cases for drone technology

While the majority of applications have been military, drones will be a huge part of commercial aviation for years to come. Applications today span a huge variety of sectors, from agriculture to filmmaking. For example, in Australia, drones have been used to deliver hundreds of textbooks. In Japan, more than 40% of rice crops are sprayed using drones. To get a better idea of the future of drone services, have a look at Amazon Prime, who promise to deliver your product by drone autonomously.

Risks that must be overcome

As with all new technology, its potential is coupled with high risk. From crashing into power lines to creating threats to national security, drones pose a huge regulatory, safety and insurance challenge.

The Lloyd's Emerging Risk report, ‘Drones Take Flight’, identifies three key areas of risk:

1 - The operator

Inexperienced operators are likely to cause damage to property or other parties. Additionally, by operating the equipment remotely, pilots can feel disassociated from the risks of operating drones, which may lead to negligent or reckless behaviour.

2 - The rules

The second threat posed is the patchy regulatory framework, and subsequent enforcement. As with many new technologies, regulators have trouble keeping up. This includes licensing for commercial and non-commercial purposes, setting aside airspace and creating safety requirements for the drone themselves. To get an idea of what drone regulation enforcement could look like in the coming years, check out this video of the ‘falcon drone’. The drone is able to deploy a net and safely take out rogue drones that pose a threat or breach drone laws.

3 - Hacking

The third issue is hacking. A drone is guided by a computer that receives inputs via Wi-Fi or remote control. If this is intercepted, or the computer is compromised prior to launch, a third party could take over the drone, do damage with it or steal it and its contents.

In addition to the above, privacy is a large concern. Australia has strict privacy laws, but aerial photography is such a new area that legislation is still underdeveloped.

Legislation for drones in Australia

Effective 29 September 2016, drones weighing less than 2kg can now be flown without certification, even for commercial gains, as long as they comply with Civil Aviation Safety Authority operating guidelines including:

• Stay at least 30 metres away from people with the drone.
• Keep the drone under 121.92m.
• Keep drone within sight while operating.
• Don’t operate drone within 5km of an airport and a place where planes take off or land from.

Clearly this limits some broader commercial aspects of drone flight, and a drone licence would be recommended for any business aiming to integrate it into a significant aspect of their business. Further to this, you will need to consider your liability and insurance using the risk matrix, using the risks outlined above. Things such as rigorous training, compliance with regulation cyber risk assessment, and privacy impact assessments will go some way in ensuring your liabilities aren’t excessive.

If you want a further understanding of how drone flight may affect your premiums, make sure you get in contact with one of our specialists.