Passenger Drones Present Emerging Challenges for the Insurance Industry

A recent unveiling of a manned drone by the company Passenger Drones has advanced the concept of personal aircraft from the imaginary distant future to a certain reality. Last week, Passenger Drones unveiled its version of a two-person passenger aircraft that is successfully flying passengers. The car-sized drone is powered by 16 individual motors paired with propellers for stability purposes. The company plans to start producing the manned drones commercially next year.

The company is focused on producing its lightweight drone that can fly autonomously. It can also be maneuvered or controlled remotely. The company plans to build more prototypes and log additional flight hours before moving forward with their commercial production plans.

There are other companies like EHang, Airbus and Volocopter that are working on their versions of passenger drones. Manned drones can carry 200 lbs of payload and cruise at a speed of more than 35 miles per hour. They are designed to fly at 11,500 feet above sea level, making them ideal for short or medium distance transportation.

Manned drones are autonomous, meaning passengers can program their desired destination and the drone will fly to the location. However, most people will not be willing to complete the many hours of instruction required to obtain a private pilot license as required by the Federal Aviation Administration. The future of manned drones might belong to fully automated, computer-controlled passenger drones owned by ride-sharing services similar to the self-driving ground vehicles already in use today.

Uber has already announced plans to produce a fleet of on-demand electric aircraft. According to the ride-sharing company, their manned, piloted aircraft will be able to travel at about 150 for up to 100 miles and carry multiple passengers. Uber expects to roll-out their Vertical Take-Off and Landing (VTOL) aircraft in 2026.

There are still many challenges and issues that would need to be resolved before passenger drones would become common. Aviation regulations are still quite strict.  Drone use is still in its infancy; there are heavy restrictions and regulations on where they can fly – and at what heights. Infrastructure that coordinates their communication with each other and to ground control in order to ensure there were no accidents or other safety considerations would have to be devised.

However, consumer attitudes are an obstacle for both driverless cars and passenger drones. Currently, one in five people state they are not willing to ride in a driverless vehicle. We are living in an age of transportation revolution. Once people become familiar with the new technology they may be more open to the possibilities.

Another piece of the puzzle that needs to be addressed is the insurance implications of passenger drones. What will insurance coverage look like? Will passenger drones be classified as a traditional airplane or will there be a new class of vehicles to consider? What type of policies will need to be developed to accommodate this new breed of vehicle? Will individual passengers have any liability if the drone were to crash and injure someone?

A new market is likely to develop to tackle the specific challenges of passenger drones and autonomous vehicles as well. How will the insurance industry tackle these issues? How will passenger drones and driverless vehicles be underwritten and reinsured and what technology will be needed to manage the risk?

While it may be difficult to conceptualize manned passenger drones today, the industry is viable and ready to move forward with production. Public policy, the FAA and other regulating entities as well as the insurance industry needs to resolve these issues in the near future.

Marsh & McLennan Agency (MMA) offers the resources necessary to help businesses properly protect themselves against traditional and emerging risks. Contact MMA to learn more about innovative risk management services.