Back in March, our Data Privacy + Security Insider blog reported an increase in the use of commercial drones by State Departments of Transportation across the country. Now, insurance companies are also getting in the game. Using drones for underwriting, determining property values and conditions for policy issuance, inspections and risk evaluations may be more economical, may provide for better response times for inspections of insureds’ properties during a catastrophe, and may increase the safety of insurer employees.

So what does this mean for insurance companies? Well, certain provisions of the Federal Aviation Administration (FAA) Modernization Act may be implicated. Insurers may also consider Section 333 exemption and certificate. Section 333 of the FAA Modernization Act allows the FAA, on a case-by-case, the ability to grant entities the authorization to use certain unmanned aircrafts (i.e. drones) to perform commercial operations prior to the finalization of the Small UAS Rule. To date, the FAA has granted approximately 5,200 exemptions. All of this applies until a final rule for small drone operations is adopted. Right now, the proposed rule is still sitting in limbo – the comment period closed back in April 2015. Insurance companies may need to consider whether the employees who will operate the drones (presumably insurance adjusters) may need to get an airman certificate from the FAA.

Some state, county and municipal legislatures have passed (or have proposed) ordinances regulating the use of unmanned aircraft systems. Syracuse University’s Institute for National Security and Terrorism has a website that reportedly tracks the status of such legislation throughout the nation. Insurers considering the use of drones may need to keep in mind that local rules regarding the use of drones may vary from the federal regulations, and consider whether the federal law preempts state and local regulations. An interesting question also arises with respect to insurers operating under the National Flood Insurance Program, and whether those insurers would be subject to state and local regulations.

Drone operations may become a more feasible alternative for insurance companies during major catastrophes, and all businesses for that matter; the FAA says that the new rules will be in place soon (supposedly this summer) and the restrictions on commercial drone use may be alleviated a bit.

This post is also being shared on our Data Privacy + Security Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.