Drone Insurance Gets More Takers: What Does It Cover? Why Is It Necessary?

As the adoption of drones for commercial purposes grows, the risks involved are set to increase.

Drones are costly. They cost anywhere between Rs 25,000 and Rs 6 lakh.

(Photo: The Quint)

On Christmas Day 2022, a delivery drone carrying a box containing blood vials crashed onto the Magenta Line of the Delhi Metro.

As the adoption of drones for commercial purposes grows, the risks involved are also set to increase – as the incident in Delhi highlights.

However, the drone insurance market in India is still in its nascent stage. After HDFC Ergo, ICICI Lombard, Bajaj Allianz, and Tata AIG, public sector New India Assurance launched its Unmanned Aircraft System Insurance in December 2022.

So, what does the insurance for drones cover? And why should drones be insured? The Quint answers all these questions for you.

Increasing Adoption of Drones

Drones come in all shapes and sizes. While the smaller ones typically have three to four rotors and can carry something small, like a camera, the biggest that are usually deployed by the military look more like aeroplanes and are capable of carrying substantial payloads.

Drones are costly. They cost anywhere between Rs 25,000 and Rs 6 lakh, according to a report by Moneycontrol.

Commercial drones are increasingly gaining adoption across several industries in India. 

The application of commercial drones has cut across sectors like construction, law enforcement, media and entertainment, precision agriculture, surveying and mapping, and inspection and monitoring.

Amber Dubey, former joint secretary at the Ministry of Civil Aviation (MoCA), told The Quint, "Drones offer tremendous benefits to almost all sectors of the economy. These include agriculture, medical deliveries, disaster management, infrastructure, mining, media, defence, and law enforcement, to name a few."

Govt's Push for Drone Adoption

The Centre has been pushing for the adoption of drones for a while now. In February 2022, it banned the import of drones, except for those needed by the military or for research and development.

To support the indigenous drone industry, the MoCA last month issued production-linked incentive (PLI) scheme guidelines for drone manufacturing and drone components companies.

The ministry announced a Rs 120 crore fund allocation for companies that manufacture drones and drone components between the financial years 2023 and 2025.

"The last 18 months saw the government coming up with significant policy, regulatory, and monetary support for drones. It came up with the liberalised Drone Rules, 2021, drone airspace map, unmanned aircraft system traffic management (UTM) policy, drone import ban, single-window DigitalSky platform, drone certification scheme, drone-purchase subsidies and also placed large orders from its various ministries and departments etc."

"The platform has been set and 2023 may see the impact of these initiatives on revenue growth and job creation on the ground," added Dubey.

'There Is Potential for the Market To Grow'

According to a report by marketing intelligence firm TechSci Research, the size of the Indian drone market stood at $0.92 billion in 2021 and is projected to reach $2.13 billion by 2027, growing at a compound annual growth rate (CAGR) of 15.7 percent.

The key drivers of these projected figures, the report says, are the Centre's push to make India a global drone hub through the ecosystem, a growing user base, emerging potential applications, a surge in the number of start-ups/investments, and a business-friendly drone policy.

Dubey adds that given India's traditional strengths in innovation, information technology, and frugal engineering, huge unmet domestic demand across sectors, and the significant support from the government, "India has the potential to become a global drone hub by 2030."

And drones can be significant creators of employment and economic growth due to their reach, versatility, and ease of use, especially in India's remote and inaccessible areas, he adds.

The drone industry has the potential to create close to 1,00,000 jobs directly or indirectly over five to seven years, according to data from staffing company TeamLease Digital.

Is Drone Insurance Mandatory?

As per Rule 44 of Drone Rules, 2021, all drones larger than 250 grams are mandatorily required to have third-party insurance.

The provisions of the Motor Vehicles Act of 1988 apply to third-party insurance of drones and compensation in case of damage to life or property.

"Drones carry multiple risks like battery fires and loss of communication and control during operations. Drones may pass over people, moving vehicles and properties. Considering all this, operating drones without proper insurance coverage should be highly discouraged," Dubey adds.

Agnishwar Jayaprakash, Founder and CEO of Garuda Aerospace, tells The Quint that among other things, drone insurance can also help farmers leverage the data collected and help to file a claim for crop insurance in case of damages.

Currently, most drone operators in India have minimum levels of insurance like the third-party lability cover instead of a comprehensive coverage.

The third-party cover protects against liability to others in the event that property is damaged or people are injured while flying the drone.

Comprehensive coverage, meanwhile covers risks like damage to hull cover, payload cover, equipment cover, personal accident cover, medical insurance cover, and third-party liability.

Why Is Comprehensive Drone Cover Missing in India?

Wasim Akhtar, an independent drone industry consultant, who has previously worked with drone service providers, including Terra Drone and Aerodyne, explained the reason behind most companies providing third-party insurance coverage.

Akhtar was instrumental in getting insurance companies to offer coverage for drones in India initially.

"What is essentially happening is that most of the drones till now are only being assembled in India and not manufactured. The parts that are manufactured outside is being brought to India and assembled in India. It's plug and play in India. And the parts tend to be be very expensive."

"For example, a Lidar sensor (light detection and ranging that uses eye-safe laser beams to “see” the world in 3D providing machines and computers an accurate representation of the surveyed environment) costs between Rs 30 and Rs 60 lakh and a thermal sensor costs about Rs 10-12 lakh. Until and unless there is 100 percent certification on paper of a drone being completely made in India, comprehensive coverage is a little difficult," he tells The Quint.

Getting to a point where comprehensive coverage is offered may take some time, he concludes.