Turning a bird’s-eye view into a business

Specialist Business

Turning a bird’s-eye view into a business

Published: 13 June 2018

For those considering using a drone commercially, there are a few factors to take into account – not least of which is the law. James Godden delves into two of the biggest considerations: legislation and insurance.

James Godden

Head of Santam Aviation

Drones have become more than simply devices to take pictures from the sky. They are increasingly commonplace, fostering new businesses – think of the gig economy and the rise of freelance drone photographers and videographers. They have also opened the window to a number of life-saving services. Zipline is an example of a company using remotely piloted aircraft systems (RPASs) to deliver blood for transfusions to remote areas in Rwanda. In addition, drones are being used to combat soil run-off, spray crops, identify safety risks in mines, herd and dart animals, predict traffic flow, forecast disasters, and even transport humans.

From package deliveries and logistics to data analysis and content creation, drone-based business opportunities abound. But with all these opportunities come new security risks. For example, Chinese smugglers recently used drones to import $80 million’s worth of iPhones from Hong Kong.

Part 1: Legislation on commercial drones

For those looking to integrate drones into an existing business model or start a new company entirely reliant on RPASs, familiarity with the law should be step one. The South African Civil Aviation Authority (SACAA) identifies operational drones as aircraft that have to abide by laws similar to those on manned aircraft. For commercial use especially, there is strict legislation in place.

As soon as you use a drone to earn an income – even if you’re just selling footage you captured in your private capacity – you need to follow certain laws. Here are some of the main ones:

  1. A commercial drone pilot needs to get his or her remote pilot’s licence as a starting point, followed by an air service licence (from the Department of Transport) and a remote operator’s certificate (from SACAA).
  2. A drone may not be flown within a 10 km radius of an airport, airstrip or helipad.
  3. Drones must be operated in daylight and in clear weather conditions.
  4. A drone may not be flown by an intoxicated individual.
  5. A drone may not be flown within a 50 m radius of any person, property or public road.

Once the legislation side is sorted, drone insurance is the next major consideration.

Part 2: The ins and outs of commercial drone insurance

In 2017, the most expensive drone cost US$300 000. In an environment rich in risk exposure – from human inexperience to theft and technical failings – the cost of the total loss of a drone can be devastating to a business.

Interestingly, birds often dislike drones and intentionally knock them out of the sky, accounting for 1-2% of claims. In the private sector, inexperienced piloting accounts for 90% of claims, while in the commercial sector, technical failures catalyse the majority of claims (80%).

Insurance for drones is similar to aircraft insurance, and third-party liability insurance is highly recommended. In order to secure commercial drone insurance, business owners first need to decide what kind of cover they require – and how much of it – in line with the market value of their RPAS.

Types of cover

The following kinds of cover are available:

  • Cover for the physical loss of or damage to the RPAS (airframe, payload, launch station and/or GCS) in its operating or routine testing environment
  • Hull war extension cover: Cover for the physical loss of or damage to the RPAS as a result of a deliberate/malicious act or act of sabotage
  • War liability extension cover: Third-party liability cover for the loss of or damage to the RPAS as a result of a deliberate/ malicious act or act of sabotage arising out of the use of the RPAS

Those requiring cover will need to fill in a detailed questionnaire which asks for the model, make, management system and insured value of the RPAS, its class certificate, intended operating environment (for example, you may be flying it over the sea if you have a fishing business, which increases the risk of a total loss), as well as the pilot’s details with questions about the operator’s pilot licence and total flying hours.

Remember, in order to successfully claim, you need to:

  • declare whether you intend taking the RPAS across the border;
  • declare whether you intend doing any hazardous flying, like at night or near power lines, and
  • keep a flight log in accordance with any standard flight operation.

Insurance is worth the investment, especially in the commercial sector, where drones tend to be more sophisticated and expensive. For businesses, there’s also the option of business interruption insurance, should a drone-dependent company temporarily lose its RPAS, rendering it unable to be fully operational.