FAA Announces Drone Testing Partnerships Beyond Current Regulations

Drone regulations FAA

Yesterday, the Federal Aviation Administration announced three partnerships with companies to expand the operation of unmanned aerial vehicles (UAVs) in an initiative the agency is calling the Pathfinder program.

U.S.-based drone maker PrecisionHawk will be exploring the possibilities of flights over agriculture while testing tracking and a system for drones and planes to remain aware of each other in flight to avoid collisions. CNN will be testing the use of drones for newsgathering in urban areas where drones will remain in the line of sight of operators. BNSF Railroad, owned by Warren Buffet’s Berkshire Hathaway, received permission to test drone operations outside of the operator’s visual line of sight. The company will “explore command-and-control challenges of using UAS to inspect rail system infrastructure,” the FAA reported.

“Government has some of the best and brightest minds in aviation, but we can’t operate in a vacuum,” said U.S. Transportation Secretary Anthony Foxx. “This is a big job, and we’ll get to our goal of safe, widespread UAS integration more quickly by leveraging the resources and expertise of the industry.”

To that end, Pathfinder will allow these corporate entities to research operations that push the boundaries of the recent draft rules released regarding small unmanned aircraft, namely by operating both within and without the visual line of sight requirements currently mandated by the FAA.

“Even as we pursue our current rulemaking effort for small unmanned aircraft, we must continue to actively look for future ways to expand non-recreational UAS uses,” said FAA Administrator Michael Huerta, who announced the initiative at a conference held Wednesday by the Association for Unmanned Vehicle Systems International. “This new initiative involving three leading U.S. companies will help us anticipate and address the needs of the evolving UAS industry.”

This effort is also the first step in realizing some companies’ grander aspirations for drone use, such as the package delivery applications being pursued by Amazon. That being said, the information gathered by these companies will merely provide data to inform future FAA regulations, which are still pending and may only approve broader operations in a few years. Other companies looking into similar applications that are beyond the scope of current draft regulations would still need to apply for and receive a Section 333 exemption from the FAA. While about 300 of these requests have been granted, the agency has received repeated criticism for an exceptionally slow and sometimes mystifying review process.

“The impact of the Pathfinder Program could be profound for several reasons — perhaps most importantly, it shows the FAA is serious about moving quickly to safely and practically integrate commercial drone use in the U.S.,” said Anthony Mormino, senior legal counsel at Swiss Re. “Allowing drone flights beyond the sight of a drone operator is considered the key to unlocking the true potential of commercial drone use.  This collaboration could impact the future rules promulgated by the FAA regarding the line of sight requirement for commercial drones.”

Such developments could also significantly impact insurers. As discussed in “Drones Take Flight,” the April cover story of Risk Management magazine, one of the most promising near-future applications for UAVs could be in the insurance industry in the wake of natural catastrophes or other major claim events. “Reducing or eliminating the visual line of sight limitation on commercial drone use will allow insurance companies to employ UAVs to their fullest extent in insurance underwriting and claims management,” Mormino said. “Consider that the FAA has already granted a number of insurance companies permission to test and use UAVs for insurance inspection purposes. These companies include AIG, State Farm, Erie Insurance Group, and USAA. They plan to use UAVs, for example, to more quickly process insurance claims after natural disasters by allowing them to inspect damage —especially in remote locations—in real time. Insurers also plan to use UAVs to obtain imagery and data for use in underwriting, such as roof inspections. Until the FAA mitigates the visual line of sight limitation, however, the foregoing insurance uses for UAVs will remain drastically limited. Success for the FAA’s new Pathfinder program would open the door to potentially even larger scale use of UAVs by insurance companies.”

The implications for insurers also extend to the products and pricing offered. “First, the current dearth of UAS loss data makes it difficult for insurance companies to properly price insurance policies covering drone use,” said Carol Kreiling, senior claim manager at Swiss Re. “It is therefore no surprise that only a handful of insurers actually issue stand alone drone insurance coverage, such as Zurich Insurance in Canada, and Tokio Marine in the Lloyd’s of London market. An increase in commercial use of drones in the US could provide a steady flow of data that would allow more insurers to price and issue coverage for use of UAS. On the other hand, if the Pathfinder program’s goals are fulfilled—to find ways to safely use UAVs outside a pilot’s visual line of sight—increased remote use of drones could raise risk profiles for insurance coverage.”

At the conference, Huerta also announced a new smartphone app called B4UFLY, designed to help model aircraft and UAS users know if it is safe and legal to fly in their current or planned location by pairing geolocations with the relevant restrictions and requirements.

For more about drones, UAV regulations, and the potential impact these machines may have on the insurance industry, check out “Drones Take Flight,” the April cover story of Risk Management magazine.

A Turbulent Year for the Aviation Industry, Despite Improving Safety

MH 17 Wreckage Denis Kornilov / Shutterstock.com

First, Malaysia Airlines flight MH370 mysteriously disappeared in March, dominating the news cycle and baffling aviation experts, government officials and civilian observers alike. This month, three tragedies in short succession have kept the industry in the hot seat. Malaysia Airlines made headlines once again on July 17 after Flight MH 17, a Boeing 777 flying from Amsterdam to Kuala Lumpur, was shot down over Ukraine. It is now the seventh most deadly aviation crash in history. Exactly who fired on the plane remains unclear, as do many questions of insurance, as war has not officially been declared, despite months of fighting in the region. An act of war would exclude losses from insurance coverage, but remaining uncertainty does as well. Plus, “Unless Russia has declared war on Malaysia, that would knock out the exclusion,” RIMS Vice President Rick Roberts told Mashable. But for it to fall under under terrorism coverage, “someone has to certify that the act that occurred wasn’t a mistake—that it was a malicious act.” The already struggling company may not be able to survive this second disaster, or the reputational devastation.

Ten Deadliest Plane Crashes

Tragedy has further plagued the industry this month. On July 23, a TransAsia flight from Taiwan crashed, killing 48. The next day, an Air Algérie flight from Burkina Faso to Algeria disappeared less than an hour after takeoff in the air space over Mali. Approximately 24 hours later, peasants found the plane’s wreckage near Gao, Mali, and French soldiers dispatched to the scene were able to recover a black box, but no survivors.

Despite the string of disasters, there is no evidence that air travel is in any way more dangerous on the whole. In fact, it is safer than ever before. Nearly three billion people fly safely each year on more than 37 million flights, the International Air Transport Association (IATA) reports, and the global plane accident rate fell to the lowest level in aviation history in 2012. Over the past 10 years, both the crash and fatality rates have trended downward, according to statistics from the Bureau of Aircraft Accidents Archives. But, little more than halfway into 2014, the number of people killed in plane crashes is more than double the total for 2013 (991 and 459, respectively).

Based on BAAA data:

Crashes per year

Deaths per year

Looking back even further, this chart from the Wall Street Journal leaves little doubt that the aviation industry has grown drastically safer:

Deadly flights

While 2014 has been more fatal thus far, the overall number of crashes continues to decrease. There have been 70 commercial-plane crashes globally so far, versus 81 for the comparable period a year earlier, according to Aviation Safety Network, part of the Flight Safety Foundation. Further, the four tragedies do not have any common root causes for their failures.

Insurance Changes on the Horizon

International carriers are feeling most of the strain, and that is likely to have serious implications for insurance premiums. “Given the accumulation of losses, including the loss of Asiana Airlines’ Boeing 777 in San Francisco last year, an explosion causing damage to 20 aircraft in Tripoli recently, and this week’s losses in Africa and Taiwan, these will, altogether, put pressure on the global insurance market,” said Robert Hartwig, president of the Insurance Information Institute. “I expect most of the impact to be focused on international carriers, particularly those operating in or traversing parts of the world that I would characterize as ‘hotspots,’ currently experiencing military or political instability. That would certainly include Ukraine, parts of the Middle East, and parts of Africa.”

While the recent spate of tragedies may leave many travelers wary of getting on a plane, American airlines have less to worry about regarding premiums than their foreign counterparts. There have been are no notable losses this year among domestic carriers, or U.S.-based airlines that fly internationally. As Hartwig pointed out, however, “With a few exceptions, they do not tend to traverse many of those hotspots to begin with.”

In Africa and other developing regions, “you identify accidents in many places that would have happened 30 or 40 years ago in the West, because oversight is lagging,” Dominique Fouda, spokesman for the European Aviation Safety Agency, told the Wall Street Journal. “You also see different accidents linked to local conditions.”