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High risk business: insurer urges businesses to consider implications of using drones

08 May 2024 Santam

In recent years, drones have transformed from military apparatus to infiltrating almost every type of industry under the sun, including agriculture.

According to Industry ARC, South Africa’s small drone market is experiencing rapid growth, and is expected to reach $134.5 million by 2025, with a compound annual growth rate of 22.35% from 2020 - 2025.

Besides being seen as a fun new novelty, businesses are starting to realise how these remotely piloted aircrafts can help them save costs, boost operational efficiency, and open up new revenue streams. This is according to James Godden, Aviation Manager at Santam, who explains that drone technology is getting more advanced by the day as sophisticated sensors allow drones to gather a wealth of data across various sectors.

For example, in the local agriculture sector, drones are being used for soil and field analysis and crop spraying, Godden says. “Ultrasonic echoing and lasers allow drones to adjust altitude as the topography and geography vary, and thus avoid collisions. Consequently, drones can scan the ground and spray the correct amount of liquid, modulating distance from the ground for even coverage. They’re also used for monitoring and irrigation, revealing production inefficiencies through imaging and thus enabling better crop management and irrigation.

Businesses are awakening to the benefits of including drones in their operations, Godden explains. “Drones are expected to play a significant role in cargo transport and delivery in the near future, as they will be able to deliver packages to homes. They have also featured in commercial filmmaking, search and rescue, mining and quarrying, conservation, and much more.”

On a governmental level, the Department of Infrastructure Development has been using drones to monitor various projects since 2018, while the South African National Blood Service launched its first blood delivery drone in 2019. The Western Cape also initiated its Emergency Medical Services drone project in 2020, which has since saved countless lives.

Understanding the commercial use of drones
As with all technologies, while there are immense benefits for local businesses in using drones, there are also risks involved, Godden says.

He explains that drones are complex and have the ability to potentially harm property, and even people. “Given their remote nature, they’re vulnerable to theft, which also poses a cyber security risk due to the data they carry. Drones are at the mercy of those who operate them, and are thus susceptible to human error, as well as ethical and social risks.

“Drones are also pricey, which presents the risk of financial loss should damage or theft occur,” says Godden. While personal drones retail for between R25,000 – R50,000, commercial or professional drones for use in the mining, agriculture or film industry can cost anywhere between R350,000 – R1M.

Finally, it is important to understand the legalities around using drones, with the commercial use of drones governed by law. The South African Civil Aviation Authority (SACAA) defines operational drones as aircraft that have to abide by laws similar to those of manned aircraft. For commercial use, there is strict legislation in place. These laws include:

• A commercial drone pilot needs to get his or her Remote Pilots Licence as a starting point, followed by an Air Service Licence (from the Department of Transport) and Remote Operators Certificate (from the SACAA)
• A drone may not be flown within a 10km radius of an airport, airstrip or helipad
• Drones must be operated in daylight and in clear weather conditions
• A drone may not be flown by an intoxicated individual
• A drone may not be flown within a 50m radius of any person, property or public road

Godden says that the drone economy is set to explode, with Goldman Sachs forecasting a $100 billion market opportunity over the next five years. “With the drone technology sector being a lucrative market for business and government, applications will continue to evolve, which means that regulation will change continuously.

“Given the high expense of drones and the various risks attached with their commercial use – from human inexperience to theft to technical failings – is prudent to consider insurance to safeguard yourself and your business from potential loss. The cost of the total loss of a drone can be devastating to a business” says Godden.

Godden adds that not all cover is created equal, so it is important to chat with your insurer. Santam’s Aviation Cover, for example, is one of the few comprehensive insurance policies for drones (whether operated or not) and includes third-party cover.

“Drone insurance helps to ensure that if your drone is lost, damaged or causes loss, damage or injury to others, you and your business will be protected,” says Godden.

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