Deepening the Safety Net

The recent escalation in drone-related hostilities (essentially a drone war) between India and Pakistan has underscored the need for a mature and secure drone regulatory ecosystem in India. As drone warfare spills into mainstream conflict zones, India’s liberal civil drone policies, introduced to catalyse economic growth, must now confront pressing national security challenges. The Drone Rules, 2021, while progressive, reveal critical regulatory and structural gaps that must be addressed if India is to become a global drone hub by 2030.

As dramatic as these events were, they reflect a deeper shift underway: drones are no longer just gadgets, they are geopolitical tools, commercial workhorses, and a growing part of everyday life. Whether they’re used to drop payloads across borders or deliver medicines to Himalayan villages, drones have firmly embedded themselves into India’s civil, strategic, and economic landscape. One of the most rapidly evolving technologies within the aviation sector is that of Unmanned Aircrafts (UA) or Remotely Piloted Aircraft (RPA) or Drones, which will have significant impact on both domestic and international aviation law. Unmanned aircrafts or Drones have, apart from considerable military applications such as surveillance, boarder patrols etc., significant civilian applications that are not just limited to providing transportation.

And yet, while drone technology soars ahead, the ecosystem meant to support and regulate it, especially the drone insurance market remains stunted. Without urgent reform, this gap may threaten not only public safety and investor confidence but also India’s goal of becoming a global drone hub by 2030.

The Drone Boom

Drones are already transforming sectors across India with applications across various sectors and industries such as agriculture, logistics, disaster management, infrastructure, policing, surveillance etc. The importance of drones is also highlighted by the fact that the Government of India came out with the Production-Linked Incentive (PLI) Scheme for drones and drone components in 2021. In fact, it is estimated that drone and its components industry can significantly strengthen India’s manufacturing, having a projected potential to become USD 23 billion approximately by 2030 as per a recent EY-FICCI report titled, “Making India the drone hub of the world”.

There is no doubt that the timely Drone Rules, 2021 played a key role in catalysing this growth. By eliminating many licensing bottlenecks, digitising approvals through the Digital Sky platform, and introducing a liberal classification system for drone types, the government sent a clear signal: India is open for drone innovation.

But regulatory liberalisation alone cannot carry the sector. Without an enabling insurance ecosystem, both commercial viability and public safety remain at risk. This also requires a focused impetus on subsidising skilling costs for training and development because there is a severe lack of skilled man-power in this industry in India.

Criticality of Drone Insurance

In most sectors, insurance is the invisible infrastructure that facilitates growth, trust, and enables risk-taking or increases the appetite for greater financial investment. For drones, this is especially important because of three unique factors:

✻ High Risk of Liability: Drones can malfunction. They can collide with aircraft, fall on people, trespass into private property, or cause damage to critical infrastructure. As drones become more autonomous and are deployed in urban areas, the likelihood and cost of accidents grows. Thus, without insurance, the operators are personally liable for third-party damages, victims have no quick recourse and the courts may be flooded with claims (which isn’t ideal in our already clogged judicial system).

✻ Essential for Business Scaling: Startups and MSMEs need insurance to have access to bank loans or leasing arrangements, conduct field trials and testing and in order to secure government tenders or large commercial contracts. Just like vehicle finance relies on motor insurance, drones too require insurance to become bankable assets.

✻ Catalyst for Innovation and Exports: Product liability insurance is a prerequisite for exporting drones to most developed countries. Without it, Indian drone manufacturers cannot scale globally or tap into high-value markets in Europe, North America, or the Middle East.

Regulatory Landscape and the Gaps

India’s Drone Rules, 2021, under Rule 44, make it mandatory for drones other than nano drones to carry third-party liability insurance. The provisions of the Motor Vehicles Act, 1988 and rules made apply, mutatis mutandis, to the third party insurance of Drones. This is a progressive step and aligns with practices in the EU and China. However, in practice:

✻ Awareness of this mandate remains low.

✻ Enforcement is weak, particularly in Tier-2 and rural areas.

✻ Few Indian insurers offer drone-specific products.

✻ Coverage limits are low, typically Rs 10–20 lakh, insufficient for major incidents.

✻ Lack of claim data and understanding surrounding the risk involved in UAS operations has made this particular area of aviation challenging for insurers and reinsurers.

There is also a lack of (a) Hull insurance (for damage to the drone itself), (b) Cyber insurance (for data breaches or hijacking), (c) Fleet insurance for operators managing multiple drones and (d) Pay-as-you-fly insurance models for seasonal users like farmers among other products that should be more readily available in the Indian market. The net result? Under-insurance across the board, even as drone usage accelerates.

Markets like the EU and North America offer a thriving market with product offerings being both flexible and readily available. Hourly, monthly, or annual insurance products, some integrated into apps that track flights in real-time are being made available by insurers. Insurers assess risk based on flight location, drone specs, and pilot history. China has developed robust domestic insurance products to support exports, logistics, and even urban drone taxis. India, by comparison, has the policy intent but no deep insurance market to underpin growth.

There is an urgent need for a well-developed drone insurance market that would enable safer skies, ensure more financing, build startup confidence and also ensure better compliance and greater public trust. Crucially, insurers would generate valuable data: on crash causes, operator behaviour, and risk hotspots which can lead to more informed and better policymaking.

What Next?

To bridge the gap, the following steps are critical. First, the Insurance Regulatory and Development Authority of India (IRDAI) must issue comprehensive guidance on drone insurance categories, risk-based pricing, and standard coverage formats. IRDAI must nudge insurers to offer more products specifically tailored for the drone market and should encourage more players who are willing to offer such products. Secondly, the current focus on just third-party liability with limited coverage must shift to more broad-based coverage with focus on specialised products. Third, we must incentivise insurers to develop innovative products such as Usage-based insurance (UBI), Real-time cover based on telemetry and automated claims processing using flight data logs. IRDAI must also engage with the Insurers to address the gaps and concerns surrounding data privacy, security risks, and the impact of cyberattacks on drones, which are not adequately addressed in current insurance policies. Premium costs also need to be brought down and awareness levels amongst small operators need to be raised. Insurers would also need skilled human resources who can design and under-write drone related insurance policies.

No Take-off Without Insurance

India’s drone sector is poised for exponential growth. But growth without guardrails is dangerous both to people on the ground and to investor confidence. Insurance is the missing safety net that will allow drones to flourish responsibly, at scale, and in line with global standards. As drones become as common as smartphones, delivering parcels, surveying lands, supporting troops, the financial ecosystem around them must keep pace. That begins with risk protection. The government’s vision of India as a global drone hub cannot be achieved on policy alone. It must be underwritten, literally, by a forward-looking insurance regime.

The writer is LLM, Air and Space Law (McGill University). Views expressed are personal