Insurers struggling to keep pace with drone and e-bike tech

If you own an e-bike or a drone and expect them to be covered by your current home contents insurance policy, it might pay to check the fine print.

Insurance broker group NZbrokers did some research into home contents policies on the market and found that the industry hasn't kept pace with the development of new technologies.

NZbrokers partner services manager Simon Moss says that the wording used in home contents policies was both complex and varied, which means many e-bike and drone owners would be without cover for loss, damage, or third party liability.

He says that most people who buy e-bikes or drones think of the technology as similar to a model aircraft or pushbike because they both perform the same functions. And there are a lot of e-bike owners out there – an estimated 40,000 in New Zealand alone.

"The insurance company is looking at it very differently however - while they may cover your $5000 push bike, many will not cover your e-bike of the same value because of terms in the policy or the legal status of your e-bike," Moss explains.

He notes that some home contents policies will cover an e-bike if its output is under 300 watts, which is the 'maximum power output' before the bike is classified as a motorcycle by NZTA regulations.

"This is one source of potential confusion as some e-bike motor manufacturers print on the motor their maximum 'input power' because that number is larger (typically motors run at about 80% efficiency) thus giving the impression the buyer is getting a more powerful motor.

"Conversely a consumer may see '300 watts' written on the motor but the bike may generate more power than this when in use," he says.

 "The risk of a road accident on an e-bike, which can travel in excess of 40 km/h, is at least as high as any other road user travelling at that speed and most home content policies we looked at don't cover owners for third party damage to other vehicles."

While recreational drones are everywhere and can cost as much as $5000, the Civil Aviation Authority has received hundreds of complaints about drone users over the last five years.

"A drone may be treated by insurers as a type of aircraft if it is capable of lifting more than its own weight - a criteria which is impossible for most consumers to measure.

"What this means is your drone may be covered for loss if you drop it while getting it out of the car, but if it falls from the sky while in use, you are on your own.

"And if a drone happens to cause an accident while it is in use near a road, the owner will be left to foot the bill in most circumstances," he says.

Moss notes that the technology is evolving so quickly that there's no consistency across insurance policies.

Some policies will not cover e-bikes and drones while others will set maximum standard limits but will include third party damage.

"From the insurer's perspective, drones and e-bikes are an unknown risk and until they have an accurate picture of that risk they will tend to act conservatively.

The way they will start to understand that risk is when they see a claims trend. This will make it more likely that exclusions and conditions will be applied to e-bikes and drones.

This kind of inconsistency is not new.

"We saw a similar trend with laptops, after insurers realised they were replacing damaged technology with better equipment because you couldn't buy the same product with old software anymore. So anything over two-three years of age would then be replaced at its second hand value," he says.

While there are no e-bike specific policies on the market at the moment, some insurers are starting to offer better cover for drones.

"Drones have a number of commercial applications and so we are seeing what amounts to mini aviation policies coming on the market now, but there are limited options for private or hobby drone users," Moss concludes.

Moss says consumers who are concerned about the level or type of cover they are receiving should consult a broker.