Managing cyber risk across drone software, products and operations
Drone technology businesses can influence the safety of an operation without ever owning an aircraft.
Software may support mission planning, manage pilot qualifications, transmit live imagery or turn sensor data into decisions.
A failure anywhere in that chain can expose the supplier, the operator and the customer to different losses.
Insurance therefore, needs to follow what the technology actually does and the consequences if it fails.
For Australian developers, manufacturers, integrators and service providers, cyber insurance should sit within a wider governance and insurance program.
That program must connect digital resilience with professional liability, physical damage, aviation exposures and management accountability.
This article explains those connections, including their relevance to agriculture, government and critical infrastructure operators/organisations.
The drone business extends beyond the aircraft
A useful starting point is to map the complete service: aircraft and components, firmware, navigation, communications, cloud platforms, third-party integrations, data processing and human oversight. Record who controls each element and who relies on it.
A business that supplies a reporting platform has a different exposure from one that writes flight control software or supplies a complete autonomous system. Those differences must be reflected in the activities disclosed to insurers.
Consider a software business that supports mission planning, pilot qualifications, aircraft maintenance records, safety reporting and live imagery.
Its platform helps customers manage drone operations, even if the business does not manufacture or fly an aircraft.
An outage, incorrect record or unauthorised disclosure could consequently expose it to customer claims. Insurance should reflect these functions and the decisions customers rely on the software to make.
Governance provides the evidence behind insurance
Effective governance assigns responsibility for approving missions, managing access, testing changes, maintaining equipment and responding when a system fails.
It also preserves evidence.
Which software version was deployed, which permissions were granted, what the operator saw and what approvals applied at the time.
For technology suppliers, this should include secure development, documented testing, controlled releases and a clear boundary between automated recommendations and decisions requiring human approval.
Operators need current qualifications and approvals, maintenance records and practical procedures for loss of connectivity or unavailable software. Customer contracts should explain responsibilities for data, configurations, updates and emergency decisions.
These controls help reduce the likelihood or impact ofloss, support underwriting and make a claim easier to investigate. They do not guarantee cover or remove liability.
Insurance provides financial protection for specified events that remain possible despite appropriate controls. The strongest program is built while the service and its contracts are being designed, then revisited as capabilities and customers change.
Cyber risks can disrupt the whole service
A drone service may depend on user accounts, application programming interfaces, mobile devices, telecommunications and cloud providers.
An attacker does not need to compromise an aircraft directly to disrupt operations. Stolen administrator credentials could expose mission records; a compromised integration could corrupt data; ransomware could make a planning platform unavailable.
Protecting information and its integrity
Drone data may include identifiable imagery, property information, precise locations and details of sensitive facilities.
A breach involving infrastructure imagery may have serious contractual and security consequences even where personal information is limited.
Access controls, retention periods and data sharing arrangements should therefore reflect both privacy and commercial confidentiality.
Integrity deserves equal attention.
Incorrect telemetry, altered inspection results or corrupted agricultural mapping may cause a customer to make a costly decision without an obvious service outage.
Technology businesses should be able to establish where information came from, whether it changed and who approved its use.
Drone activities can also engage Commonwealth, state and territory privacy and surveillance laws; the relevant obligations depend on the organisation and activity.
What cyber insurance should be tested against
Depending on its wording, cyber insurance may fund forensic investigation, legal advice, notification, data restoration and crisis communications following a covered incident.
It may also address the insured’s lost income and additional costs during a covered interruption, and liability to others arising from security or privacy failures.
The availability of specialist incident response can be particularly valuable when technical containment and customer communications must happen quickly.
For a drone technology supplier, the review should go beyond whether ransomware is covered.
Does interruption cover require a malicious attack, or include an accidental system failure?
Does dependent business interruption extend to the cloud, communications and other providers actually used?
Are customer devices, hosted environments and outsourced data within the relevant definitions?
How do waiting periods, restoration periods and sublimits affect the likely loss?
A supplier’s interruption cover generally addresses its own insured financial loss. It does not automatically reimburse every customer whose drones are grounded.
Customer claims will usually require a separate examination of liability cover. Equally, compromised imagery is not necessarily a personal data breach, so confidentiality and network security provisions need their own review.
When a cyber event causes physical harm
A malicious change to an automated command could contribute to a collision. Compromised agricultural instructions could cause incorrect chemical application.
These events require explicit review of bodily injury, property damage, pollution and aircraft exclusions across cyber, technology liability and aviation policies.
Physical harm should never be assumed covered merely because the initiating event was digital.
Governance should connect the incident response plan with operational stop procedures. Teams need to know who can suspend a release, isolate an integration, ground affected aircraft and preserve logs. Emergency safety decisions and insurer notification arrangements should be rehearsed together.
Building the wider insurance program
Technology errors and omissions:
Technology errors and omissions insurance, often called Tech E&O or technology professional indemnity, addresses liability arising from covered failures in products or services.
A software defect, faulty integration or incorrect analysis can generate a claim even where no attacker is involved.
A farmer alleging financial loss from inaccurate crop mapping presents a different claim from a supplier seeking recovery for ransomware on its own network.
The insured activities and definitions should reflect the actual work, development, licensing, hosting, implementation, maintenance, analytics and hardware where relevant.
Review exclusions for aviation, safety critical systems and particular end uses.
Check contractual liability, service level commitments, intellectual property claims, retroactive dates and notification requirements.
Rework costs, refunds, performance guarantees and the cost of improving a defective product require specific scrutiny rather than assumptions about E&O cover.
Public and products liability and aviation liability:
Public and products liability can address covered injury and damage arising from business activities or supplied products.
Drone manufacturers, component suppliers and integrators should establish whether aviation products and completed work fall within cover.
Operators should examine specialist aviation liability for aircraft operations, alongside hull cover for damage to the drone and agreed payloads.
Trials, demonstrations, autonomous operation and flights beyond visual line of sight need accurate disclosure and specific acceptance where required. [3]
Public and products liability included in a technology package may be useful, but its presence does not establish that operational drone liability is covered or that a separate policy is unnecessary.
Compare exclusions, limits and insured activities against premises exposures, field work, manufacturing and flight operations.
The same review applies to leased aircraft, subcontractors and damage to property in the business’s care or control.
D&O / Management liability:
D&O or Management liability addresses a different set of allegations. Following a serious incident, a board could face allegations that it failed to oversee cyber controls, manage known product defects or disclose material risks.
Employment practices, crime and statutory liability may be separate sections or separate policies. Their scope varies, and fines or penalties must not be assumed insurable. D&O / Management liability does not replace E&O, cyber or aviation cover.
Property and specialist exposures:
Manufacturers and operators should consider premises, stock, equipment, battery fire and business interruption.
Drone hull, payload and transit cover need to reflect where equipment is stored, transported, tested and flown.
Product recall is distinct from liability for resulting injury or damage; withdrawal and replacement costs may require specialist cover.
Agricultural spraying raises chemical drift and pollution questions, while maritime operations introduce different equipment and navigation exposures.
Workers Compensation, motor, cargo and travel cover remain relevant to the workforce and delivery model.
Coordination matters as much as the selection of policies. One event can involve several insurers, shared limits, multiple excesses and competing exclusions.
Review other insurance clauses, defence arrangements, aggregation and whether defence costs reduce limits.
A combined technology policy can simplify some interfaces, but still needs to be tested against realistic drone scenarios.
Australian security reforms and their implications
Australia’s 2026 drone security consultation and the proposed reforms to Ministerial Directions Powers under the Security of Critical Infrastructure Act 2018 are separate processes with related implications.
The first addresses drone security; the second concerns national security risks to critical infrastructure.
Supplying drone technology to a government body or infrastructure operator does not, by itself, mean every Security of Critical Infrastructure(SOCI) obligation applies directly to the supplier. Applicability requires assessment of the entity, asset and service.
The drone security proposals
Home Affairs released its drone security paper on 24 April 2026, with submissions closing on 25 May.
It explored a national security framework initially focused on aerial drones, with scope to address land and maritime systems.
Its six themes concerned emerging threats, counter-drone capabilities, identification and tracking, enforcement, operating restrictions and awareness.
These are consultation proposals and should not be described as enacted requirements.
For technology suppliers, possible commercial implications include new tracking interfaces, more sensitive data sharing, updated restriction information and changes to permission workflows.
Platforms may need to demonstrate how they authenticate identities, distribute updates and preserve evidence.
Manufacturers may face additional design or interoperability expectations. These are planning implications, with the eventual obligations dependent on the final framework.
The Tech Council of Australia (TCA)member consultation paper favours flexible, coordinated regulation, while highlighting privacy safeguards, practical transition periods and the risk of overlapping obligations. It is a preliminary member position paper, not a final submission.
Its concerns are relevant to how businesses budget for product changes and allocate responsibility for compliance in customer contracts. [6]
The proposed SOCI directions reforms
Home Affairs separately consulted on five measures concerning existing directions powers, a new conditions power, restrictions on high risk vendors or products, delayed continuous disclosure and increased civil penalties.
That consultation closed on 1 May 2026. Separately, Home Affairs reports that enhanced Critical Infrastructure Risk Management Program Rules are now in effect; those rules should not be conflated with the proposed directions powers.
In its 6 May 2026 submission, TCA opposed weakening the existing safeguards and opposed the conditions power as proposed.
It supported vendor restrictions and delayed disclosure in principle, subject to protections.
Its recommendations included merits review, feasible transitions, compensating controls and protection against contractual consequences of compliance.
These are industry recommendations, not existing statutory protections.
What this means for drone technology businesses
If implemented, broader directions could affect the products, hosting arrangements or suppliers used by infrastructure customers.
Drone technology businesses may consequently face stronger due diligence, audit and access requirements through procurement contracts.
They should map dependencies, assess replacement options and negotiate responsibility for mandated changes.
Notification protocols should also accommodate any applicable confidentiality or disclosure restriction.
Insurance needs a parallel review. Replacing an otherwise functioning product because of a government restriction, funding routine compliance or losing a contract is not automatically an insured event.
Cyber interruption generally needs a covered trigger; E&O needs a covered claim. Directors’ defence costs and contractual claims require assessment under their respective wordings.
Scenario planning should identify which costs may be insured and which require business funding.
Turning governance into an insurance strategy
The practical objective is a program that can explain how a loss would be managed before it happens.
Technology suppliers should bring operational, engineering, cyber, legal and insurance teams together to test a small number of credible scenarios.
The exercise should follow the consequences through customers and suppliers, rather than stop at the first system failure.
Test the program against real decisions
For a drone software provider, consider an outage that makes mission planning unavailable to multiple customers.
Establish how operations continue safely, what contractual obligations apply and how the supplier’s lost income differs from customers’ claims.
For an agricultural service, consider an inaccurate mapping output or spraying instruction. Identify responsibility for validating the data and distinguish financial loss, crop damage and pollution.
For an infrastructure or government customer, consider unauthorised access to imagery and mission records.
Establish how access is revoked, evidence preserved and reporting obligations assessed. Separately, test a supplier restriction that requires replacement of a platform or component.
This distinguishes recovery from a covered incident from the cost of adapting to regulatory change.
Questions to resolve before the next renewal
Have all products, services, field activities and customer end uses been disclosed, including trials, defence work and autonomous capabilities?
Who owns each operational and cyber risk, and can the business demonstrate its testing, access controls, maintenance and approval records?
Do policy definitions include the relevant software, firmware, hardware, data and outsourced services, with aviation and physical damage exclusions expressly reviewed?
Can the program address both the business’s own recovery costs and covered customer claims, with sufficient limits for a failure affecting several customers?
Do contracts impose indemnities, guarantees, security obligations or change costs beyond the liability the business would otherwise bear?
Are incident response, safety escalation and claims notification procedures aligned, including insurer consent requirements and any lawful disclosure restrictions?
A well designed insurance program can provide drone technology businesses access to recovery resources and financial protection when specified insured risks materialise.
Governance supplies the controls, accountability and evidence that make that protection meaningful.
Businesses should review both as they introduce new features, enter higher consequence sectors or expand the scale of their operations.
To discuss how your drone technology activities, customer contracts and operational dependencies align with your insurance program, contact the Lockton Cyber and Technology team.
For more information about our collaboration with the Australian Association for Uncrewed Systems (AAUS) and how we can support their members, visit our webpage here (opens a new window)
The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice and should not be relied on in that way. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action based on the content in this publication.
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