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Commercial drones pose new risks to corporate privacy

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If you haven't noticed, there's been quite a buzz around drones recently. Unmanned aerial vehicles, as they are formally known, have long been used for military purposes, but lately they are being used for commercial purposes, including in the insurance industry.

Last week, both American International Group Inc. and United Services Automobile Association, or USAA, announced they had received regulatory authority to start using drones. State Farm had previously been given approval by the Federal Aviation Administration to start testing drones for commercial use.

For insurers, it would seem that the mini pilotless aircraft could be a big help, particularly for assessing damage in catastrophe areas or tough to reach locations, such as roofs of commercial buildings. Assessing risks more accurately during the underwriting process would also seem like a big advantage of drone use.

But the regulatory framework for drone use is still murky, and a lot of work remains to be done to catch up with their already extensive use in other fields, such as the movie industry.

The FAA has been understandably cautious in its approach to regulating drones, but in February it proposed regulations governing smaller drones. The proposed regulations include restricting flights to daylight hours and a stipulation that the devices must remain within the operator's or observer's sight unaided by anything other than corrective lenses.

You can't help feeling that, given the ubiquity of GPS tracking and the sophisticated navigation sensors already used with other vehicles, that in a few years we'll look back on these as quaint rules of a bygone era, similar to the Red Flag laws passed in the United Kingdom and some U.S. states in the 19th century requiring that early automobiles be preceded by a pedestrian waving a flag. And before too long, Internet retailers will be routinely making good on their plans to use drones to deliver packages, much like the owls in the Harry Potter books.

What isn't so quaint is the potential privacy violations that could occur if the drones and the images they capture are used for reasons other than legitimate commerce. It doesn't take a lot of imagination to figure out how, in the wrong hands, drones could be used — and no doubt already are being used — as corporate spying devices, let alone what use Peeping Toms might make of the devices.

Several states already have laws in place to try and address privacy concerns, but they usually are directed at preserving the privacy of private citizens, often focusing on restricting governments' use of drones, and inevitably offer only piecemeal protections.

Corporations are often feared as the entities that will abuse drones, but they are also likely victims. As the FAA continues to assess what rules it should impose on drone use, it should address corporate privacy concerns to ensure that companies are piloted through these uncharted skies.