December 2017

Changing times for marine insurers with blockchain and IoT
Emerging technologies like blockchain and the Internet of Things (IoT) are likely to transform the maritime transport industry in the coming years, creating potential opportunities for insurers.

The marine and transport sectors are starting to invest in innovative technology solutions as they look to increase efficiency and improve the quality of products and services.

Earlier this year IBM and Maersk piloted a blockchain supply chain system, which the shipping company is using to process some 10 million containers in 2017. In the aviation sector, GE is developing micro-robots to carry out routine inspections of jet engines, a technology that they could also use for gas turbines.

Blockchain, in particular, is expected to make big waves in the logistics sector, increasing efficiency and transparency and reducing the potential for fraud. Blockchain-based platforms enable multiple parties to share and verify data and documents in real time – so-called ‘smart contracts’ could also use blockchain to automate certain actions, like paying a claim or releasing funds.   

In the context of the marine and logistics industry, a blockchain platform can link shippers, freight forwarders, financial institutions, ports and customs authorities, enabling them to share shipping data and documents, such as invoices, bills of lading or insurance certificates.

Maersk is working with EY on a cargo insurance blockchain solution that can capture marine data, such as information about risk and liability, as well as help firms comply with insurance regulations.

The other big technology development for marine and transport is IoT. Developments in computing and sensor technology will enable companies to track and monitor the condition of cargo in real time, while IoT systems can monitor engines and plants, flagging up faults or recommending maintenance.

The marine and logistics sectors are expected to be among the biggest adopters of IoT. According to the Boston Consulting Group, business to business investment in IoT will reach €250bn by 2020, of which 50% will be driven by the transportation, logistics and utilities sectors.

If shipping and logistics widely adopt technologies like blockchain and IoT, it could mean big changes for global trade. IBM estimates that digitising the container paper trail using blockchain could save shipping carriers about $38bn every year.

Technology adoption is now attracting the attention of the marine insurance industry, and was the focus of the President’s Workshop at this year’s IUMI (International Union of Maritime Insurers) conference in Tokyo. The IoT and blockchain workshops at the event gave the impression that there is plenty of opportunity for marine insurers that are willing to adapt to changing technology.

Insurers are starting to work with their clients to explore such technologies – a small number of marine contracts using blockchain have already been underwritten, for example.   

Blockchain and IoT technology will have wide-ranging implications for marine and transport insurers, both in terms of the risks they underwrite and how they do so. They are also likely to present an immense opportunity for insurers writing other classes.

Cargo policies, as well as related coverages like trade credit, could plug into blockchain-based supply chain or logistics platforms, giving insurers access to data and potentially leading to major efficiencies.

IoT could also give insurers access to new data, such as station-keeping data for floating offshore platforms or data on ‘hogging and sagging’ of super tankers, which would enable insurers to monitor fatigue of vessels.

The increased availability of data and analytics will be a rare step-change for the marine and transport insurance sector, giving underwriters better information and insights.

However, huge volumes of data alone will be of limited value for insurers. Data will need to be relevant to assessing risk and will need to be built up over time. For example, data on cargo movement could provide powerful information for insurers. However, to be of real benefit, it would need to cover a period of many years as it would only detail historical information rather than being forward-looking.

Although the application of blockchain and IoT technology is still in its infancy, marine and transport insurers need to start thinking ahead and identifying the data they would find most relevant and who they might need to partner with in order to access it. 

 

 

Written by


James Straker-Nesbit
Senior Executive, Underwriting

This article was previously published in the 2017 Autumn/Winter edition of Viewpoint


 


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