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
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
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
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
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.