Few industries have stood the tests of time like insurance. Its origins can be traced back to the 3rd millennium BC when merchants were known to manage risk by dividing cargo between multiple boats. Circa 1750 BC, the Code of Hammurabi scribed to law the legal relationship between financier and merchant, clarifying the exchange of operational funds in relation to the success or failure of shipment.
Contemporary insurance dates its origins to the 17th and 18th centuries, with the advent of the English Coffee Houses, where Lloyds of London was founded. During this time, the framework for modern insurance was built. Lloyds remains at the forefront of insurance today. Yet, tradition exemplifies the antiquity of today’s insurers; Lloyd’s underwriters still reverently record ships lost at sea, and their assets, on paper with a quill pen and ink. Insurance serves business as the balancing fulcrum between risk and finance. At its root, insurance is simply risk sharing and risk management. The cost of which is determined by analyzing historically known data vs. the value of the item insured. In the maritime industry, such information could be the nature of the waters navigated, the volume of goods moved through a port, and statistical failure or success. Essentially, it is the past that dictates the price of premiums and deductibles.
For three centuries, the insurance industry has operated on this principle. Now, developments in modern technology, powered by algorithms and the Internet of Things (IoT), offers cutting edge insight into variables that were previously obscure. Based on the input of real-time conditions and data assessment, insurance can adapt moment to moment, adjusting coverage when risk spikes, and decreasing premiums when operations slow.
Step by step from the claimant, insurer to underwriter, the timeline in which data is traditionally shared is quite slow. As volume increases, quality of information typically declines as it moves throughout a value chain. A properly developed interface would allow for relevant data to be shared with all involved parties. With a single platform, the level of efficiency for updates to claims, policy, and payouts could change from a drawn-out process to immediate results.
Today, the industry is on the cusp of extraordinary change. From AIS data to digital cargo systems, modern ships create a massive amount of unstructured information. Built with the real-time input of smart devices, the Internet of Things (IoT), and algorithms, value-added products have been developed which will disrupt the face of modern industry and the customer-insurer relationship.
London based scaleup, Concirrus honed in on the maritime industry for this reason. Recognizing the global industry as data-rich and ripe for improvement, they positioned themselves to harness the power of technology. Specifically serving the insurance sector, they’re already providing savings and efficiency at all levels.
The challenge with big-data analytics is how to change terabytes of unstructured data into useful information. Concirrus has developed algorithms that tap into over twenty industry-specific data sets. Known details, such as vessel characteristics, manufacturer, and ownership history are combined with movement data from AIS. Real-time tracking allows algorithms to interpret speed and distance travelled, identifying information such as how often a vessel deviates from standard sailing routes or navigation channels. In turn, Concirrus is able to analyze behaviour, risk exposure, policy, and claims moment by moment. The resulting product is a user-friendly data interface that can instantly produce a price for policy and a thorough explanation as to why.
Shippers, insurers, and underwriters can apply this real-time data to deductible, premium, and policy adjustments. If a ship is unexpectedly laid up in port, then cost to the company can be appropriately adjusted downward. If a vessel unexpectedly departs a shipping channel or reroutes to waters with high incidents of piracy, then the premium can increase as risk increases. Such innovations afford accurate coverage when risk spikes and creates immediate savings when operations are benign. What would otherwise take underwriters potentially hours or days to do, can be done in mere seconds, providing additional cost savings with less administrative expense.
When cargo is transported, the chain of custody can be long and difficult to track. Even today, most cargo records are transferred and checked manually. The process is inefficient with little room for input from the cargo handler. If cargo is compromised or damaged it is difficult to track where and when an incident occurred. This lack of information makes maintaining the condition of cargo difficult and accurately insuring it even more so. With the development of smart devices and the Internet of Things (IoT), we can harness vast amounts of cargo-specific data to better manage integrity and risk.
U.S. startup Parsyl is quickly establishing itself at the forefront of this issue. Offering small devices that can be placed directly in with sensitive cargo. These devices track a plethora of data, such as temperature, humidity, light exposure, impact forces and GPS location, wirelessly transmitting the information to customers and shippers to monitor.
Sensitive products like fish or pharmaceuticals must be transported at specific temperatures or they can go bad. IoT offers solutions in tracking the conditions in which these products are kept. Officers and Supercargo will be able to monitor product integrity remotely without tampering with packaging or storage. If products are at some point compromised, users will be able to pinpoint the exact moment of error. This information will allow customers, insurers, and shippers to accurately adjust business practices and cost.
The Parsyl device, combined with their smart digital interface, allows handlers to take photos and enter write-ups regarding the shipment. With this data, stakeholders will be able to better understand the variables which may have caused damage. Insurers and shippers will be able to identify spikes in risk when an unexpected volume of goods become concentrated in a single location. Chain of custody will be tracked in real-time, allowing for improvements in methods of shipping and ease of filing claims.
As the industry ultimately adopts these value-added products and services, business models will inevitably become more efficient. The combination of IoT and big-data analytics will change the insurer-customer relationship, from that of transactional to consultatory, ushering in a new era of understanding and cost savings.
Patrick is a Technology Analyst at Thetius and a maritime officer with experience aboard a variety of commercial sea-going vessels. Patrick is a graduate of Maine Maritime Academy and holds a Bachelor of Science in Marine Vessel Operations & Technology, he closely follows new technology developments and the future of the Maritime Industry.