Testing the digital waters

The impact of digitalisation on marine insurance could potentially be huge, but even then it won’t be mainly about the technology. It will always be about what insurers have always cared most about: knowing risk.


This is the take from Alem Jasarevic, chief operating officer at Skuld, the underwriting giant based in Oslo.

Jasaravic has spent most of his career in landbased insurance, a background that gives him valuable perspectives from industries that are currently running a nose ahead of the maritime industry in exploiting digital technologies.

It’s possible to combine many more risk factors using big data.

“Insurance is about distributing risk. An owner wants coverage against potential accidents, and insurers want to cover the customers with the lowest exposure to risk. Then the key is putting the right price tag on risk.”

Jasarevic compares marine underwriting to automobile insurance, something nearly everyone is familiar with. “Just like with car insurance, there are reasons for the different prices for premiums,” he says. In automotive insurance, pricing variables can include power, size, age, driving habits, and history.

“All these things go together to make up an overall risk picture, and companies have to be good at evaluating that risk and putting a number on it.”

And though the variables are different at sea, the same basic principles apply.

So how can digitalisation help reduce risk?

“With precise information you get a better risk description. What you had to assume before is now knowable. In this way, telematics are contributing to reducing risk, because they allow you to gather so much more information.” This is already impacting automotive insurance, as companies gain a clearer overall picture of car performance and driver behaviour. “But you still have to process that information in order to gain value from it,” he observes.

And that is where big data comes in. “It’s possible to combine many more risk factors using big data. In that sense it is an enabling technology. Digitalisation becomes about meeting customer needs more efficiently and more accurately with the help of technology.”

The digital world also facilitates changes the nature of businesses, and that in turn presents insurance companies with new risk pictures. “Just like Uber challenges taxis using new technology, we are seeing the contours of change in shipping,” he says, referring to the emergence of integrated and remote operations, automation, and even autonomous ships.

On that last one, Jasarevic reflects his industry’s cautious optimism: “Autonomous ships are an enticing prospect, but time will tell whether the concept is truly feasible. Is there more or less risk when man meets machine on the water? Perhaps the turning point will come when there are 80-90 per cent unmanned ships, and no one is predicting when, or even if that will ever happen.”

Another take on autonomous vessels is that not having people on board means there is less to insure. This is countered by many factors, however, not least the increased risk of cyber crime, or physical take-over of an unmanned vessel. Addressing the latter, Jasarevic cites current studies on how to equip ships to defend themselves, with barriers, water cannons, or electrical fields. “All this impacts the owner’s cost, though, and that influences their choices,” he adds.

But the industry doesn’t have to look as far as autonomous shipping to begin to see the benefits of increasingly digitalised shipping.

“The use of sensors is already making a difference. If predictive or preventive maintenance leads to less repair or replacement, it will mean less expensive premiums, but insurance companies will have to see the effect first.”

Even with remote access reaching many ships on the water, insurance companies are not yet following ships directly. “We sell policies for one year at a time. Costs are based on assumptions, recognisable patterns, and the history of the owner or operator. Of course we can make adjustments in response to developments during the insurance period, but with 15000 vessels in our portfolio, tracking them individually 24/7 would be a huge task, even using big data.”

While suppliers are delivering remote surveillance and advisory systems, actual remote operations have yet to kick in, Jasarevic observes. “But if or when they do, if they can provide improved control, it could be interesting for both parties. Lower risk for insurers, and lower premiums for customers.”

Though employing digital technologies can mean lower risk and lower premiums for shipowners, Jasarevic realises that insurers cannot demand that customers install the latest equipment onboard. “In today’s picture, we will continue to insure all types of ships, while we wait and see how digitalisation affects the risk profile.”

“The benefit has to be apparent in the balance between cost and reward. Safety has a cost, and if you invest in systems to reduce risk of breakdown or accident, then you want the same reduction in premium. The insurer has to agree that your investment makes you that much less of a risk, and there is no guarantee that they will do that,” he points out.

Then there is the potential down side of connectivity. “Theoretically, we could see digitalisation affecting safety, for example if crews do not get sufficient rest because they spend too many off duty hours online, or if onshore intervention distracts or disturbs command on board. But it would be too invasive to monitor crew behaviour on board in real time, or communication between the bridge and home office,” he says.

And for all the buzz around cyber security, Jasarevic still believes that cyber threats are not yet a principle risk. “How many major incidents of cyberhacking impacting ships have we seen?” he asks, referring to the few documented incidents to date. “When it becomes an apparent threat, it will be addressed, but of course we have it on our radar.”

Whether ships are continuously monitored, remotely controlled, manned or unmanned, Alem Jasarevic knows there will always be one main factor in reducing risk: running a tight ship.

We will continue to insure all types of ships, while we wait and see how digitalisation affects the risk profile.

“Bad luck and bad operations are two different things. Anybody can have bad luck, but if you have bad operations, no amount of digitalisation is going to help,” he concludes.


Tore Forsmo has spent most of his career assessing and managing marine risk, with a background from Det Norske Veritas (now DNV GL) and 10 years as managing director for the Nordic Association of Marine Insurers. His present capacity as Area Manager Norway with the The Swedish Club gives him the opportunity to apply this depth of knowledge to the digital revolution currently shaking up shipping.

Reflecting on the enormous amount of information that goes into determining risk factors and putting a price tag on risk, Forsmo observes: “The insurance business has always been about big data. What’s new is, the 4th industrial revolution is making big data available in real time.”

That being said, Forsmo maintains that the marine insurance industry is not yet actively using all the data it has access to. “For example, car manufacturers log millions of hours of vehicle activity, and they can already prove that safety improves with assisted driving. Once that claim is verified, insurance costs go down accordingly.”

The insurance business has always been about big data. What’s new is, the 4th industrial revolution is making big data available in real time.

But a ship presents different challenges: “In automotive, the car is all theirs. The same applies to aircraft. Ford, Boeing, GM, Tesla, they all collect all the data, analyse it, and apply the resulting knowledge to their products. But a ship is more composite, made up of parts from many different manufacturers, with no single point of responsibility. So who should handle all the data, and how should they use it?”

Forsmo acknowledges that there are some companies claiming the capability to gather, process and utilise huge amounts of data in a common arena, but as of yet there have been no major commercial deliveries of comprehensive data handling systems.

If anyone is to assume such a role, Forsmo speculates that it might be the classification societies. But again, enigmatic human factors overlap with the rigid binary world:

“It will come down to who trusts whom. Trust and regulations will be the factors that determine whether such a complex responsibility can be handed over to a third party.”

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