Shipping is one of the world's oldest industries, and marine insurance, specifically hull and cargo, is considered the oldest form of insurance. So, when it comes to talking about technological advances and the use of technology, the shipping industry is not one that immediately springs to mind. However, for an industry seeking cost savings and improvements in safety and efficiencies, technological innovations are helping to bring significant advantages in risk mitigation and management.

“Digital transformation is critical to global trade," says Ray Markley, president of Shorepoint Insurance Services, an Acrisure Partner. “Many partner platforms are engaged to reduce product waste, gain energy efficiency, and build economic links between finance providers, suppliers, truckers, ocean or air carriers, rail and warehouses. In particular, theft, pilferage and non-delivery are risks that are better mitigated by the use of technology."

New technologies are key to providing oversight and ensuring goods are monitored every step of the way, helping improve clients' loss experience. “For example, the use of temperature devices can directly tell clients when, within the supply chain, there was a temperature excursion of their goods that needed to be refrigerated at all times," says Brendan Neligan, marine insurance broker, Risk Placement Services Inc. “Clients can determine if their goods had a loss or sustained a loss, and if it was due to their own error or if it was due to the vendors they used." 

In essence, “the better monitoring of temperatures during transit and storage helps pin liability on negligent parties and hopefully triggers better cargo handling by logistics partners," Markley says.

Further, fraud, in which criminals imitate haulers and other sub-contractors, including drivers with falsified documents, is a dominant occurrence, according to international freight transport insurer TT Club. Criminal fraud is seen by the insurer as a primary and growing threat in the global supply chain.

With the advent of new technologies, insurers and their clients now have access to more information to assist in the underwriting and protection of their risks. However, while companies operating in the marine insurance sector are focused on mitigating and reducing risk through the introduction of new technologies, “there must be economic benefits to investing in the technologies," Markley says. “Otherwise, fewer clients will participate."

For instance, “there's growing availability of new technologies to manage and monitor cargo, but the uptake is slow because of the cost," says Mike Perrotti, chief underwriting officer, Marine—Americas, AXA XL. “It will be a while before usage is commonplace."

But like in other insurance markets, carriers are taking into account the risk-reducing technologies clients are willing to use to protect their risks in calculating their rates. “If a sensor or some kind of monitoring device can give early warning that helps minimize a loss or avoid one altogether, clients may position themselves well for better pricing or terms and conditions," Perrotti says. “Additionally, policyholders have deductibles, and these sensors impact their retained portion of the risk as well."

“Clients get direct premium credit for the use of weather temperature devices as well as anti-theft devices," Neligan adds. “However, the first thing they're going do is to bemoan the upfront costs of doing that—but those costs are repatriated over the usage of those devices."

Technology use in the marine industry can be placed in two broad buckets: “those that serve to proactively mitigate risk, and those that serve organizational purposes," says Sam Hellebrush, product line director, Hull & Liability, Intact Insurance Specialty Solutions.

“Examples would be engine monitoring software versus back-office paperwork and compliance systems that include automated check-and-balances," Hellebush says. “Both are positives when it comes to a carrier's assessment of a risk."

Of course, no mention of new technology is complete without the introduction of cyber liability risks. “More and more small businesses are using automated payment systems and cloud storage rather than retain paper records—this introduces a new operational exposure that can be addressed in either the standalone cyber market, or increasingly as an add-on to a marine package policy," Hellebush notes.

“Unfortunately, cyber risk continues to haunt the industry, with marine insurers excluding loss due to cyber causes," Markley adds.

Olivia Overman is IA content editor.