Risk management creates new opportunities for marine insurance
Throughout 2020, several factors relating to marine risk changed due to Covid-19, accelerating digital transformation within the marine insurance industry. So, what lessons can we learn from the global pandemic? And, how can we turn our newfound insights into actions that create a more sustainable future for marine insurance?
2020 - a year of unprecedented change in marine insurance
Earlier this year, we spoke to Jonathan Humm, Class Underwriter at AEGIS London and Patrizia Kern, Head of Marine at Swiss Re Corporate Solutions about the changes they had witnessed. Four key themes emerged:
Lloyd’s of London and the global marine insurance market is well known for the strength of its relationships, and face-to-face engagements are at the heart of this community. Many have praised the industry on its ability to adapt quickly to remote working. However, a lack of personal, face-to-face contact has come at a time when clients need increased levels of reassurance from the market. Jonathan addressed the issue, stating, “It is very easy for an insurance practitioner or the industry in general to appear faceless in difficult times.” In an era of uncertainty, these relationships matter more than ever. The insurance market must strike the right balance between delivering the best products promptly in conjunction with increased levels of contact and support.
Measures to limit the spread of Covid-19, including harsh restrictions on travel, have caused significant challenges for the marine sector. In October, the IMO reported more than 400,000 seafarers were stranded on ships globally, some of whom have been at sea for more than 17 months without a break.
Most of us will have suffered from fatigue during the past eight months as we’ve adapted to working from home and missing out on our usual holidays. Now imagine you had to work 12-hour days for more than 17 months onboard a ship without a break, far from loved ones and no idea when you might be able to go home. The level of exhaustion is unthinkable, and this will only give rise to increased levels of risk for the crew and the vessels they work on. Patrizia recognised this issue commenting, “With up to 70% of claims normally resulting from human error, we are likely to see an increase in claims.”
Aggregation of risk
In our last blog post, focused on data and digitalisation – the key to calmer waters for marine insurance, we looked at risk aggregations for cruise ships and tankers due to changes in demand.
To recap, the CDC No Sail Order on cruise ships saw increasing numbers of vessels moored in ports across the globe. Also, crude tankers were deployed on short term contracts to store oil during the oil contango, creating new vessel accumulations. These occurred both at sea and outside busy ports.
Spares and repairs
Essential support services for maritime have also been affected by the travel restrictions and social distancing rules. Rescue services and salvage operations have slowed, impacting fleet operators, marine insurance companies and the broader supply chain.
All these factors have a part to play in assessing the level of risk for individual vessels and marine insurance portfolios, but only if we have access to the right data.
A new approach to marine insurance will help to deliver a more sustainable future for the sector
Insurers who choose not to leverage big-data will soon be at a significant disadvantage. Applied in the right way it provides a more accurate view of risk, improves client support and helps build market-leading solutions fit for this new era.
By equipping your underwriting teams with the right tools, your organisation can achieve the following results:
Cover that’s truly reflective of risk
You can gain an increased understanding of your client's risk profile, both at portfolio, and individual vessel level. Such visibility allows your team to identify and advise on the best cover available, ensuring premiums reflect behaviour.
Not only that, you can also provide clients with insight into the factors influencing their risk score. This level of transparency means clients can take measures to improve their score and benefit from improved pricing in future.
Take a look at this blog to understand more about how behaviour can impact risk profile.
Real-time alerts for certain vessel behaviours guide risk mitigation activities throughout the policy term. These alerts can trigger actions such as enhanced cover for a limited period when necessary, or consultation services to help operators correct risky behaviour before it results in a claim. This type of real-time intervention provides opportunities to strengthen client relationships.
Streamlining and automating processes removes unnecessary expense from the insurance supply chain. It helps the market to focus on the expertise of its people in the areas that make a difference to the community it serves. It provides the market with the freedom to innovate at a time when it needs it the most. By using the tools available, a more sustainable future can be built by the market, for the market.
A lack of innovation has led to marine insurance becoming a commodity in recent years. We have an opportunity to re-energize the market, to create market-leading solutions that meet the emerging needs of the marine industry. Those organisations that leverage data and their inhouse expertise to offer operators increased levels of support, mitigate claims, and minimise vessel downtime will likely be rewarded with improved customer loyalty and retention.
Safer maritime industry
Improved safety is the ultimate goal for everyone within the industry. We have the tools to be able to make a fundamental change from simply covering risk to preventing it, but we have to use them. Real-time data provides us with the visibility to correct behaviour before it results in a catastrophic maritime incident. We all have a part to play in making the industry safer and protecting those that serve it.
All about the people
Data and digitalisation is undoubtedly here to stay and will be at the heart of businesses moving forward, but so too will its people. The industry is quickly realising the benefits of automating simple, repetitive processes so that their teams can focus on using their knowledge and expertise to better advise clients. Companies will need to evaluate the skillsets within their existing underwriting teams to ensure they can effectively leverage new digital tools. This could result in the expansion of existing roles whilst employees broaden their skills. However, it could also be an opportunity to recruit and learn from people outside of the insurance market.
In a digital era of insurance, where algorithms will become commonplace, we have an opportunity to share our insights and make our industry safer. Improved safety does not happen overnight, it takes time, and it takes teamwork. One simple intervention to help change risky behaviour could save lives.
Read the full interview with Jonathan Humm and Patrizia Kern in our Beyond Covid: The Marine Insurance Business Resilience Blueprint.
Don’t miss out on this year’s Marine Insurance London online event.