Who remembers getting on planes and actually travelling to meetings? We used to travel a lot at CTX Special Risks and the worst part of the experience was trying to guess the right moment to buy plane tickets.
Whether we booked early or waited for the last minute, we always met somebody who had had more time to work out the airline ticket pricing algorithm and get a much cheaper seat.
Now the insurance industry is a target for disruption as the airlines were 25 years ago. Will the consequence be insurance professionals trying to second-guess insurance algorithms?
Wrong focus
At CTX, we think that a lot of the focus is in the wrong place. Instead, marine insurance should be looking at artificial intelligence (AI) applications on ships.
Insurance companies are making alliances with insurtech start-ups analysing everything from AIS data to the macro claims picture, trying to develop algorithms based on a whole basket of new factors that vary perhaps over a matter of weeks rather than years.
Buying insurance is now getting to be a little like buying airline tickets. It could become more important to work out when to ask for a price than make the fundamental investment in running ships as well as they possibly can be.
But if assureds have fewer and smaller claims, improved records mean that premiums will eventually reduce, so our business model involves us in a lot of pre-casualty loss prevention and post-casualty risk mitigation.
We are always on the lookout for tools to help with this process. Insurers should also be in the space to help themselves and their clients.
Technology has come of age
We think that the case for loss prevention based around AI, hooked up to the internet-of-things (IoT) capabilities of the ship and providing assistance to the master and the chief engineer in real time, has come of age.
This is where insurance companies that want to be the players of the future, working in strong cooperative partnerships with their assureds, should be investing.
At this level, millions of data points on a ship-by-ship basis will allow AI to pick out significant patterns, which will be far more telling and predictive than mining the data in a relatively small number of claims events and reported near misses.
Systems like Orca AI and Alpha Ori Smart Ship system have been demonstrated to safety and loss professionals in the insurance industry. Those with sea time in their CVs universally say they wish they had had these systems in their seafaring days.
But there is a problem. The full potential of these systems will only be realised when the AI systems have untold millions of data points to work with, while the data only becomes available once the systems are rolled out to hundreds of ships.
Who will make the first move?
Somebody needs to make the first move. We want the protection and indemnity clubs and the big hull underwriters to identify key owners and be a third player in the partnership between AI provider and the ship operator.
The extra transparency that the operator will be exposed to can only be a good thing for insurance providers. It seems obvious that operators who want to be partners with underwriters in this way, and to help identify bad practice in the industry, should expect some payback for their efforts.
We are surprised marine insurers have not embraced the IoT approach more quickly in the way the car insurance industry has become involved with car telematics.
Car insurers that have engaged with the data are confident that they price risk more fairly.
In the marine environment, with so much less data, the time for improved claims records to be reflected in insurance premiums is too long to encourage operators to invest in data-based products.
We think that insurance players should make a contribution to help this technology get off the ground, and to start seeing, through partnership arrangements with their key assureds, just how much insight can be gleaned from individual ship data.
Understanding individual operators and their approach to risk is surely the goal of investment in data analysis, so it is much better to work up from data collected on ships than to try to drill down from global claims statistics.
We should all — operators, insurers and intermediaries — be focused on minimising claims not just making sure that premiums are adequate to cover ever increasing risks.
Charlie Hedgcock is executive director of CTX Special Risks, a marine insurance brokerage
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