- The Shipowners’ Club is collaborating with automated vessel owners and builders to develop insurance products tailored to address unique needs, reflecting the complexities of the transition to automation.
- Insurers will need to adjust their pricing models to account for the new risk landscape and evolving maritime regulations, which may lead to higher operating costs in the initial stages of automation.
- Structured testing may struggle to simulate rare but plausible crisis scenarios, raising concerns about the adaptability of automated systems during low-probability, high-impact events.
- Automating ships is expected to significantly enhance safety by reducing human error, potentially lowering annual claims by a quarter for leading insurer The Shipowners’ Club.
- While automation could lead to a decrease in risks and claims over time, uncertainties regarding technology risks hinder the precise estimation of premium reductions.
Balancing Promises And Uncertainties
While the automation of ships promises enhanced safety through the reduction of human errors, potential technology failures may constrain the extent of risk mitigation.
On paper, leading protection and indemnity insurer The Shipowners’ Club could eliminate a quarter of the annual claims it fields if club members’ vessels were fully automated. But commercial director Mark Harrington says uncertainties around technology risks prevent putting an exact figure on premium reductions for now.
“We handle approximately 1,400 crew injury and liability claims annually, which accounts for about 25% of all claims,” says Mr Harrington. The figure powerfully makes the case for automation, leading to a net reduction in risks and claims over time but does not factor in ‘known unknowns’ when it comes to calculating the exact cost reductions that can be expected.
Navigating Risks In Automation
“While automation promises safety leaps, it also introduces new technology risks, such as cyber security and technical reliability challenges,” he says. “The transition from human-operated systems to AI-directed automation requires careful regulation and testing to mitigate the potential for severe incidents.”
He cautions that structured testing alone may struggle to simulate scarce but still plausible crisis scenarios – such as fires, collisions, or groundings. The concern is that automated systems could lag human adaptability during such low-probability, high-impact events. Sudden steering failures, freak wave conditions, or unexpected maritime traffic configurations challenge even seasoned captains. So keeping experienced operators involved as fail-safes during the transition may prove prudent.
The Shipowners’ Club’s five-year average incurred claims amount is about US$16M. It is a crude number, but it gives an idea of the theoretical premium savings from eliminating 25% of claims by number. However, removing certain loss exposures does not automatically eliminate expenses for insurers, as fixed overhead remains. The adoption of automation also necessitates IT upgrades, staff training, and bespoke insurance products to address novel liabilities.
Rethinking Pricing Models In The Age Of Automation
“Insurers will need to revamp their pricing models to map the new risk terrain and accommodate evolving maritime regulations,” Mr Harrington says. “Though scale may defray things eventually, higher operating costs appear unavoidable in automation’s initial stages.”
He says The Shipowners’ Club has engaged with automated vessel owners and builders to develop tailored insurance products that address unique needs.
“There is no question automation promises a fundamental positive transformation. At the same time, the transition poses novel complexities for insurers and vessel owners alike.”
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Source: lngprime
