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  February 1st, 2017 | Written by

Insurance Implications of Autonomous Shipping

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  • Autonomous transportation is already in use by the Chinese navy, scientific researchers, and oil and gas companies.
  • Rolls Royce plans to release an autonomous remote-controlled cargo ship by 2020.
  • On autonomous vessels there is more room for cargo, and the safety of cargo and humans is better managed.

It seems only yesterday that the autonomous car was a thing of science fiction, or at the very least many years off from reality; nonetheless, the driverless car is taking the industry by storm and many auto manufacturers are already working to release their own models—Ford Motor Company intends on introducing fully driverless cars to the public by 2020; and other manufacturers like Mercedes, Volvo and BMW are currently creating their own test vehicles. While insurance companies are now starting to take the emergence of this technology more seriously—carriers are reevaluating the issue of liability, considering new crash types, and determining what effects the technology will have on underwriting, claims, and other core functions—it is only logical that other industries will follow the autonomous trend. Autonomous shipping has now entered the conversation, and is already beginning to make headlines across the insurance industry and shipping industries alike.

Although discussion about autonomous transportation has been a more recent topic of conversation, autonomous shipping is already in use by the Chinese navy, scientific researchers, and oil and gas companies. Now, one of the world’s most advanced users of maritime technology is getting involved: The United States Navy. The Office of Naval Research, for instance, just demonstrated the ability of autonomous unmanned boats to perform collective patrol missions using remote human supervision rather than direct human operation. In addition to this niche-driven technology, it seems that autonomous shipping is headed to greater seas: since this specialized technology is intended to be used for military applications primarily, it leaves the door open for autonomous shipping to be used in the shipping and transportation industries as well.

Rolls-Royce has been a major player in the transportation industry, most notably for cars but also for jet engines and ship engines. For this prestigious company, autonomous shipping is the natural next step—they already plan to release an autonomous remote-controlled cargo ship by 2020. Senior vice president Jay McFadden claims that the ship will “have the capability to integrate autonomously with the rest of the infrastructure – to moor and dock in port, unload and offload cargo.” Quadrant predicts that with this technology the crews of today will diminish and will be replaced by centralized command centers in which a fleet of ships will be controlled much in the way the military controls a fleet of drones far away from US-based command centers.

The benefits of this shipping technology are many: no longer do vessels need the infrastructure to support humans, there is more room for cargo, and the safety of cargo and humans is better managed. But just like with the emergence of the driverless car, autonomous shipping has drawn the attention of the insurance industry.

Insurance and shipping have a long history; in fact, ships is where our insurance world began. Lloyd’s of London was the first witness to insurance through their financial protection contracts for ships and cargo back in the 1600s: “Before a merchant or other financially-interested party would entrust his goods to a sea captain, he wanted to assure that there would be some financial guarantee if the cargo ended up at the bottom of the ocean.”

Due to this long history, it is logical that autonomous shipping will change the landscape of the insurance industry. Although in the past humans have always been a key component of shipping—they made decisions that can make or break an action—automation in shipping removes the variables of human action and makes decisions more accurate, thereby standardizing variables and making insuring much more feasible.

The resultant benefits of this automation are many: the cost of a living crew, the living and working area for humans versus cargo, and the uncertainty of navigation are all reduced, if not eliminated, with these new technologies. Quadrant predicts, however, that although the insurance itself is bound to change and cover different things than before, the rates are not likely to be less. Just as with cars and trucks, the potential financial benefits of autonomous shipping are enormous. As the industry develops, we need to maintain an ongoing understanding of it so as to properly protect the people and companies affected by it, especially as it seems autonomous technology shows no signs of slowing.

Michael Macauley is CEO of Quadrant Information Services, headquartered in Pleasanton, California. For over 25 years, Quadrant Information Services has generated national price comparisons for insurance companies and consumers and in doing so has created a new culture in response to technological growth.