IUMI 2017 Preview

Technology Takes Center Stage in Tokyo

IUMI’s annual meeting in September will offer a rare glimpse into local markets.
By: | August 30, 2017 • 4 min read
Topics: Marine | Underwriting

The official theme of the International Union of Maritime Insurers (IUMI) annual meeting in Tokyo September 16-21 is “Disruptive Times – Opportunity or Threat for Marine Insurers?” and one key focus will be on technology issues, including cyber threats and Big Data. But the conference will also be an opportunity to see the Japanese market from the inside, a perspective that few international underwriters and brokers have.

Lars Lange, secretary general, IUMI

“In the Tokyo market there are not many foreign insurers,” said Lars Lange, secretary general for IUMI, “but Japanese insurers are very active in the rest of the world. There was a concern after the massive Fukushima earthquake in 2011, everyone expected massive losses. But that is not a problem though; the national market in Japan is fairly balanced. They write and cover it locally.”

In terms of cargo premium, Japan is the second or third largest market in the world, Lange noted. Underwriters seeking to enter the market would do well to consider their core competency. “Is it coverage and claims, is it technology, is it distribution?” Lange asked.

“Insurers have to deal with their own business first, and then extend that to their customers,” he continued. “It is especially the case in marine insurance what clients need from us is risk assessment, loss prevention, and identification of emerging threats. Every company struggles with cyber threats. This is an area where we can do a great service to our clients.”

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There is still a lot of ground to cover, even for the bigger companies, in areas like the Internet of Things and Big Data. There is a lot to be learned,” Lange said. “Once ways of addressing that are put in place, then that can be recognized in the premiums. The more precise your knowledge of risk the better you are able to allocate capacity at the appropriate price.”

Lange related an instance of how technology is changing both the operational realities of the maritime industry, and also the way operators and underwriters are responding to risks.

“I spoke to the chief executive officer of a major classification company, and he told me that one operator acquired a 3D printer and a supply of metal powder to provide spare parts aboard a ship.”

How well that will work in the rigors of shipboard operations, and if it lowers repair costs or boosts efficiency remain to be seen. But Lange sees an inevitable trend. “It is not unlikely that developments like this will only accelerate.”

 “It is especially the case in marine insurance what clients need from us is risk assessment, loss prevention, and identification of emerging threats.” — Lars Lange, secretary general, IUMI

The conference starts with members-only committee meetings on Sunday. They are not open to general attendees, but Lange said he does not expect there to be any major or contentious issues discussed. The first-timers’ reception and welcome reception that evening are open to all.

On Monday morning is the president’s address to the plenary session, a state of the union report to all delegates and the industry. “Dieter Berg will give his view on the industry,” said Lange. Another highlight of Monday morning will be the annual facts and figures presentation with data on growth and claims, along with the macro-economic outlook from the chairman of the Facts & Figures Committee.

Monday afternoon the macro view turns to the future with the cargo workshop. That will focus on the economic outlook for the maritime industry. Topics to be addressed in the workshop include specialized cargo markets, freight-forwarder liability insurance, and smart logistics. There will be a press release with key findings which Lange added, “is always extremely interesting.”

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Tuesday afternoon will include the ocean hull workshop, and separately the legal and liabilities session. A main topic in the latter will be the bankruptcy of the big Korean containership line Hanjin last year, but also consolidation among Asian container-ship lines including operators from Japan, Korea, and China.

“We will get the view directly from the coal face,” said Lange. There are also likely to be discussions about new marine bunker fuel and emissions rules.

Wednesday morning, the loss-prevention workshop “always has good thinking,” said Lange. “It’s a great workshop. There will be discussion of weather risk management, also the Internet of Things and topics like blockchain technology in cargo, cyber, and data analytics.”

Wednesday ends with the “Japan Evening,” and the event closes with a meeting of the new executive committee on Thursday morning.

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Property

Insurers Take to the Skies

This year’s hurricane season sees the use of drones and other aerial intelligence gathering systems as insurers seek to estimate claims costs.
By: | November 1, 2017 • 6 min read

For Southern communities, current recovery efforts in the wake of Hurricane Harvey will recall the painful devastation of 2005, when Katrina and Wilma struck. But those who look skyward will notice one conspicuous difference this time around: drones.

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Much has changed since Katrina and Wilma, both economically and technologically. The insurance industry evolved as well. Drones and other visual intelligence systems (VIS) are set to play an increasing role in loss assessment, claims handling and underwriting.

Farmers Insurance, which announced in August it launched a fleet of drones to enhance weather-related property damage claim assessment, confirmed it deployed its fleet in the aftermath of Harvey.

“The pent-up demand for drones, particularly from a claims-processing standpoint, has been accumulating for almost two years now,” said George Mathew, CEO of Kespry, Farmers’ drone and aerial intelligence platform provider partner.

“The current wind and hail damage season that we are entering is when many of the insurance carriers are switching from proof of concept work to full production rollout.”

 According to Mathew, Farmers’ fleet focused on wind damage in and around Corpus Christi, Texas, at the time of this writing. “Additional work is already underway in the greater Houston area and will expand in the coming weeks and months,” he added.

No doubt other carriers have fleets in the air. AIG, for example, occupied the forefront of VIS since winning its drone operation license in 2015. It deployed drones to inspections sites in the U.S. and abroad, including stadiums, hotels, office buildings, private homes, construction sites and energy plants.

Claims Response

At present, insurers are primarily using VIS for CAT loss assessment. After a catastrophe, access is often prohibited or impossible. Drones allow access for assessing damage over potentially vast areas in a more cost-effective and time-sensitive manner than sending human inspectors with clipboards and cameras.

“Drones improve risk analysis by providing a more efficient alternative to capturing aerial photos from a sky-view. They allow insurers to rapidly assess the scope of damages and provide access that may not otherwise be available,” explained Chris Luck, national practice leader of Advocacy at JLT Specialty USA.

“The pent-up demand for drones, particularly from a claims-processing standpoint, has been accumulating for almost two years now.” — George Mathew, CEO, Kespry

“In our experience, competitive advantage is gained mostly by claims departments and third-party administrators. Having the capability to provide exact measurements and details from photos taken by drones allows insurers to expedite the claim processing time,” he added.

Indeed, as tech becomes more disruptive, insurers will increasingly seek to take advantage of VIS technologies to help them provide faster, more accurate and more efficient insurance solutions.

Duncan Ellis, U.S. property practice leader, Marsh

One way Farmers is differentiating its drone program is by employing its own FAA-licensed drone operators, who are also Farmers-trained claim representatives.

Keith Daly, E.V.P. and chief claims officer for Farmers Insurance, said when launching the program that this sets Farmers apart from most carriers, who typically engage third-party drone pilots to conduct evaluations.

“In the end, it’s all about the experience for the policyholder who has their claim adjudicated in the most expeditious manner possible,” said Mathew.

“The technology should simply work and just melt away into the background. That’s why we don’t just focus on building an industrial-grade drone, but a complete aerial intelligence platform for — in this case — claims management.”

Insurance Applications

Duncan Ellis, U.S. property practice leader at Marsh, believes that, while currently employed primarily to assess catastrophic damage, VIS will increasingly be employed to inspect standard property damage claims.

However, he admitted that at this stage they are better at identifying binary factors such as the area affected by a peril rather than complex assessments, since VIS cannot look inside structures nor assess their structural integrity.

“If a chemical plant suffers an explosion, it might be difficult to say whether the plant is fully or partially out of operation, for example, which would affect a business interruption claim dramatically.

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“But for simpler assessments, such as identifying how many houses or industrial units have been destroyed by a tornado, or how many rental cars in a lot have suffered hail damage from a storm, a VIS drone could do this easily, and the insurer can calculate its estimated losses from there,” he said.

In addition,VIS possess powerful applications for pre-loss risk assessment and underwriting. The high-end drones used by insurers can capture not just visual images, but mapping heat, moisture or 3D topography, among other variables.

This has clear applications in the assessment and completion of claims, but also in potentially mitigating risk before an event happens, and pricing insurance accordingly.

“VIS and drones will play an increasing underwriting support role as they can help underwriters get a better idea of the risk — a picture tells a thousand words and is so much better than a report,” said Ellis.

VIS images allow underwriters to see risks in real time, and to visually spot risk factors that could get overlooked using traditional checks or even mature visual technologies like satellites. For example, VIS could map thermal hotspots that could signal danger or poor maintenance at a chemical plant.

Chris Luck, national practice leader of Advocacy, JLT Specialty USA

“Risk and underwriting are very natural adjacencies, especially when high risk/high value policies are being underwritten,” said Mathew.

“We are in a transformational moment in insurance where claims processing, risk management and underwriting can be reimagined with entirely new sources of data. The drone just happens to be one of most compelling of those sources.”

Ellis added that drones also could be employed to monitor supplies in the marine, agriculture or oil sectors, for example, to ensure shipments, inventories and supply chains are running uninterrupted.

“However, we’re still mainly seeing insurers using VIS drones for loss assessment and estimates, and it’s not even clear how extensively they are using drones for that purpose at this point,” he noted.

“Insurers are experimenting with this technology, but given that some of the laws around drone use are still developing and restrictions are often placed on using drones [after] a CAT event, the extent to which VIS is being used is not made overly public.”

Drone inspections could raise liability risks of their own, particularly if undertaken in busy spaces in which they could cause human injury.

Privacy issues also are a potential stumbling block, so insurers are dipping their toes into the water carefully.

Risk Improvement

There is no doubt, however, that VIS use will increase among insurers.

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“Although our clients do not have tremendous experience utilizing drones, this technology is beneficial in many ways, from providing security monitoring of their perimeter to loss control inspections of areas that would otherwise require more costly inspections using heavy equipment or climbers,” said Luck.

In other words, drones could help insurance buyers spot weaknesses, mitigate risk and ultimately win more favorable coverage from their insurers.

“Some risks will see pricing and coverage improvements because the information and data provided by drones will put underwriters at ease and reduce uncertainty,” said Ellis.

The flip-side, he noted, is that there will be fewer places to hide for companies with poor risk management that may have been benefiting from underwriters not being able to access the full picture.

Either way, drones will increasingly help insurers differentiate good risks from bad. In time, they may also help insurance buyers differentiate between carriers, too. &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]