Digitalisation in shipping and logistics
Digital technologies continue to transform industrial processes all over the world. Shipping and logistics are no exception: the benefits in efficiency, security and energy savings will be far-reaching. So will the risks.
With the emergence of big data and increasingly interconnected technologies, a second digital revolution is taking shape. Shipping and logistics are set to benefit from these developments : GPS navigation, real-time weather data feeds as well as smart containers are just some of the technologies redefining the movement of goods. The International Maritime Organization (IMO) supports the implementation of automated electronic data exchange from ship to ship and ship to shore to increase efficiency, safety and security of maritime navigation and communications. In future, ships will inform ports of what goods are in which containers on board long before docking, allowing better planning and faster unloading. Containers equipped with sensors and radio-frequency identification (RFID) transponders will be registered and tracked for optimised transport and distribution. Perishable goods, for example, will be monitored and delivered before spoilage. Telematics systems and databases in freight trucks will help reduce waiting times and bottlenecks in ports, by keeping drivers informed of precisely when and where containers will be unloaded.
I’m convinced that the entire field of traffic and port logistics as well as just-in-time shipping will change. Marine insurers can realise new opportunities with innovative and intelligent solutions.
The internet of things at sea
Ship operation and maintenance are also affected by the technological advances. Based on the concept of the “internet of things”, onboard machinery and equipment can be fitted with sensors and transmitters that report performance and early signs of malfunction via WiFi to the ship’s central computer. Consistently repairing or replacing faulty systems while in the home port can save time and the substantial cost of flying technicians and parts to a ship’s location in transit. In addition, real-time updates on weather systems, wind and ocean currents will enable captains to readjust navigation for lower energy consumption. As in aviation, unmanned operation of ships is altogether feasible. Experts foresee deployment of autonomous feeder vessels, for example, to ferry containers along known routes of limited distance in the near future. While it is unlikely that captains and ship’s engineers will become obsolete, given the complexities and many variables involved in operating a large oceangoing ship, electronic systems can carry out or assist with an increasing number of tasks. Crews are expected to continue to shrink in size.
Interconnected data are attractive for cyberattacks
While real-time data on goods in transit will allow a better overview – where a given package or container is at what time, what goods it contains, its condition, has it been tampered with – yet these large volumes of precise data could also be exposed to cyber attacks and accidental data leakage. Container ships reliant on digital navigation systems could potentially be manipulated to go off course or even run aground. Alongside cyber and property risks, exposures include liability, business interruption and extortion. Whether caused by criminal intent or by accident, a single system failure can have extremely far-reaching consequences in an interconnected digital environment. It will become more important than ever for insurers to dedicate resources to risk management as well as to understand and model accumulation risks. In addition, active loss prevention focusing on digitalisation in marine insurance will take on a greater role. Shipping and logistics companies, software and hardware manufacturers as well as insurers will need to work together to ensure maximum data security.
Who is liable at sea?
Marine liability issues can be expected to become considerably more complex, especially in shipping through different national waters and jurisdictions. Reliance on technology and software also raises questions – who is responsible for a given failure or accident? The prospect of unmanned operation further complicates the matter. Here again, the risks are moving targets and the insurance industry must follow the technological developments and legal decisions closely. Knowledge gathered in other lines of business, specifically cyber risks, can and must be applied in the marine sphere. Munich Re has dedicated teams working on loss prevention in this area, with resources to support primary insurers in developing their products to address digitalisation in shipping and logistics. The coming years will show how big data and digitalization reshape the marine insurance market. It will take close monitoring and innovative initiative to serve the needs of the shipping and logistics industries and realise new business opportunities.