Transforming Marine Insurance with AI

In today’s rapidly evolving insurance landscape, artificial intelligence (AI) has emerged as a powerful tool for streamlining processes and enhancing underwriting accuracy. The Marine Insurance sector, with its complex and global nature, is uniquely positioned to benefit from AI. By leveraging AI-driven solutions, marine insurers can optimize the underwriting process from the initial submission to binding policies more efficiently and with greater precision. In this article, we explore how AI is transforming Marine Insurance and walk through a comprehensive example of the underwriting process, from submission to bind.

What is Marine Insurance?

Marine Insurance provides coverage for losses or damages associated with the transportation of goods, vessels, and other assets over water and land. The coverage is divided into two main categories:

1. Ocean Marine Insurance: Covers risks involved in shipping goods over oceans, including Cargo Insurance, Hull Insurance, Protection & Indemnity (P&I) Insurance, War Risk Insurance, and more.
2. Inland Marine Insurance: Covers risks associated with the transportation of goods over land, such as via trucks or rail, and provides coverage for other movable or specialized property.

AI in Marine Insurance: An Overview

Artificial Intelligence in Marine Insurance plays a critical role in automating data collection, risk assessment, claims analysis, and even in improving customer interactions. AI solutions help underwriters analyze large datasets, evaluate complex risks, and make informed decisions more quickly. This automation not only accelerates the underwriting process but also enhances the accuracy and efficiency of premium pricing and policy terms.

End-to-End Example: Submission to Bind with AI Integration

To better understand how AI transforms the Marine Insurance process, let’s consider a detailed example of insuring a shipping company’s cargo vessels. We will walk through each stage, from submission to binding, highlighting the role of AI at every step.

Step 1: Submission

A broker submits a Marine Insurance application on behalf of a client, a global shipping company named OceanLink Inc., which owns a fleet of container vessels. The submission includes detailed information about the client’s operations, the types of cargo transported, routes taken, and historical loss data.

Information Requested from the Broker:

1. Company Details: Name, years in business, fleet size, and experience.
2. Vessel Information: Age, type, tonnage, flag state, and classification society.
3. Cargo Details: Types of goods transported, volume, and shipping routes (e.g., high-risk piracy areas).
4. Operational Details: Frequency of shipments, ports visited, and safety measures in place.
5. Claims History: Past losses, causes of claims, and preventive measures adopted.

AI Integration:

• Data Extraction & Analysis: AI tools extract and analyze data from the submission documents and external sources (such as shipping databases) to validate vessel details and assess risks associated with the shipping routes.
• Risk Scoring: AI algorithms assign risk scores based on factors like vessel age, routes through high-risk areas, and historical claims data. These scores help underwriters prioritize and evaluate submissions efficiently.

Step 2: Risk Assessment and Quoting

Once the submission is processed, the underwriter uses AI to evaluate the risk and determine the appropriate premium. AI tools analyze a vast amount of historical data, weather patterns, geopolitical risks, and real-time data feeds to offer a more precise risk assessment.

Details on the Premium, Aggregate and Sub-limits, Retention:

• Premium: Based on the risk analysis, AI models suggest a base premium for OceanLink Inc. The premium may be adjusted based on factors such as cargo type (perishable vs. non-perishable), vessel conditions, and routes.
• Aggregate and Sub-limits:
• Aggregate Limit: $100 million per policy year, covering the total amount payable for all claims combined.
• Sub-limit for War Risk: $20 million, covering losses due to acts of war or piracy.
• Sub-limit for Natural Disasters: $10 million, specifically for weather-related damages.
• Retention (Deductible): $1 million per claim, ensuring that the insured retains some portion of the risk.

AI Integration:

• Predictive Modeling: AI-powered predictive models help underwriters analyze the likelihood of various risks, such as piracy in high-risk zones or weather-related incidents, adjusting the premium and limits accordingly.
• Dynamic Pricing: AI enables dynamic pricing, adjusting quotes in real time based on market conditions and updated risk factors.

Step 3: Endorsements and Policy Terms

The underwriter, assisted by AI, finalizes the policy terms and endorsements. Endorsements are specific clauses added to the policy to modify or extend coverage.

List of Endorsements:

1. Institute Cargo Clauses: Standard coverage clauses for the transportation of cargo.
2. War Risk Endorsement: Extends coverage to include war and piracy risks.
3. Strike and Civil Commotion Endorsement: Covers losses due to strikes or civil unrest.
4. Natural Disaster Endorsement: Provides additional protection against extreme weather events.
5. Equipment Breakdown Endorsement: Covers damages to equipment and machinery aboard the vessels.

AI Integration:

• Endorsement Recommendations: AI systems analyze the insured’s profile and suggest relevant endorsements based on common risks associated with their operations.
• Compliance Checks: AI performs automated checks to ensure that all policy terms comply with local and international maritime insurance regulations.

Step 4: Subjectivities and Final Approval

Subjectivities are conditions that must be met before the policy is officially bound. In this case, OceanLink Inc. may need to provide additional documentation or meet certain safety requirements.

Common Subjectivities:

1. Verification of Vessel Inspections: Proof of regular vessel inspections and maintenance.
2. Implementation of Anti-Piracy Measures: Evidence of anti-piracy protocols for voyages through high-risk areas.
3. Updated Safety Training Records: Confirmation that crew members have undergone safety and emergency response training.

AI Integration:

• Automated Reminders: AI sends automated reminders to the broker and client to provide the necessary documentation.
• Document Verification: AI tools verify the authenticity and completeness of the submitted documents, flagging any missing or non-compliant information.

Step 5: Binding the Policy

Once all subjectivities are satisfied and the underwriter approves the policy, the coverage is bound. The AI system automatically generates and sends the policy documents to the broker and client.

AI Integration:

• Policy Issuance: AI automates the generation and distribution of policy documents, reducing administrative time and errors.
• Data Storage: All documents and risk assessments are securely stored in a data management system for easy access and future reference.

Conclusion

AI is revolutionizing the Marine Insurance industry by enhancing the efficiency and accuracy of underwriting processes. From data extraction and risk assessment to dynamic pricing and automated compliance checks, AI enables marine insurers to deliver faster and more accurate coverage. As the industry continues to evolve, the integration of AI will be crucial in navigating the complexities of global trade and maritime risks.

This example demonstrates how AI can streamline the journey from submission to binding, making Marine Insurance a more agile and data-driven industry.