Sea-change: how technology is changing the transportation of goods

For hundreds of years, merchants have transported their wares across land and sea trying to find the delicate balance between getting their goods to their destination as quickly as possible, and in the best condition, in order to be able to command the highest price.

In the mid-19th century, the state of the art way to transport tea, a highly valuable commodity, was by Clipper – a high-speed, narrow sailing ship primarily used on trade routes between the UK and far-flung places.

Such was the demand for tea delivered speedily that shippers could command a premium, payable if their ship were the first to arrive, written into the ship’s bill of lading. In 1866, several of the world’s fastest clippers took part in the Great Tea Race – to bid to be the fastest ship to carry a cargo of tea from China to Britain. A crucial factor was not just the speed of the ship but also the need for rapid loading and a prompt departure.

The 14,000 mile-race, which was keenly followed in the British press, was completed in 99 days with the prize split between two ships.

Things have, of course, moved on since then. The opening of the Suez Canal in 1869 cut hundreds of miles off the journey time from China to Britain and, being more suited to steamships more or less rendered Clippers obsolete.

But the need to transport goods swiftly, safely and in tip-top condition remains to this day. And the insurance market that underwrote the Clippers all those years ago is continually exploring ways to help make the management and transfer of risks associated with transporting cargo more efficient.

In the insurance marine cargo line of business, risk engineering has sometimes been more of an art than a science. Each cargo is different for every journey. Risk engineers need to assess how the goods being transported will react to both external climatic conditions and internal storage conditions, for example.

Technology is helping us, however, to take that art and add some science.

A major development is the use of sensors and the advancements that the interconnectedness of the Internet of Things is bringing. Internet of Things technology is evolving rapidly and we believe that, over time, there will be many more solutions developed specifically to be used in the shipping of cargos around the world.

Today, sensors are being used to track and trace crates of cargo, from the beginning of their journey to the end.

For risk engineering and loss prevention, the real-time data produced by these sensors is hugely valuable and can give risk professionals insights into how to better pack crates to reduce losses, for example.

One example of how we can leverage this technology is our recently announced partnership with a supply-chain data platform start-up, Parsyl Inc.

Parsyl uses a combination of sensing hardware and data-mining to give shippers and their insurers insights into the context and quality conditions of sensitive products as they move through the supply chain.

This data constantly becomes more valuable – with each shipment we learn more. Information gathered by sensors about the way goods react to factors such as light, acceleration, temperature and moisture can help risk engineers to assess risks and underwriters to price and tailor coverage.

We are also learning from this data how to make shipments safer and what are the optimum times and conditions under which goods should be transported. It may also make some cargos a more attractive risk for insurers. For example, underwriters often have been disinclined to insure shipments of frozen goods, because they are so sensitive to changes in temperature. Sensors that can immediately notify of any fluctuation in temperature – and enable that problem to be instantly rectified – could greatly increase the insurability of such shipments and reduce supply-chain disruption.

Another benefit of tracking and tracing goods throughout their voyage is that the data produced on humidity and temperature levels, for example, can prove the quality of the goods – which means that they potentially could command a higher price when they are sold. If the temperature and humidity have fluctuated, this too will be measurable and will enable those goods to be more accurately priced on the secondary markets, for example.

As the use of this type of technology develops, there are potential huge benefits all the way through the insurance process. As well as the upfront risk engineering information, as it takes off, this technology will mean that claims departments will be able to be notified of incidents immediately and the measurement of the quantum of a loss can be carried out more quickly. It also should simplify the subrogation of claims.

It’s a long way from the nostalgic romance of fast-sailing ships, but these are incredibly exciting times for risk engineering teams. The power of the data that can be derived from the use of sensors and from interconnected devices will transform the way marine cargo risk is assessed, managed, priced and transferred.

Pascal Matthey
Senior marine risk engineer at AXA XL, a division of AXA