Filed Under:Markets, Commercial Lines

Is the insurance industry ready for self-driving boats?

Autonomous cargo ships are on the horizon, following the lead of self-driving cars and drones. What will be the effect on marine insurance and underwriting risk? (Photo: iStock)
Autonomous cargo ships are on the horizon, following the lead of self-driving cars and drones. What will be the effect on marine insurance and underwriting risk? (Photo: iStock)

The calendar says that it’s spring, and in many parts of the United States, that means getting ready for pleasure boating season.

Most pleasure boat owners prefer to pilot the vessel themselves, charting their own course on open waters. But, like autonomous cars, self-driving boats have moved past the drawing board into the test phase. For example, the U.S. Navy’s Office of Naval Research recently demonstrated autonomous unmanned boats, guided by software, radar and other sensors with remote human supervision.

For the global shipping industry, autonomous vessels have the potential to provide significant cost savings by using drone ships that can navigate themselves. Some shipping industry experts project that reducing the crew could eliminate up to 50 percent of the total cost of operating a container ship while also eliminating much of the on-board infrastructure needed to support the crew, resulting in 12 to 15 percent savings in fuel costs.

To get a better understanding of autonomous boats and the insurance issues they raise, PC360 interviewed Michael Macauley, CEO of technology supplier Quadrant Information Services (pictured below, right). According to Macauley, despite the potential financial benefits, Property & Casualty insurers will need to adjust course as self-guided watercraft become a reality. Insurers are already struggling with the implications of self-driving cars and trucks in terms of safety and reliability — and autonomous boats will come to pass more quickly than expected,” he said. “The insurance industry needs to start preparing for it now.”

Macauley pointed out that, until recently, the idea of a driverless car was regarded as science fiction. Now, it’s predicted that 10 million self-driving cars will be on the road by 2020. He expects autonomous boating will follow suit, observing that, Rolls Royce has been working on the technology since 2013.

Although insurers won’t decide when, where and how autonomous boats will hit the water, Macauley said, they can help make the transition safer by implementing innovative technology that evaluates the risks posed by different operators in different kinds of boats in different waters and in different weather.

Insurance began with ships


PC360:
How will autonomous boats change the landscape of the insurance industry?

Macauley: Boats are where our insurance world began. But humans have always been a key component. They proved decisions that can make or break an action. Automation improvements have made piloting a ship, driving a car or owning a home a better decision every year. But, removing the variables of human decision-making and evolving to automation makes decisions more accurate. Effectively, standardizing variables makes underwriting risk more feasible.

PC360: Do you have a prediction for when autonomous boats will become a mainstream reality?

Macauley: Autonomous boating, trucks and cars are here. It’s only a matter of time until self-driving vehicles become mainstream, but Quadrant believes they will be mainstream within the next 20 years.

PC360: Will the technology allow better insurance rates?

Macauley: Insurance will be different and cover different risks. The rates, however, aren’t likely to be lower in the initial phases of rolling out the technology.

Potential benefits


PC360:
What are the potential benefits of autonomous boating? Michael Macauley Quadrant

Macauley: The potential benefits include:

  • The cost of a human crew, which factors in salary, benefits and food while the vessel is underway, and
  • A reduced living and working area for the crew, which allows more room for cargo.

These costs are reduced, if not eliminated, with the new technologies.

PC360: Why do you think car manufacturers, such as Rolls Royce, are getting into the boating industry?

Macauley: Rolls Royce has been a major player in designing and manufacturing engines from aircraft to cars to ships, beginning in 1884, and autonomous ships are a natural next step.

PC360: Do you see autonomous boats one day being used by the general public for leisure? 

Macauley: Although the technology will make this available, the battle with autonomy and leisure boating is that leisure boaters want command of the boat. It’s similar to many drivers who want to maintain control of their cars.

PC360: What jobs could this technology make extinct? Could this technology open any new jobs?

Macauley: The crews of today will shrink and be replaced by centralized command centers in which a fleet of ships will be controlled much in the same way the military controls a fleet of drones far away from U.S.-based command centers.

Related: Our autononous future: Lessons from the Hoboken and Tesla crashes

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