Analysis of the shipping industry's insurance claims record

Abstract

The objective of this project is to study the trend of claims in the marine insurance industry, identify the primary causes for the trend and establish solutions to reduce the level of claims. This report focuses primarily on Hull and Machinery claims. Data is collected from various sources in the industry, and also through interviews conducted with industry professionals. It is observed that the primary factors giving rise to claims are human error, piracy and ship failure. However, it must be highlighted that human error is a contributing cause for around 90% of all marine accidents. Human error in the shipping industry can be broadly classified into four main categories; fatigue, crew shortage, crew competency and communication. Nonetheless, piracy being increasingly rampant in the recent years also calls for attention. The study then goes on to suggest some solutions to minimize the impact of the abovementioned causes. Solutions, such as training, implementing a crew transfer fee mechanism and tighter regulations, to mitigate human error are directed at increasing the competency of seafarers, improving fatigue management onboard and also communications between seafarers. Increasing the utilization of Best Management Practices and anti-piracy technology and international coordination, are some suggestions to curb the escalating piracy activity. Lastly, the answer to prevent ship failure revolves around ensuring quality.