- The use of AI in insurtech has driven personalised pricing, which may be beneficial to some customers but may result in other customers not being able to access insurance.
- AI-generated deeply faked content such as photorealistic images and videos can be used in insurance fraud, raising concerns about authenticity and the security of the insurance industry.
OUR TAKE
AI presents applications and challenges in the insurtech space. Personalised pricing may bring benefits and risks, and there are issues with AI generating deeply falsified content that can be used for insurance fraud. At the same time, while AI can help to analyse large amounts of data and accelerate administrative tasks, there are limitations to relying exclusively on AI for underwriting, and AI is still to be solved in detecting the problems it generates.
-Rae Li, BTW reporter
What happened
Funding for global insurtech companies grows by 40% to $1.27 billion in the Q2, thanks largely to investment in AI-focused businesses. However, the use of AI in insurance poses challenges, particularly in dealing with the risk of “deepfakes” in fraudulent claims and the potential exclusion of potential customers by AI models.
Although insurtech funding has cooled since peaking at $16 billion in 2021, companies still have high hopes for AI to automate tasks and reduce costs. There are also some concerns that AI can lead to a large number of job losses. Gallagher Re, one global reinsurance broker, reports that in Q2, around 33% of insurtech funding goes to AI-focused companies. AI is valuable in insurance pricing and underwriting, but the report mentions that there are limited successes when underwriting is left entirely in the hands of AI.
The report indicates that it can be a mistake to remove human labour altogether, as AI is very useful in analysing large amounts of data and speeding up administrative tasks. AI may find solutions to its own problems, for example in detecting deeply forged content. However, AI-generated deeply forged content can be used in insurance fraud, raising concerns about authenticity and the security of the insurance industry.
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Why it’s important
AI continues to grow in influence in the insurtech space, and there are potential risks. It has the potential to not only significantly change the way the insurance industry operates, but also to create new challenges and ethical issues. For example, AI’s efficiency in processing large amounts of data and automating tasks may improve the operational efficiency of insurers, but it may increase the risk of fraud through the misuse of technologies at the same time. Moreover, AI’s complete automation of the decision-making process can lead to unfair exclusions of certain customer groups, sparking discussions about fairness and inclusivity.
Gallagher Re’s report and analyses provide an insider’s view of the industry to help understand how AI technology is actually being used in insurance and the challenges it faces. Understanding these trends and challenges will help relevant stakeholders better adapt to technological change while taking steps to protect consumer interests and market stability.
