This March, The Fintech Times has turned Its focus towards insurtech, shedding light on the innovative advancements and sustainable initiatives within the insurance sector.

Today, we explore the role of artificial intelligence in insurance and the delicate balance between leveraging technology and preserving human expertise.

Is the insurance sector risking over-reliance on artificial intelligence, and what’s the balance between innovation and human expertise?

In part two of our spotlight on AI, let’s hear more from our community… (part one here).

Allianz Partners

Simon Powell, head of travel claims at Allianz Partners, one of the UK’s largest travel insurers, addresses the integration of AI alongside experienced colleagues to streamline travel claims processing.

“We very much see AI and people working alongside each other: we are already using AI alongside experienced colleagues to speed travel claims for clients. We use AI to pick up some routine administration and to straight through process straightforward claims frees up staff to focus on more complex and involved claims – for example medical repatriations – that need their skilled and experienced management.

“Allianz Partners has got two AI bots working on travel claims. The first of these, Edith, can handle claims submitted through our own portal which often white labelled in partners’ apps. For simple claims, such as flight delays, which meet our criteria Edith will check the claim against then policy rules and can move directly to settlement, giving us genuine straight through processing capability.

“Florence, the second bot picks up some of the routine administration that can slow down claims – for example it automatically chases customers to provide documents that they’ve promised to get to us. The quicker we get them, the faster we can settle the claim.

“Right now Allianz is using AI to help improve its claims customer service. However, we do see future roles for the technology across the entire customer journey, which includes being able to deliver personalisation at scale.”

Publicis Sapient

Daniel Cole, senior managing director, financial services and insurance at digital transformation company Publicis Sapient, highlights the significant opportunities AI presents for the insurance industry.

“AI presents much opportunity for the insurance industry from enabling greater robustness of customer engagement, giving customer operations ”super-powers’ in the background while unlocking efficiency at the same time. However, the risks for AI are real and have been well reported on a cross-industry basis.

“We need to remember that the adoption pace by the large insurers is still slow, steady and narrow – typically around pricing analytics and machine learning orientated operations. Many insurers are still grappling with their data – the very cornerstone of getting AI to work well.

“But the sooner that insurers start establishing robust guard rails, governance and processes, the sooner they can start realising the true value of AI.”

Mphasis

The insurance sector has currently reached the crossroads of advancing with the power of AI and rethinking the concerns about over-reliance, according to Vijay Mahendrakar, head of insurance business solution, Europe at information technology services and consulting company Mphasis.

“AI has been a game changer and excelled in analysing vast data sets, enabling accurate risk assessments, fraud detection, and streamlined claims processing. For instance, it has the potential to offer personalised coverage and pricing tailored to customers’ needs. However, there are concerns about potential biases in algorithms, diverse and dynamic nature of threats and lack of transparency in decision-making.

“Hence striking the right balance between automation and human expertise is crucial to enhance efficiency without compromising risks due to automated decisions. Human intervention and expertise are crucial in areas like complex risk analysis, ethical considerations, and building trust with customers. AI is augmenting human capabilities rather than replacing them.

“So, insurers are looking at a collaborative approach in dealing with AI now. This is done through transparency at every stage and preventing some tasks from being fully automated by keeping humans in the loop as it is important until the technology fully matures.”

Protegrity

“The potential of AI and the ambitions of AI advocates continues to grow, the insurance sector finds itself at an important juncture,” says Alasdair Anderson, vice president at data protection company Protegrity.

“Yes, artificial intelligence brings dazzling efficiency and precision to our fingertips, but it also whispers the question of over-reliance. My perspective? It’s crucial we don’t lose sight of the human element that’s always been the backbone of insurance.

“AI is a tool, not a silver bullet. It offers a way to analyse data at a speed and scale never seen unearthing insights that might otherwise remain buried. However, the essence of insurance goes beyond algorithms and data points; it’s about understanding life’s complexities and offering a safety net that’s as much about empathy as it is about economics and data.

“The real magic happens when we blend AI’s analytical prowess with the nuanced judgement and emotional intelligence that only humans can provide. This balance ensures that while we embrace the innovations AI brings to our sector, we also preserve the irreplaceable human connection that builds trust and loyalty with our clients which also goes hand in hand with keeping their data secure.

“Embracing AI shouldn’t mean sidelining the human touch. Instead, it’s about forging a future where technology reinforces our human strengths, ensuring the insurance industry remains both innovative and inherently human. However, in doing this it is critically important that customer data remains secure and only relevant data is shared across AI platforms.”

SS&C Blue Prism

Despite the uptake of AI within insurance firms, no insurers are relying on AI to make decisions, suggests Rob Paisley, industry director for financial services and insurance at SS&C Blue Prism, a specialist in digitising operations across financial services, insurance, health and pharma, and banking.

“AI is only useful when it works in tandem with human intelligence. In the insurance industry, AI helps  underwriters identify risks and threat vectors, helping them to work more efficiently. AI’s revolutionary ability to help humans identify hidden patterns, signals and opportunities is an industry game changer.

“It has the potential to create new niche insurance businesses with unique coverage parameters. However, these models need constant retraining to remain accurate. Humans need to identify obvious errors and inconsistencies that help improve model performance. That feedback loop is also essential to maintain model health and prevent bias.

“By delegating certain tasks to intelligent automation, workers can optimise their time, prioritising business expansion. A human-centric approach to governance, including mandatory awareness, transparency, and policy enforcement, is essential to strike the right balance.

“Achieving a balance between AI and human expertise will be pivotal for insurance enterprises to fully capitalise on the advantages of AI while navigating its limitations. Only a joint effort can propel insurance companies into the future. Without this, companies risk over-using AI and not drawing on the creative benefits of having human intervention alongside AI-led innovations.

“To summarise the true impact of AI on the insurance industry, I would reframe it as augmented intelligence. These tools are designed to improve human performance rather than replace it.”

SAS UK & Ireland

Over recent years, we’ve seen more insurers turn to AI to provide the best, personalised experience for their customers, while also helping facilitate innovative risk solutions, outlines Andrew Pollard, insurance specialist at analytics specialist SAS UK & Ireland.

“While there aren’t any tangible indications to suggest the insurance industry is relying too much on AI, like everything, there must be a balance to ensure the right safeguards are in place for AI to work effectively and complement human efforts.

“For one, it’s vital that AI models are transparent so that decision-making can easily be explained to regulators or customers. New research has emphasised this priority for insurers, with many now turning to their AI software vendors for guidance.

“To avoid the consequences of over-reliance on new technologies, insurers will also want to make sure they account for common pitfalls like bias. If AI or machine learning is applied to data that is inaccurate, it has the potential to magnify the errors and cause unintended bias in results – which is why human intervention is still vital at various points of AI implementation and beyond.

“The right AI modelling can help reduce bias, alongside significantly speeding up the process through automation. Ultimately, it’s all about finding a happy equilibrium between AI innovation and human expertise – with AI providing the leg work and human oversight ensuring the technology is utilised to the best of its ability.”

One Inc

Ian Drysdale, CEO of One Inc, a digital payments network for the US insurance industry, acknowledges the significant advantages AI offers to insurers in enhancing operations and customer support, but highlights concerns around biases and privacy risks,

“The insurance industry, traditionally slow to adopt new technologies, faces a shifting landscape with the emergence of innovative startups and established giants venturing into the sector. This prompts traditional insurers to catch up or risk being left behind.

“The rise of artificial intelligence offers significant advantages to insurers, including smoother operations, better risk evaluation, and improved customer support. Predictive and prescriptive analytics are particularly valuable, enhancing underwriting capabilities and managing loss ratios effectively. These technologies can predict the likelihood of water loss and recommend where to place sensors. In the event of a car accident, they not only estimate the loss but also can outline necessary repairs and recommend an auto shop.

“However, social concerns and risks hinder widespread adoption, with some fearing that dependence on AI algorithms may exacerbate biases, compromise privacy, and erode human judgment.

“Despite these challenges, finding a balance between AI and human expertise is achievable. While AI and automation streamline processes and enhance efficiency, human judgment offers intuition, empathy, and nuanced understanding.

“Integrating AI and human expertise improves accuracy in underwriting and claims processing while maintaining customer trust. This symbiotic relationship enables insurers to adapt to market changes while providing personalized service. Embracing innovation while honoring human insight is pivotal for the insurance sector’s success in the digital era.”

This March, The Fintech Times has turned ts focus towards insurtech, shedding light on the innovative advancements and sustainable initiatives within the insurance sector.

Today, we explore the role of artificial intelligence in insurance and the delicate balance between leveraging technology and preserving human expertise.

Is the insurance sector risking over-reliance on artificial intelligence, and what’s the balance between innovation and human expertise?

In part one of our spotlight on AI, let’s hear what our community says… (part two here).

LexisNexis Risk Solutions

Artificial intelligence is already becoming a key area of competition, having a direct impact on the speed of deployment, efficiency, improved customer experience, targeted pricing and customisation,” says John Beal, senior vice president, data science, LexisNexis Risk Solutions. “However, it is not a panacea for all our data problems.”

He continues: “For insurance providers, machine learning cannot effectively manage, cleanse, analyse and deploy data without input from a highly experienced data scientist.

“Algorithms are incredibly helpful and intelligent but without manual intervention by a data scientist, algorithms are not able to accurately structure data or use them for the correct business acumen, especially within Insurance while keeping in mind the relevant regulatory requirements as they model to a loss curve. Understanding the problems, how a solution will work, and how it should be implemented still requires human expertise.

“With human involvement playing such a fundamental role in data and analytics for insurance, ‘applied intelligence’ or ‘machine augmented intelligence’ are better descriptions rather than full artificial intelligence. This is the application of automation within the insurance workflow, alongside the essential human intelligence and business acumen, rather than a fully machine run operational process.

“LexisNexis Risk Solutions has been undertaking data science in this way for more than four decades. While today AI is increasingly helping within the insurance analytics process it is best utilised by a team of expert data scientists who understand the fundamentals of insurance.”

INSTANDA

Kevin Gaut, chief technology officer at no-code insurtech platform INSTANDA, suggests that while artificial intelligence is increasingly ingrained in activities, the idea of replacing humans with machines, especially in fields like insurance, would be too hasty.

‘’AI has seamlessly integrated into our lives, yet the notion of replacing humans with machines, especially in insurance, remains premature. AI, exemplified by Siri or Alexa, operates on predefined rules, executing tasks deterministically.

“In contrast, generative AI, like ChatGPT, uses learning techniques, continuously refining decision-making processes based on available data. These approaches embody different capabilities and characteristics. While ChatGPT has significantly advanced in the last 18 months, the extensive groundwork in machine learning preceding these advancements must be acknowledged.

“Although fears of job displacement are legitimate – Goldman Sachs predicts 300 million jobs worldwide could be affected – the technology is still in its infancy. In the short to medium term, AI’s role should be viewed as a support system, enhancing user capabilities rather than supplanting them. Comparable to a colleague offering assistance, AI provides tools that users can leverage as needed.

“Take underwriting. By streamlining the underwriting process, underwriters can do what they do best – harnessing more data, but quicker and more efficiently. By using a rich vein of data to make better, more informed decisions, AI does not remove human expertise, but saves time and frees underwriters to be even more productive.

“Essentially, AI doesn’t replace human expertise but rather enhances efficiency, allowing individuals to focus on skill development. Looking forward, AI’s trajectory promises continued evolution, presenting opportunities for collaboration and long-term skill refinement.’’

Financial Technology Research Centre (FTRC)

Fintech consultancy, the Financial Technology Research Centre is hosting an AI in Financial Advice event this summer. Its founder Ian McKenna says there’s no doubt that AI can offer substantial benefits to the insurance sector.

“While much of the sector is only just becoming acquainted with the potential benefits of AI, human expertise is crucial on several levels. AI providers themselves need to have a very clear and specific use case for the insurance sector to ensure the most effective and valuable outcomes for both the sector and the end consumers.

“Second, insurance providers need to conduct extensive due diligence to ensure that there is a complete understanding of the outcomes generated by using an AI service. This is particularly fundamental following the introduction of Consumer Duty.

“For example, there are cases where it would be unwise to use generative AI due to the risks of hallucinations while predictive AI may be more reliable and auditable. All these nuances therefore need to be assessed on a case-by-case basis with human expertise.”

Venteur

It would be a mistake to suggest the insurance sector is over-reliant on artificial intelligence, according to Stacy Edgar, licensed insurance broker and the CEO and founder of health startup Venteur.

“We’re in the early stages of the technology, and while there’s excitement around the tech, the insurance industry is the most risk-averse industry out there. There are valid concerns around data privacy and potential data biases, but these can be overcome if you approach implementation thoughtful.

“In particular, transparency is key. At Venteur, we have publicly share how we trained our AI, where we got the data, and how data is used. This not only helps to meet regulation concerns, but also helps build trust in our AI technology with our clients.”

Carpe Data

Geoff Andrews, chief operating officer at Carpe Data, which provides next generation predictive scoring and data products to life insurance companies, says the insurance sector is not currently in danger of over-relying on artificial intelligence, as most insurers are still figuring out how and in what areas to apply it.

“Insurance has always had to adapt to changing market conditions and human behaviour, but rarely has it adapted fast. Today the best use cases for advanced generative AI models in insurance are focused on efficiency and accuracy.

“With the looming talent gap presented by an aging workforce, insurers must use AI to maximise the efficiency of time-consuming manual tasks, reduce overall costs (time and resources), and empower human expertise rather than replace it.

“Some examples: AI can automate rating and quoting processes in underwriting so insurers can be more intentional about refining their risk appetite and selection while providing a superior customer experience. And, AI can simplify passthrough toll gates for smaller claims, as well as monitor open claims at scale to flag potentially fraudulent activity.

“Done right, AI will enhance ‘human-in-the-loop’ processes but never entirely replace them. People should be the brain and AI the engine, automating repetitive tasks and organising data-driven insights so people can make more confident decisions with better context while exhibiting the knowledge and compassion integral to insurance.”

Homeprotect

“If anyone’s worried that AI is coming to take our jobs, I think it’s worth looking back at the history of technology in the industry,” says Dan Huddart, chief technology officer at specialist home insurer, Homeprotect. “Just like all technology evolutions, advances in AI will fundamentally change the jobs that we do to meet what customers need and expect from us.

“Insurance changed forever when computers landed on desks. It changed again when the internet linked them all together. Each evolution in statistical modelling has driven a bow wave through the way we calculate prices, analyse risks and design products. Large language models give us new tools and ways to work with text and speech at speeds and granularity that were unthinkable until recently. Advances in image and video technology will drive similar shifts in how we analyse and interact with real world risks and claims.

“Human expertise has been critical through every technology change. For example, the role of an underwriter has the same purpose after each tech revolution, but the tools and productivity per person look very different.

“What AI takes away in single-person productivity, it replaces with new opportunities and new roles. We now gather more data, in new ways, than ever before. Customer expectations go up over time. Risks evolve, and new products need to meet new customer demands. Human expertise is essential in adapting to these new opportunities and we rely on technology including all forms of AI to give us the productivity boost to tackle them.”

Sprout.AI

Roi Amir is the CEO of insurtech Sprout.ai, where he is driving Sprout.ai’s mission to work in partnership with insurance companies, building AI and data-led products. He suggests that although it may sometimes feel AI hype is everywhere, it is only pockets of the insurance industry that are adopting AI.

“Incumbents, for example, have still been slow to catch on to the opportunity that technology presents. Key hotspots include marketing, fraud detection, customer service, and claims management and automation. These processes have all existed without AI for many years, but AI can drastically improve the efficiency levels, leading to a knock-on effect across the wider industry.

“Claims AI technology can reduce the time for a claim to be processed from weeks or months, to near real-time, and at a 97 per cent accuracy rate. That being said, some of our research shows that both insurers and customers believe that we shouldn’t totally hand over complete control to AI. By automating the mundane, while maintaining other important elements of the traditional insurance model, we can avoid over reliance. AI should be there to enhance, not replace roles.

Humans are crucial

“There’s been a broad misunderstanding of AI in the insurance industry up until now – that the purpose of AI is to replace claim handlers all together. But the human element is as crucial now as it’s ever been. Our research found that nearly 30 per cent of insurance customers are concerned about losing human interaction where AI is used, and a further 43 per cent lack trust in AI’s decision-making.

“However, different people look for different things in their insurance claims process. In some circumstances, such as a claim on a vet bill, people prefer the journey to be fully automated due to the speed at which AI can solve these cases. Although, people still value human expertise and communication when it comes to more complex scenarios, such as complex medical claims, for which it’s important that the option of that support is reserved. It’s horses for courses, but one should not come without the other.

“Rather than replacing claim handlers, the use of this technology frees up crucial time in the claims process, so that insurance professionals can provide better and a more personal customer experience. With AI innovation, claims handlers will be able to handle more complex claims and spend more contact time with their customers.”

Medallia

“The insurance sector’s seeming reliance on AI isn’t risky, it’s savvy,” says William Perry, VP UK&I and MEA at management software company Medallia. “Initially fuelled by a need to manage the rising proliferation of data, it has resulted in industry-wide innovation – enhancing the entire customer journey from initial policy purchase, right through to underwriting and making a claim. Such is its perceived value, that Allianz believes it could add $1.1trillion to the insurance market annually.

“AI is arguably just helping the insurance sector to keep pace with the scale of innovation it has to respond to. Indeed, from the rise in autonomous cars with self-driving capabilities, to the continued prevalence of connected devices, insurers need to use tools like AI to connect, use and analyse the data generated – or risk being left behind.

“As with all successful implementations though, technology must be coupled with the requisite human expertise if it is to reach its potential. Securing buy-in from the C-Suite to invest in engaging the right people to mould the strategies to harness the full power of AI, will be essential over the coming months and years.”

Stellarman

Will Larcombe co-founded technology and change delivery consultancy Stellarmann in 2020, with his business partner Alex Colwell. He thinks investing in AI is a must.

“The greatest risk to the insurance sector is surely not investing in AI, he says. “Businesses cannot afford not to, if they are to meet customer expectations, drive time and costs saving efficiencies, gain competitive edge, and detect fraudsters – who are themselves a step ahead with GenAI.

“There are literally hundreds of potential applications for AI in insurance though, so businesses must prioritise by identifying the solutions that make most sense for their specific operations, customer base and architectural framework.

“Highly specialist human expertise is essential to successfully manage the introduction of AI and businesses will need to bring in expertise in the following areas:

• Understanding the businesses areas where AI will bring most value
• Implementing the technology
• Maintaining up to date, relevant, clean data – as AI is data dependent
• Negotiating changing regulations
• Ensuring all stakeholders know what and why things are changing

“The talent pool in this emerging area is still small and relatively undefined. As such, finding and and retaining these new skills and experience is the first step towards successful AI adoption and so competition for human expertise will be high. To attract the best and get the most from AI implementations, organisations will need to show they are serious about investing in AI.”

Okoora, the automated business currency management solution provider, has launched an App Marketplace for its Automated Business Currency Management (ABCM) platform; aiming to provide businesses with a secure and user-friendly environment to buy additional services that enhance the core functionality of the ABCM cloud-based platform for managing currency operations.

The new Okoora app marketplace reflects a broader trend toward the democratisation of financial services. Open banking and regulatory changes have weakened the hold major banks have had on the provisioning of what were traditionally viewed as banking services.

Okoora, a Swiss-Israeli fintech startup, has been focusing on improving the experience small and medium-sized businesses have in managing their currency operations and giving them greater control through its ABCM platform. The newly launched app marketplace is available to any Okoora customer regardless of whether they are on a free plan or have a paid subscription to the ABCM platform.

Benjamin Avraham, CEO and founder of Okoora, commented: “The app marketplace represents the next step towards Okoora’s mission of democratising financial services and empowering businesses to fine-tune their currency management experience.

“As we break away from the limitations of traditional banking, our goal is to enhance the control and efficiency that small and medium-sized enterprises have in managing their currency operations.”

Currently, several apps are available on the Okoora app marketplace. These include Free Outgoing Payments, where companies can reduce costs by sending free, regular payments; an FX Expert Package, which provides a team of experts who will walk the company through the complexities of FX management; and an FX Hedging Policy, which enables users to build a custom FX hedging policy that serves their strategic objectives and business needs.

Okoora, established in 2021 by Avraham, the founder of Ofakim Group, an Israel-based financial risk management firm, currently boasts a committed team of 100 professionals across Israel, Switzerland, Germany, and India. With sights set on further European expansion, Okoora is gearing up to expand its workforce, aiming to bolster its operational capacity and provide outstanding service to its growing clientele.

A new year means new year’s resolutions. Although some people may look to better their health at the gym or choose to read more in 2024, research from Loqbox, the financial wellbeing business, has found that 84 per cent of its members are looking to establish new financial goals this year, as financial health becomes a bigger priority.  

A 2022 study from the UK’s Financial Conduct Authority (FCA) reported that 24 per cent of adults surveyed expressed low confidence in handling their money. Additionally, 38 per cent admitted to having low knowledge and awareness of financial matters. Meanwhile, an ONS study revealed that 42 per cent of adults expect not to save any money in the next 12 months.

However, a stark contrast emerges when comparing Loqbox members’ optimistic savings goals and overall financial wellbeing. It found that 83 per cent of members are looking to set savings goals for the upcoming year, and 53 per cent of respondents declared an improvement in their financial wellbeing since joining Loqbox.

Tom Eyre, co-founder and co-CEO of Loqbox, comments: “As we embark on a new year, the insights gathered from our recent survey paint a compelling picture of the financial aspirations and resilience of our members in 2024. Financial goals are being listed as a key part of many people’s New Year’s resolutions, and this dedication speaks volumes about the drive of UK individuals toward achieving financial stability.”

Tech can provide a helping hand to improve financial situations

Growing Loqbox usage aligns with a broader trend emerging among Brits relying on modern finance tools to improve their financial situations. Data from a PwC study reveals that the UK’s usage of personal finance apps surged by 71 per cent between 2017 and 2022, with people using budgeting apps as tools to track expenses, set budgets, and improve financial habits.

Eyre added: “Our commitment at Loqbox is evident in the transformative impact on our members’ financial lives. While a significant percentage of UK adults express low confidence and knowledge in financial matters, our members showcase a remarkable contrast. Loqbox members are not only setting optimistic savings goals but actively improving their overall financial health. We’re proud to be at the forefront of this positive shift, helping our members take charge of their financial futures.”

Loqbox found that 75 per cent of respondents outline specific goals for improving their credit scores in the next year, showcasing a proactive stance toward overall financial health.

Users aren’t getting carried away this time of year either. Despite a majority refraining from setting a budget during the Christmas holidays in 2023, 63 per cent of members admit to cutting back in other areas to accommodate festive spending. This awareness has caused a setback in spending in areas such as dining out (64 per cent), shopping (50 per cent), social events (46 per cent), and recreation (31 per cent).

Sam Bankman-Fried (SBF), the founder of cryptocurrency exchange FTX, claims that spending clients’ fiat deposits was just part of “risk management” for his intertwined crypto hedge fund Alameda Research.

During the former crypto executive’s court testimony on October 31, prosecutor Danielle Sassoon of the Southern District of New York asked SBF if he believed that it was permissible to spend $8 billion of FTX customers’ fiat money. “I thought it was folded into risk management,” he said. “As CEO of Alameda, I was concerned with their portfolio. At FTX, I was paying attention but not as much as I should have been.”

As told by SBF, during his tenure as both CEO of FTX and Alameda, no individuals were fired for allegedly siphoning $8 billion worth of clients’ money for speculative trading. “I don’t remember knowing anything about particular employees,” replied SBF to a question by Sassoon.

Bankman-Fried also disclosed during the proceedings that the now-defunct exchange, which was headquartered in the Bahamas, had close ties with the island country’s government. “You gave the Bahamas Prime Minister floor side seats at the Miami Heat Arena,” asked Sassoon. “I don’t remember that,” replied SBF. “Here’s a message where you say he is in FTX’s courtside seats with his wife,” said Sassoon.

Allegedly, SBF talked with the Bahamian prime minister, Philip Davis, about paying off his nation’s debt. Although the crypto executive denies it, he admits to helping Davis’ son secure a job. 

Related: Sam Bankman-Fried trial [Day 15] — latest update: Live coverage

Just before the exchange collapsed last November, FTX announced that Bahamian users would be made whole and that it would process their withdrawal requests in priority. The FTX trial remains ongoing and is expected to wrap up before the end of next week.