PriyaPatel
TLDR:
- Global funding for insurance tech firms increased by 40% in the second quarter to $1.27 billion, with a focus on AI.
- The use of AI in insurance presents challenges such as deepfakes in fraudulent claims and exclusion of potential customers.
Global financing for insurance technology (insurtech) firms saw a significant rise of 40% in the second quarter, reaching $1.27 billion, with a particular emphasis on investments in AI-focused businesses, according to a report by reinsurance broker Gallagher Re. However, the use of artificial intelligence in insurance also poses challenges, such as the risks associated with deepfakes in fraudulent claims and the exclusion of potential customers by AI models.
While global insurtech funding peaked at $16 billion in 2021, funding has since cooled down due to shrinking valuations. Nevertheless, companies are continuing to invest in AI to automate tasks and reduce costs, even though there are concerns about potential job losses. Around 33% of total insurance tech funding in the second quarter was directed towards AI-focused insurtechs, indicating a growing reliance on AI technologies in the industry.
AI has proven valuable in insurance pricing and underwriting, although the report highlights that complete delegation of underwriting to AI has shown limited success. It emphasizes that removing human involvement entirely may not be a prudent approach. Additionally, AI-enabled risk assessments may lead to individualized pricing, offering benefits to some customers while leaving others uninsurable.
One of the risks associated with AI in insurance is the creation of deepfakes, which could be used in fraudulent schemes. Despite these challenges, AI remains a useful tool for analyzing large volumes of data and streamlining administrative tasks. The report also suggests that AI may potentially be used to address its own shortcomings, such as detecting deepfakes.
