As we look ahead to 2024, FinTech Magazine has gathered insight and expertise from dozens of leaders representing companies operating right across the financial services spectrum.
In this instalment, the focus is on the insurance and insurtech sector.
Rinesh Patel, Global Head of Financial Services at Snowflake
With the introduction of more LLMs and generative AI in the industry, the way in which customers interact with service vendors is evolving toward more visible engagements, with AI acting as a co-pilot in those experiences.
For example, with consumer banking and wealth management, we will see AI-powered products that have a natural language and questioning type feel that will guide consumers in lieu of a human asset manager.
We’ll see this in insurance as well – in claims filing and handling; expediting responses and resolution. The ultimate kind of use case is really focusing on improving that customer experience across sub-industries and financial services to create greater customer experiences.
Nicole Carrillo, Managing Director, Financial Services at Workday
Seven in 10 organisations worldwide feel pessimistic about insurance market prospects or unprepared to handle coming disruptions, IDC data shows. Beyond productivity boosts, AI will help settle nerves and instil confidence as the technology will drive increasingly sophisticated insurance products, enabling providers to be more predictive and prescriptive.
By nature, the insurance industry is particularly exposed to external factors like climate change, cybersecurity threats and an evolving economic environment. AI will offer more sophisticated recommendations for how insurers can prepare and protect against unpredictable events like extreme weather or unplanned policy changes. For example, AI models could use climate data like geography, temperature and historical weather trends to develop a predictive analysis of weather patterns, which will, in turn, enable them to make specific solution recommendations to a customer, like developing a three-month policy on flood insurance in anticipation of hurricane season.
As AI and ML models become more sophisticated, they’ll be able to more accurately predict changes and proactively offer product and policy recommendations that can support both insurers and their customers. By using AI and ML, insurers can take on the role of proactive value creator and advisor, as opposed to just reacting to circumstances.
Piers Williams, Insurance Lead at AutoRek
Innovations in fintech have driven the pace of change in the financial services industry, transforming the way much of the sector conducts its back and middle-office operations. However, the insurance industry still lags behind. 2024 will see the insurance sector playing catch-up, focusing on how automation – rather than AI – can create efficiency, improve controls and ensure operational resiliency.
Back-office operations are the key source of inefficiencies for insurers, with many firms turning their attention to AI and advanced analytics to streamline processes. While there is a lot of hype in the corporate world regarding AI’s potential, it is likely still several years until we see tangible solutions leveraging AI to support back and middle-office finance operations processes. Insurers should currently be prioritising investment in intelligent automation over AI.
AI is not a magic wand that will solve all problems. Much like a human, AI will make mistakes and we will likely see a new concept of ‘AI error’ over the coming years as it is used more and more. Due to its ability to supplement information, and learn from the data that feeds it, AI can come to its own conclusions, which, when viewed in the context of financial control processes, is not needed. Financial control processes at their core have a correct and incorrect logical outcome – does data meet certain criteria or not? – which is the core validation a reconciliation process is looking to perform. Intelligent automation also typically follows a set of pre-defined rules, rather than attempting to simulate human thoughts or spot patterns. If you adopt AI to make decisions in outcomes where data doesn’t conform, then you introduce the risk of AI error in place of human error.
Economic headwinds, which are set to continue well into the first half of 2024, also mean that firms need to be optimising resources and increasing efficiencies, which automation has the power to do.
Anders Holm, Chief Commercial Officer at Fadata
- Cloud: There is a clear cloud trend in all current modernisation initiatives in the insurance industry, especially in the direction of the public cloud. Using a standard solution in the cloud offers insurers far-reaching benefits such as agility, flexibility, performance, cost efficiency and scalability. SaaS solutions in particular are becoming increasingly important. They are expected to increasingly replace on-premises environments. Bold and aggressive companies are bypassing a technology generation, choosing to be fast-moving by going straight to the loud for the ability to swiftly adapt to market changes and offer innovative services.
- AI and analytics: The insurance industry is becoming increasingly data-driven. In this context, AI solutions and analytics applications are becoming increasingly important, predominantly driven by the hype surrounding Gen AI. They provide the technical foundation for data integration and analysis, including semi-structured and unstructured data such as scanned files. This provides insurers with important and accurate insights. AI and analytics solutions can help insurers better understand their customers, identify risks and make more informed decisions to deliver the personalised service that will elevate the industry to ‘caring’. AI has been talked about a lot, but real-world application has been extremely slow in the insurance industry. As insurers look to use data and technology to improve their processes and better serve their customers, insurance should begin to look more intuitive and provide an experience for customers which is more in line with services outside of insurance.
- Digital ecosystems: There is a clear trend towards digital ecosystems in the cloud, which make it easier to link one's own insurance offerings with those of other service providers. An ecosystem allows insurers to further differentiate themselves and develop innovative offerings that best meet the needs of policyholders. The insurance industry will therefore increasingly ‘open up’ and utilise digital ecosystems, meaning open rather than closed networks will dominate, including the integration of external partners as part of open insurance models. Such models, characterised by end-to-end processes, flexibility, agility and, above all, openness, will become indispensable for insurers from a competitive perspective, especially in property and health insurance. Above all, open insurance also creates the basis for the implementation of embedded insurance, and it is expected that many more companies will look to capitalise on embedding insurance in their products or services.
FinTech Magazine is a BizClik brand.