On Thursday, Gallagher Re reported that global financing for insurance technology (insurtech) firms climbed 40% to $1.27 billion in the second quarter, driven by AI-focused investments
In a report, Gallagher Re stated that using artificial intelligence in insurance presents challenges due to the risks of “deepfakes” in fraudulent claims and the exclusion of prospective customers by AI models.
The funding of global insurtech attained a peak of $16 billion in 2021; however, it has since declined as valuations have decreased.
Nevertheless, businesses are investing in AI to automate tasks and reduce expenses despite concerns that it could result in substantial employment losses.
According to the report from Gallagher Re, a division of Arthur J Gallagher (AJG.N), approximately 33% of the total insurance tech funding in the second quarter was allocated to AI-focused insurtechs.
The report stated that AI benefited insurance pricing and underwriting; however, “where underwriting has been entirely delegated to AI, success has been limited.”
“It is becoming clearer that removing the human entirely is a mistake.”
According to the report, implementing AI-enabled risk assessments could initiate a transition to personalized pricing, which could be advantageous for specific customers but render others uninsurable.
The report also suggested that AI could generate deepfakes, or convincing images and videos, in the context of insurance fraud.
Andrew Johnston, global director of insurtech at Gallagher Re, stated to Reuters, “Any ability to obscure the truth and make it look very, very real is a problem.”
The report stated that AI is beneficial for analyzing large volumes of data and accelerating administrative duties. AI could also solve its issues, such as identifying deepfakes.