AI boosts insurance tech financing, deepfakes a risk, report says

LONDON - Global financing for insurance technology (insurtech) firms rose 40 per cent to US$1.27 billion (S$1.7 billion) in the second quarter from the previous three months, helped by money going into AI-focused businesses, reinsurance broker Gallagher Re said on Thursday (Aug 1).

The use of artificial intelligence in insurance presents challenges, however, because of the risks of so-called "deepfakes" in fraudulent claims and of the exclusion of potential customers by AI models, Gallagher Re said in a report.

Global insurtech funding reached a peak of US$16 billion in 2021, but funding has cooled since then as valuations shrank.

Companies are nonetheless betting on AI to help them automate tasks and cut costs, though there are fears it could lead to dramatic job losses.

Around 33 per cent of total insurance tech funding in the second quarter went into AI-focused insurtechs, according to the report from Gallagher Re, a unit of Arthur J Gallagher. AI was valuable in insurance pricing and underwriting, but "where underwriting has been entirely delegated to AI, success has been limited", the report said.

"It is becoming clearer that removing the human entirely is a mistake."

AI-enabled risk assessments could drive a shift to individualised pricing, which could benefit some customers but leave others uninsurable, the report said.

The use of AI to create deepfakes, or convincing images and videos, could be used in insurance fraud, the report added.

"Any ability to obscure the truth and make it look very, very real is a problem," Andrew Johnston, global head of insurtech at Gallagher Re, told Reuters.

However, AI is useful in analysing large volumes of data and speeding up administrative tasks, the report said. AI could also find a way to solve its own problems, for instance in detecting deepfakes.

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