Gallagher Re, the reinsurance broker, has released its Global InsurTech Report for Q2 of 2024, which outlines the impact AI driven technologies are having on insurance markets.

According to the report, global financing for insurtech firms rose 40% in the second quarter from the previous three months, with around 33% of total insurance tech funding in the second quarter going into AI-focused businesses. Over Q2 of 2024, funding in the insurtech space reached $1.27 billion (£992.8 million), the highest level since Q1 of 2023.

This surge in funding is closely linked to the boom in AI technology. Insurtech firms are utilising AI tools to more effectively process claims, evaluate risk, process contracts, and underwrite policies, as well as automate tasks and cut costs. 

Despite the upturn, there are challenges for insurtechs in rolling out AI tech. Among the potential risks this latest study highlights are the introduction of biases by AI, the lack of transparency in its modelling, and the questionable reliability and accuracy of data.

Of particular concern is the risk that deepfakes pose. Realistic and highly convincing images and videos could threaten the underwriting and claims processes, where they might be used as evidence of insurability. 

Further, the report argues that with increasingly individualised pricing for products which AI permits, certain customers might become uninsurable. The kind of granular risk-assessments capable with AI modelling could lead to a shift away from the solidarity-based risk pools currently used, and towards a case-by-case insurance market.

Recommended reading

• UK Businesses Face New Cyber-attacks Every 44 Seconds in Q2 2024
• Half of Cybersecurity Professionals Expect to Burnout Within the Next Year
• Cyber Leaders Reveal Compliance and Boardroom Struggles

Andrew Johnston, global head of insurtech at Gallagher Re, said: “Any ability to obscure the truth and make it look very, very real is a problem.”

Regardless of the issues, industry leaders are pushing the utilisation of AI within the sector. At Allianz Commercial, for example, a genAI exploration program has been set up in partnership with Allianz Consulting and Microsoft to investigate a number of use cases globally.

A previous report from AutoRek, a financial services software provider, found that tech budgets for insurers in 2024 were trending towards operations automation, with the goal of increasing operational resilience over the next few years.