Every few months, a new firm pops up with a bold headline promising to overhaul the insurance industry with their new product. These promises can usually be boiled down to faster claims, cheaper operations or effortless compliance.
However, insurtech firms have recently started to share some even more outlandish claims. These often revolve around removing human input entirely from the claims process – whether that be by eliminating third-party administrators or completely automating regulatory requirements. The issue is the claims just aren't realistic.
Full automation isn't necessary
Insurance is one of the most heavily regulated industries in the world. Every claim, every product, every customer interaction exists within a tight framework of both legal and ethical obligations. To suggest that a software system – no matter how advanced – can make binding claims decisions or interpret complex, evolving regulation without human oversight is just reckless.
These companies promise that their platforms will replace entire operational teams, automate every decision, and somehow keep regulators smiling. I'm not saying that the industry should rid itself of automation - it absolutely has a role to play.
AI systems can analyse patterns, flag anomalies, and support operational decisions but they cannot yet replicate the contextual judgment required for compliance and customer fairness. Handing over those responsibilities to an unverified algorithm invites both regulatory scrutiny and reputational risk.
AI should enhance the workforce, not replace it
The future of insurtech lies in enhancing human expertise, not in replacing it. AI can help underwriters assess risk faster, help claims teams identify fraud and streamline customer service through intelligent routing.
What is required in order to do this is a tried and tested rules engine, configured by the insurer, to ensure every claim is processed according to their policies and compliance requirements.
The AI assistant involved in this rules engine should help to automate workflows, streamline processes and boost efficiency, rather than acting as judge and making the final call on claims decisions.
The distinction is subtle but critical. The moment the AI makes the switch from assistant to judge, insurers cross a line that could expose them to unacceptable compliance and reputational risk.
Bowing to outside pressure
While they're busy making headlines with flashy marketing campaigns, many of these vendors are quietly burning through investor cash like it's kindling.
Vendors often promise dramatic reductions in operational costs and staff overheads. Yet achieving those outcomes requires insurers to deploy unproven technology at scale - something few can afford to do without regulatory assurance. Loss-making, over-promising, and under-delivering – these companies are betting on hype over substance.
Before jumping in, ask a critical question like is my software supplier financially sound enough to support my business long-term? The best AI in the world is worthless if the company behind it cannot support long-term implementation or maintenance. The insurtech companies most likely to endure will be those that prioritize getting the basics right over elaborate tech.
As the industry matures, investors and insurers alike are becoming more sceptical of grand promises and more focused on measurable results. Transparency around AI capabilities, robust governance frameworks and demonstrable financial stability are becoming the real differentiators in a crowded market.
For insurers, that means asking harder questions during procurement, such as can the vendor demonstrate regulatory compliance? How transparent is the AI decision-making process? Is the vendor financially stable enough to support long-term operations?
Ensuring industry understanding
Innovation still is and will always be absolutely vital to the insurance industry. Without it, we would still be reliant on paper for our claims and formulating our pricing models manually. However it is important that industry participants understand that innovation without serious thought and accountability is just risk by another name.
We now stand at a crossroads. Do insurtechs continue to throw caution to the wind and chase headlines with bold claims and opaque tech? Or do they focus on building the right tools that genuinely make a difference to insurers' operations and performance, entirely within the bounds of both regulation and reason?
True progress in insurtech comes from building technology that is smart, scalable and financially viable. The insurtech firms that will ultimately succeed are those that treat compliance and oversight not as barriers to innovation but rather as foundations for it and deliver real, measurable value to their clients.
