Clyde and Co have been gathering togather some Predictions for 2024 from their global office experts. Some interesting ones below FYI, enjoy over the festive season lull.
INSURTECH INVESTMENT IN ASIA SET TO RISE
Joyce Chan, Partner, Hong Kong, is feeling positive on the insurtech front;
Asia’s insurtech sector has increased in breadth and depth in recent years. With the region currently poised as the fastest-growing global market for insurtech investment the tech space remains key to the transformation of Asian insurance business. According to a recent report on the global insurtech market, while the US is still the leading region for overall insurtech investments, Asia is experiencing the highest rate of growth in venture capital investments, up 58% year-on-year, as of mid-2023. Appetite from the region’s tech-savvy population for insurtech-driven products is likely to attract further investment into this space next year.
A number of Asian jurisdictions, including China, have been rolling out policy initiatives to promote digital transformation of the financial services. In the short term, we believe the rate of growth is likely to be higher in Southeast Asian jurisdictions. The insurtech space in Singapore is becoming more vibrant, attracting the most investment of all Asian markets in the first half of 2023, and this is expected to continue into next year.
Insurtech business in Thailand also remains buoyant, alongside other Southeast Asian countries such as Indonesia. While Thailand in particular has seen continued investment from local players, the Southeast Asia region as a whole has also attracted investment from multinational insurers, particularly for insurtech solutions related to personal lines business.
There is optimism that inward investment into the insurance sectors in Mainland China and the Hong Kong SAR will rise steadily in the next year.
Meanwhile, the global environment for insurtech investment could remain challenging for some start-ups, and it is likely that only those companies that have already established themselves as market leaders, or service providers that offer genuinely innovative and unique solutions, are going to attract interest from capital providers.
AI AND CLAIMS
AI-driven claims fraud detection will make major advances in 2024, says Damian Rourke, Partner, Manchester.
A focus on so-called deepfakes and shallowfakes will be part of the overall push to tackle the claims fraud industry.
The integration of artificial intelligence (AI) in insurance fraud detection marks a significant progression in the industry’s ability to tackle a perennial challenge that costs it billions every year.
AI’s primary role in this field is the rapid and precise analysis of large volumes of data. AI algorithms and machine learning can efficiently sift through extensive datasets and identify patterns and anomalies that are indicative of fraud. This involves scrutinising claimant histories, the nature of claims, and contrasting them with known fraud indicators.
By learning from historical data, it continuously enhances its ability to identify intricate fraud schemes.
A crucial advancement in AI for fraud detection is its ability to extract data points from various documents. Technologies like optical character recognition (OCR) and natural language processing (NLP) empower AI to analyse documents such as claim forms and medical records, extracting essential information, comparing inconsistencies, and highlighting potential red flags. This capability is vital in detecting fraudulent activities, such as inconsistencies in dates or narrative discrepancies.
In the next five years, it is likely that AI will evolve an increasingly sophisticated ability to detect and counter deepfakes and shallowfakes. These advanced techniques involve creating realistic but fake audio, video, or image content, which can be used to fabricate evidence in fraudulent claims. AI-driven solutions are being developed to identify these fakes by analysing inconsistencies in digital fingerprints, patterns, and other anomalies that are not perceptible to the human eye.
While AI is revolutionising the insurance industry’s approach to fraud detection with machine learning, OCR, and NLP, its ultimate effectiveness will depend on continuous evolution and ethical oversight.
MGA REGULATION
Legal and regulatory scrutiny of the UK Managing General Agent (MGA) marketplace will increase in 2024, says Rob Crossingham, Partner, London
Developments including the implementation of the Financial Conduct Authority’s Consumer Duty requirements, for example, will increase the regulatory oversight of MGAs in the UK – to some extent.
But despite the expected increase in regulation, our most recent temperature check on the UK MGA marketplace, published this autumn, showed that the sector remains vibrant and optimistic. Indeed, the MGA sector, which has always been a magnet for the entrepreneurial underwriter, will benefit from proportionate regulation that is intended to protect customers, many of the respondents to our survey, MGA Opinion Report 2023; Sector Continues to Thrive, believe.
Although there is likely to be a somewhat heavier compliance burden on MGAs next year, the improved standards and behaviours that this will engender and highlight will increase customer trust in the MGA model still further. And while an increase in regulatory and compliance costs may be seen as a barrier to entry for some MGAs, our research reveals that the number of MGA partnerships will remain at current levels or even increase in 2024 as carriers look set to buck the previous trend of reducing MGA activity when the insurance market is hard.
MGAs’ heightened focus on risk selection, wordings and disciplined underwriting, coupled with the sector’s ability to use data and analytics and nimby invest in technology, mean that the MGA model will likely only grow in appeal for carrier backers over the course of 2024.
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