Insur. weekly 485 ?? How AI is shaping the future of risk assessment in Financial Services

Hi All,

First of all, let me welcome those who joined us recently. We are now over 11.900 subscribers !

Below, you'll find the three most engaging articles from this week. They are about insurance & risks innovation, FinTech comparables and tech trends worth a look.

And ahead of the holiday season, I'm glad to host 3 guest posts this week (3 more will come next week). Lisa, Hugues and Andres share their views on a topic they picked, assuming it's worth monitoring it in an insurance innovation perspective !

• In the news this week

Simplis (InsurTech for SME & freelancers in France) acquired Stello a former competitor in that space. (read more)

Groupama revamped its logo and brand image. (watch a short UI-oriented review)

Alan shared detailed KPI on how much customers enjoyed its AI-based assistant. (read more)

• Top 3 articles

1?? Responsible AI in life & health insurance

The first article was published by SwissRE recently on the roadmap insurance players should consider while embracing artificial intelligence in life & health insurance business lines. Interestingly, the article doesn't challenge the benefits of AI in these industries and focuses on how to get the most of it by tackling challenges these technologies raise (including algorithms bias, HR or operational impacts).

2?? AI in bank underwriting

The second article is an essay Simon Taylor published a few weeks ago on how AI technologies could impact credit underwriting and more broadly on productivity in underwriting functions in the banking industry. The essay explores the data challenge incumbent have had around credit, how recent AI technologies could help and challenges - including regulation - the industry will have to tackle accordingly.

3?? What 'Open Source' means in AI?

The third article was published in The Economist a few days ago. It's explore what 'Open Source' means in the AI industry. It starts with a reminder of this kind of initiatives in the tech space, details how tech giants currently communicate on it and how this could impact the AI industry.

• My podcast (in French)

I went through Benedict Evans' annual report on the state of technology (once again focused on Artificial Intelligence) and highlighted three major trends to watch in an insurance - and InsurTech - perspective.

>> Listen to it on Spotify or on Apple Podcast or on Youtube.

Listen to previous episodes:

?? From telematics to connected insurance

?? InsurTech-as-a-Service: tackling the innovator's dilemma

?? Technology serving insurance brokers

?? Open Insurance, Open Banking: same but different?

• Guest posts ??????

Lisa Wardlaw shares her views on:

Exploring the Intersection of Web3 and AI: Unlocking Scalability, Security, and Innovation

As we push the boundaries of digital transformation in insurance and beyond, one trend stands out as both exciting and necessary:?the intersection of Web3 and AI. This fusion holds immense potential to drive scalability and security while addressing critical challenges in managing and utilizing data effectively.

The Power of Web3 for Scalability and Security

Web3 technologies, characterized by decentralization, cryptographic security, and smart contract capabilities, offer a powerful toolkit to transform how we think about scalability and trust. In insurance and other data-heavy industries, scalability often hinges on the ability to handle massive, real-time data exchanges while ensuring that information is secure, verifiable, and tamper-proof.

By leveraging?decentralized architectures, startups and corporates can:

• Enhance data security?with cryptographically protected, immutable ledgers.
• Facilitate seamless data sharing?across stakeholders without sacrificing privacy or control.
• Reduce bottleneckstraditionally caused by centralized systems, enabling AI models to operate at scale with faster, more reliable data flows.

HTAP and Real-Time Insights: A Game-Changer for AI

The promise of?Hybrid Transactional/Analytical Processing (HTAP)?is another trend that excites me. HTAP blurs the lines between transaction processing and analytics, allowing businesses to operate with real-time insights directly within their operational workflows.

Imagine an insurance claims process where AI models access real-time policyholder data, transactional details, and external risk factors to:

• Instantly identify fraud patterns.
• Optimize claim resolutions in minutes, not days.
• Deliver hyper-personalized customer experiences.

Integrating HTAP with Web3 further amplifies these capabilities by decentralizing data access while preserving security and control.

The Low-to-No ETL Revolution

The traditional?Extract, Transform, Load (ETL)?paradigm has long been a bottleneck for innovation. It slows down access to actionable insights and creates significant operational overhead. The rise of?low-to-no ETL solutions?represents a seismic shift.

Startups and corporates that embrace these solutions can unlock real-time data agility, empowering AI models to work with decentralized, untransformed datasets without compromising quality. In a Web3-enabled ecosystem, this means:

• Faster data pipelines with reduced costs.
• Greater alignment between AI insights and the ever-changing, real-time nature of operational data.
• Fewer silos, more collaboration, and better decision-making.

Why This Matters

The convergence of?Web3,?HTAP, and?low-to-no ETL?is not just an exciting technical evolution; it’s the foundation for the next generation of intelligent, scalable, and secure solutions. For insurance companies, this could mean reimagining everything from underwriting and risk assessment to customer engagement. For startups, it’s a chance to build transformative solutions that set new industry standards.

The path forward is clear: explore the interplay between Web3 and AI to unlock scalability, ensure decentralized real-time data security, and redefine what’s possible. Startups, corporates—let’s take this bold step together.

Hugues Bertin shares his views on:

Open Insurance in Latin America: A High-Speed Train to the Future

Open Insurance, a concept centered on giving consumers control over their own data, is gaining momentum in Latin America. Regulatory progress is already well underway in countries such as Brazil (completing the third phase of implementation by November 2024), Chile (with regulations published by the CMF to take effect on July 4, 2026, and applied to insurance by December 4, 2027), Mexico, and Colombia (where the SFC plans to include insurance in its Open Finance roadmap by 2025 or 2026). Inspired by Open Banking, this new framework empowers policyholders to share their data with third parties in real time and at no cost. While its use cases are still in early stages, Open Insurance represents a unique opportunity to reinvent business models, products, and distribution strategies.

From the consumer perspective, Open Insurance promises a radical transformation. Imagine being able to compare, adjust, or purchase insurance products with a single click, while receiving personalized offers. For insurers, however, this transformation entails significant technology investments and heightened competition, sparking concerns about pressure on profit margins.

Why Open Insurance Is a Key Emerging Trend

Open Insurance isn’t just about regulatory compliance—it’s a revolution for the insurance ecosystem. Its opportunities include creating new products such as modular coverages or micro-insurances embedded into digital platforms. Companies can also explore innovative distribution models, such as insurance wallets or SPOCs (Single Points of Contact) for centralized data and transaction management. On this topic, Digital Insurance Latam, in collaboration with the four insurtech associations of the Pan-American Insurtech Alliance (AIP), has published a white paper on upcoming use cases for both products and distribution models. The report is available for free on digitalinsurance.lat.

Local Startups Leading the Way

In Brazil, early adopters such as Tecban, Finansystech, Lina, and Sensedia are driving the API-ification of the insurance sector. Similarly, early SPOC models, regulated by Brazil’s SUSEP (Superintendence of Private Insurance), highlight how platforms like Guru SPOC aim to facilitate data access to energize distribution efforts.

The rest of Latin America is closely watching Brazil to learn and capitalize on the effects of these regulatory shifts, which aim to foster innovation and, more importantly, increase financial and insurance inclusion. For context, insurance penetration in Latin America is only 3%, compared to 9% in Europe.

Andres Lehtmets shares his views on:

Shaping the Future: How Europe's New Policy Cycle Impacts InsurTech.

The new European policy cycle officially began on December 1, 2024, as the European Commission’s new leadership took office. This is an opportune moment to take stock of the previous EU policy mandate and its implications for the InsurTech sector, as well as to look ahead at what the future may hold.

One of the central priorities of the previous Commission was A Europe Fit for the Digital Age. The goal was to empower people with new technologies and make this Europe’s “Digital Decade.” Strengthening digital sovereignty and establishing EU standards—rather than following others—were key objectives, with a clear focus on data, technology, and infrastructure.?

Naturally, the financial sector was profoundly impacted by this strategic agenda.

The Digital Finance Package and Its Impact on Insurance

In 2020, the European Commission introduced the digital finance package, including a comprehensive strategy for supporting the digital transformation of finance while managing its risks.?

This strategy was accompanied by legislative proposals such as MiCA and the DLT Pilot Regime, which had less direct impact on the insurance industry. However, the Digital Operational Resilience Act (DORA) was a significant development, directly affecting insurance companies and InsurTechs.

DORA aims to strengthen the IT security of financial entities, ensuring that Europe’s financial and insurance sector remains resilient during severe operational disruptions. It harmonizes rules on operational resilience across the sector, bringing a much-needed regulatory framework for managing ICT risks.

The European Data Strategy and Open Finance

Another cornerstone of the previous policy cycle was the European Data Strategy, which focused on putting people first in technology development while upholding European values and rights. Data is an essential resource for economic growth, innovation, and societal progress—especially for insurance, where data-driven insights fuel new business models.

Key regulations under this strategy included the Data Act, Digital Markets Act, Digital Services Act, Data Governance Act, and the European Single Access Point. More recently, the Financial Data Access (FIDA) proposal has emerged as a crucial enabler of “open finance,” providing a framework for responsible access to customer data across financial services, including insurance and pensions.

The AI Act and Its Relevance to InsurTech

The AI Act deserves particular attention. It aims to ensure a high level of protection for fundamental rights, health, and safety. The Act follows a risk-based approach, classifying AI systems into categories of unacceptable, high, limited, and minimal risk.?

In the insurance sector, AI systems used for risk assessment and pricing in life and health insurance are classified as high-risk. The AI Act establishes rigorous requirements for providers and users of these high-risk AI systems, complementing existing insurance sector regulations.

For the remaining AI systems that are not considered to be high-risk, the AI Act establishes some minimum transparency requirements, the need to promote staff AI literacy, and the development of voluntary codes of conduct.

Reflections on the Policy Cycle

This policy cycle has been intense, with numerous initiatives reflecting the rapid pace of technological innovation. The phrase “Change has never been so quick, yet it will never be so slow again” encapsulates this well, especially when considering the recent surge in AI adoption, including generative AI and agentic AI.

The cycle has also been challenging. Policymakers and supervisors have struggled to keep pace with innovation while ensuring balanced, forward-looking regulation that does not stifle progress. Market participants, meanwhile, have had to adapt to a complex new regulatory landscape.?

The transition to a new cycle provides an opportunity to reflect on these challenges and chart a more cohesive path forward.

Future Considerations for Policy and Regulation

We are likely to see continued cross-sectoral policy initiatives, such as the AI Act, DORA, and FIDA, which will require early engagement from the insurance and InsurTech communities.?

The focus will likely shift to implementation, as DORA becomes applicable in January 2025, followed by the AI Act’s first provisions in February 2025. Insurance institutions will need to manage parallel requirements under both DORA and the AI Act, especially concerning ICT risks in AI systems.

There are still open questions about the AI Act’s implementation. In the insurance sector, two sets of requirements apply: the AI Act and sector-specific legislation. Ensuring these frameworks work together effectively, with an emphasis on proportionality and the unique aspects of the insurance industry, will be critical.

New Commission Priorities

The first week of the new Commission offers hints about its future priorities. Europe faces pressing challenges, such as rising living costs, housing shortages, and broader societal, environmental, and economic shifts. These are intensified by geopolitical instability and generational change.

The Commission has set ambitious goals for 2024–2029 and beyond, aiming to create a faster, simpler, and more united Union. These goals will likely guide the next political term, just as “A Europe Fit for the Digital Age” shaped the previous one.

Key initiatives include developing a European Savings and Investments Union to leverage private savings for broader EU objectives. The Commission also plans to review the regulatory framework to ensure that European companies and start-ups can finance their growth within Europe, which could unlock more capital for innovation, including in insurance and financial services. Another initiative worth highlighting aims to make business easier and faster by, for example, proposing a new EU-wide legal status to help innovative companies grow.

Additionally, a Digital Fairness Act may be introduced to address unethical digital practices like dark patterns, (f)influencer marketing, and online profiling—areas that could impact the insurance sector, despite existing regulations in sector-specific legislation and horizontal frameworks like the Consumer Rights Directive.

Conclusion: Turning Challenges into Opportunities

As the European Union and the insurance industry navigate a volatile landscape marked by high inflation, uncertain interest rates, and a challenging funding environment for InsurTechs, these challenges also present opportunities for innovation.

Similarly, new regulations offer a chance to reassess existing practices and drive progress. Compliance can serve as a catalyst for innovation, prompting companies to ask what they are doing, how they are doing it, and why.

That said, it is important to engage decision-makers constructively, offering practical insights and feedback to support more effective regulatory outcomes. Good ideas from practitioners are always heard and can play a vital role in shaping better policies.

What is clear is that collaboration between innovators, regulators, policymakers, academia, and consumer representatives is more important than ever. Facing the challenges ahead will require a united effort to ensure a balanced approach that fosters both innovation and resilience.

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