How is Generative AI in Banking and Insurance Changing the Landscape of Financial Services?

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Varsha

In this article | May 28, 2024

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Industries are harnessing the various capabilities provided by generative AI for purposes beyond content creation these days. This technology is revolutionizing how we develop novel services and business models and increases productivity throughout the whole value chain of any industry. In contrast to conventional automation and machine learning, generative AI can produce unique material without explicit programming. This cutting-edge technology can generate creative and innovative results that are easy to use and available to anyone with varying technical expertise.

The banking and insurance industries are swiftly embracing artificial intelligence (AI) to enhance operational efficiency, streamline processes, and facilitate data-driven decision-making, especially in risk assessment and underwriting procedures with notable advancements. Utilizing generative AI to provide automated and personalized digital financial services at a low cost can be a game-changer for the financial world. 

A report by Juniper Research shows:

  • Total spending by banks on generative AI in 2024 will be $5.6 billion.
  • Total spending by banks on generative AI in 2030 will be $85.7 billion.
  • i.e., the market growth will be around 1,430%.

Generative AI is clearly positioned to become a key driver of innovation in the banking and finance industry. The sector’s significant investment in this technology reflects its acknowledgment of its ability to revolutionize operations, improve customer interactions, and foster sustainable growth in the ever-evolving financial services landscape.

Fintech startups that cater to small and medium-sized businesses are in a prime position to lead this transformative change. Implementing generative AI in the banking, insurance, and finance industries can offer new solutions and services with reduced financial friction, presenting a significant modern opportunity for the insurance and banking sectors.

Generative AI in banking and insurance shows its potential by extending beyond merely enhancing products for well-served and tech-savvy consumers. We have tried collating some applications of Generative AI in banking and insurance.

Generative AI Transforming Banking and Insurance

Generative AI presents unique opportunities in the insurance industry for sustainable value creation that require specialized knowledge, contextual understanding, expertise, and potential investment in refining existing models and developing specialized models. One such opportunity is designing tailored solutions to analyze unstructured data to identify risk patterns that can guide underwriting decisions or provide immediate information to claimants when they report a loss. The actual  transformation in the insurance sector will come from integrating various use cases to create a comprehensive, seamless, end-to-end solution on a large scale. 

Hence, there are various opportunities, but to tap into the potential benefits, it’s essential to understand the industry standards in the real  world and connect with experts and executives in the same industries. Tech events allow us a chance to bridge the gap between theory and practical application. Exposure to real-world scenarios enables us to make informed decisions, adjust our approaches to dynamic environments, and drive significant impact within our industries. Attending such events can expand our knowledge base, introduce us to the latest technologies, and help us stay up-to-date with industry trends and best practices. 

Tech’s New Rockstar: Generative AI Takes the Stage, Lights Up Events Everywhere!

Tech events foster meaningful discussions focusing on digital transformation in various industries. These forums provide experts with insights into the latest advancements, regulatory changes, and disruptive technologies reshaping the tech landscape. 

We attended one such event, Bharat Fintech, which took place in Mumbai and created an ecosystem for major announcements and significant investment opportunities, catalyzing collaboration between traditional financial institutions and innovative fintech startups. 

The summit focused on the pivotal roles tech companies play in simplifying banking operations using  technologies like Generative AI. Specifically, the discussions around UPI for streamlining various banking processes, including lending, mortgages, and underwriting, were particularly enlightening.

Another frustrating aspect in banking is the mortgage lending process, but here, generative AI can help banks integrate data from multiple sources and help them analyze income and expenditure data from customers, property prices in local areas, insurance and utility costs, taxes, ratings, etc.

Apart from this, thoughts were given around the use of Generative AI in automating and simplifying lending processes, such as automating credit research, loan product recommendation, credit underwriting, customer onboarding, portfolio management, compliance training, etc.

Generative AI Integration: Developing Application Infrastructure and Cultivating a Tech-Aware Culture!

At the Bharat Fintech event, investors, bankers, and technology experts agreed to establish a tech-aware culture within their organizations and recognized the importance of integrating innovative technologies, especially proprietary large language models (LLMs). 

This has led to a substantial decrease in processing time, from hours to minutes, resulting in improved responsiveness to customers and distribution partners. LLMs have also effectively analyzed legal complaints against insured individuals, efficiently pinpointing key liability and coverage issues. Additionally, claim professionals benefit from quick access to precise, actionable information on technical and procedural claims matters. This streamlined approach enhances interactions with customers and distribution partners, driving efficiency and innovation within the organization. 

Different technology companies are currently developing Gen AI capabilities at different layers, including infrastructure, foundational model, and application development, to benefit from and capitalize on this technology. Each layer is affected by various competitive factors such as scale, data availability, brand recognition, and customer base. At the infrastructure layer, major players like Google, Microsoft, and Amazon are offering scalable computing resources and forming partnerships with foundational model providers to increase customer loyalty.

In industries like insurance and banking, the use of such applications can greatly improve the efficiency of the underwriting processes, identify trends, and provide concise summaries of underwriting reports. For example, Sixfold, an AI company specializing in underwriting solutions, introduced an AI tool that simplifies and streamlines the underwriting process. This tool evaluates risk by gathering data from various external sources, identifying trends, and organizing the information into the preferred format for insurers’ underwriting reports.

Generative AI in Insurance and Banking Needs Planning in Early Stages!

The integration of Generative AI into insurance and banking operations requires careful planning from the start. Early adoption of technology in streamlining different processes, in loan disbursement, digitized valuations, seamless approach to underwriting, etc., will facilitate smoother transactions and reduce operational bottlenecks. Moreover, the utilization of advanced technologies like Co-Pilot in mortgage underwriting exemplifies the transformative potential of Generative AI in optimizing decision-making processes and improving risk management. By embracing these innovations early on, insurance and banking institutions can position themselves at the forefront of industry evolution, delivering enhanced services to customers while driving operational excellence. Thus, strategic planning in the early stages of Generative AI implementation is not just a choice but a necessity for organizations seeking to thrive in the dynamic landscape of finance and insurance.

As a leading data engineering and product engineering solutions provider, Techment is uniquely positioned to assist your organization on this transformative journey. With our deep expertise in AI, Machine Learning, and other technological domains, we can guide your organization through the complexities of this transformative journey. We are currently at the forefront of exploring the potential of generative AI and expanding our knowledge in this area by testing its application in various use cases. For example, we are utilizing Open AI’s LLM and GPT 4.0 in conversational AI to respond to queries in multiple formats like text and PDF. By partnering with us, you can leverage our experience to overcome challenges, drive lasting business value, enhance operational efficiency, and foster revenue growth.

To know more about our offerings in data engineering, AI, and Generative AI, connect with our resident architects.

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