The insurance technology (Insurtech) sector has never lacked confidence. Every few months, a new vendor appears promising to transform the industry, whether it be faster claims, cheaper operations or effortless compliance.
Lately, a new breed of bold marketing has emerged, with some providers claiming their platforms can eliminate third-party administrators altogether or manage all regulatory requirements across multiple jurisdictions without human input.
The problem? These promises just aren’t realistic.
The limits of full automation
Insurance is one of the most heavily regulated sectors in the global economy. Every claim, every product, every customer interaction exists within a tight framework of legal and ethical obligations. To suggest that a software system (however advanced) can make binding claims decisions or interpret complex, evolving regulation without human oversight is more than optimistic – it’s reckless.
These companies promise that their platforms will replace entire operational teams, automate every decision, and somehow keep regulators smiling. Let’s call it what it is: snake oil in a SaaS wrapper.
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.
Augmented intelligence, not artificial replacement
The future of insurtech doesn’t lie in replacing human expertise, rather it lies in enhancing it. AI can help underwriters assess risk faster, help claims teams identify fraud and streamline customer service through intelligent routing.
What is required 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 know its place, by helping to automate workflows, streamline processes and boost efficiency – not acting as the judge.
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.
Balancing innovation with pressure from investors
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, corporates should ask a simple but critical question: 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.
Sustainability in technology isn’t just environmental – it’s financial and operational. The insurtech companies most likely to endure will be those that prioritise 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?
The reality check the industry needs
Innovation remains the lifeblood of insurance. Without experimentation, the sector would still be reliant on paper claims and manual pricing models. However, innovation without accountability is just risk by another name.
The insurtech industry stands at a crossroads. It can continue chasing headlines with bold claims and opaque AI, or it can focus on building tools that genuinely improve insurer performance within the bounds of regulation and reason.
Real progress in insurtech will come not from fantasy but from frameworks – where automation is balanced with oversight and financial and operational stability matter as much as speed and scale.
While the competition is busy selling dreams and burning cash, insurtech firms must focus on delivering results with software that’s smart, scalable and financially sound. No snake oil. Just software that works.
