AI in Insurance Claims. Game-Changer or Growing Risk?

Artificial Intelligence has officially entered the claims department and it's moving fast. From instant motor damage assessments to fraud detection systems that spot deepfakes, UK insurers are embedding AI across the claims journey. But as automation accelerates, questions around fairness, trust, and regulation are gaining volume.

So is AI revolutionising UK claims handling? Or is the industry moving too quickly without understanding the risks?

Let’s unpack the current landscape, explore real world examples, and look ahead to the AI powered future of UK insurance.

AI on the Frontline of Claims

Major UK insurers are already deep into AI deployment:

• Aviva has embedded over 80 machine learning models across its claims operations improving accuracy, customer experience, and even employee satisfaction.
• Ageas uses AI from Tractable to assess vehicle damage via photo, generating repair estimates in minutes.
• Zurich UK saved over £78 million in 2023 by using AI to detect manipulated claim images and patterns of fraud.
• Across the board, insurers are using AI for triaging claims, processing documents, answering FNOL calls, and analysing risk.

Motor and home insurance are leading the way but health, commercial, and even specialty lines are starting to follow suit.

The Upside: Why Insurers Love AI

Here’s what’s fuelling the adoption:

• Speed: Claims that once took weeks are now being settled in minutes.
• Accuracy: AI reduces human error, standardises outcomes, and flags inconsistencies.
• Cost Reduction: Less admin, less fraud, smarter repair decisions AI cuts expenses.
• Customer Experience: Faster resolutions, smoother journeys, and fewer handoffs = higher NPS.

As one exec put it: “AI is allowing us to spend more time talking to customers, not typing.”

But Here’s the Catch...

The risks of AI in claims are real and growing:

• Bias & Fairness: Algorithms trained on past claims data may unintentionally disadvantage certain postcodes or demographics.
• Lack of Explainability: If an AI denies a claim, can the customer understand why?
• Errors & Over-Reliance: Faulty inputs or rare scenarios can lead to wrong decisions especially if humans trust AI too much.
• Customer Trust: Most UK policyholders still don’t want an AI to handle their claim without clear human support.

In short: efficiency without empathy is a dangerous line to walk.

Regulation: The FCA’s Watchful Eye

UK regulators haven’t issued AI-specific insurance rules yet but they’re watching closely.

Under the Consumer Duty, insurers must avoid foreseeable harm and deliver fair outcomes even when automation is involved. That means:

• Running bias checks
• Offering human appeals for automated decisions
• Ensuring customers understand how their claim is handled
• Providing explainable AI outputs not just black-box logic

The FCA has made it clear: “You can outsource the tech but not the responsibility.”

By 2030: What Claims Might Look Like

Looking ahead, we expect:

• Instant claims for motor and home initiated by photos, sensors, or connected vehicles
• Wider use in health and commercial lines, from automating invoice validation to interpreting complex policies
• Hybrid human+AI roles, where claims handlers focus on empathy and complexity, not data entry
• Parametric and proactive claims, where the insurer opens the claim before the customer even contacts them
• Stronger governance, audits, and possibly an industry wide AI ethics framework

But most importantly, successful insurers will balance speed with sensitivity. The tech may drive decisions, but trust will determine the brand.

RiskWire Takeaway

AI is transforming UK claims handling fast. But the winners won’t be those who simply automate everything.

They’ll be the insurers who:

• Know when to hand over to a human
• Prioritise fairness and transparency
• Build AI systems customers can trust
• Stay ahead of compliance and ethical scrutiny

Used well, AI will free up claim teams to do what they do best: support people at their worst moments with speed, precision, and empathy.

The tools are powerful. But it’s how we use them that matters.

Written by RiskWire 🚙