TL;DR:
- AI is transforming portfolio management by providing sophisticated analysis and optimizing asset allocations, resulting in a five-fold increase in assets for Man Group.
- The insurance industry is using AI for various functions such as underwriting, fraud detection, and customer service, with companies like Lemonade, Allstate, and Geico using chatbots for customer service.
- AI is playing a crucial role in preventing and detecting fraud, with leading companies like Google, Amazon, and Microsoft utilizing AI-powered fraud detection services. Financial institutions have invested heavily in AI to prevent fraud, with banks using AI to develop fraud scores and understand customer behavior.
- Tax collection, management, and compliance are critical aspects of modern business operations, and AI is poised to revolutionize the tax landscape by increasing collection, developing precise customer profiles, reducing tax evasion, improving calculations, and reducing the time spent on audits.
- Tax teams are using innovative techniques like AI to uncover hidden assets and identify new risks, but the implementation of AI in tax management faces the challenge of trust. Leading tax management companies like H&R Block, Intuit, and FlyFin are already using AI to streamline their operations and provide more accurate and efficient services to their clients.
Main AI News:
Revolutionizing Portfolio Management with AI
Investment success in today’s complex financial landscape requires a sophisticated approach. The days of relying solely on intuition and experience are long gone. Portfolio management is evolving, and AI is at the forefront of this transformation.
The CFA Institute recognizes the potential of AI in conducting thorough analyses and optimizing asset allocations in portfolios. AI technology can provide reliable estimates of returns for optimization purposes, read earnings transcripts, and identify relationships between securities and market indicators. This information is crucial in forming effective hedging strategies.
Case in point: Man Group, a leading hedge fund, has leveraged the power of AI in its investment management processes. The result? A five-fold increase in assets since 2014.
Other companies specializing in AI-powered investment services include Kavout, serving clients such as Crimson Black Capital, Benzinga, and FactSet. Trade Ideas, with clients including Interactive Brokers, NYSE, Nasdaq, and Sentieo, serving clients such as Schroders, BMO Capital Markets, and MFG Asset Management.
Disrupting the Insurance Industry with AI
The insurance industry is on the brink of a technological revolution, with AI playing a crucial role. From underwriting to fraud detection and customer service, insurance companies are leveraging the power of AI to improve their operations and enhance the customer experience.
One of the most visible applications of AI in the insurance sector is the use of customer service chatbots. Companies like Lemonade, Allstate, and Geico are using chatbots to provide basic advice on billing information and answer common questions about transactions.
A report from the National Association of Insurance Commissioners found that out of 193 surveyed insurance companies, 135 reported using AI or machine learning for claims operations. AI can streamline the claims handling process by automatically reading, interpreting, and processing documents and photos. This leads to a significant reduction in case handling time for customers and more accurate assessments for different types of injuries.
Furthermore, AI is also helping insurance companies stay competitive by providing data-driven pricing. The technology collects information about a person’s marital status, geographical location, and the likelihood of filing a claim and sets premiums based on these factors.
AI Takes the Lead in the Fight Against Fraud
Fraud is a growing concern for businesses, with IBM projecting a staggering $44 billion in losses by 2025. AI plays a crucial role in preventing and detecting fraud by training software with historical data and implementing risk rules.
Leading companies such as Google, Amazon, and Microsoft are utilizing AI-powered fraud detection services to identify hackers and suspicious logins. Although the software has its limitations, such as a tendency to flag legitimate logins, the benefits far outweigh the drawbacks. For instance, Microsoft’s system has a 2.8% false positive rate, which is a small price to pay for protecting customers from fake logins.
In the banking sector, phishing scams, identity theft, and unauthorized transactions are the three most common types of fraud. Financial institutions have invested heavily in AI to prevent fraud, with Fintech News reporting $217 billion spent on AI in 2021.
Banks can use AI to develop fraud scores, create purchase profiles to understand customer behavior and compile a list of suspected fraud attempts for investigation. This approach, recommended by Telus International, provides banks with a comprehensive solution to mitigate the risk of fraud.
Streamlining Tax Management with AI
Tax collection, management, and compliance are critical aspects of modern business operations. AI is poised to revolutionize the tax landscape by increasing collection, developing precise customer profiles, reducing tax evasion, improving calculations, and reducing the time spent on audits.
The Forum on Tax Administration’s 2022 report found that over 70% of tax administrators surveyed are using innovative techniques like AI to uncover previously hidden assets and identify new risks. EY’s research found that tax teams use 40% to 70% of their time gathering and manipulating data, a task that AI can perform in a fraction of the time.
However, one of the biggest hurdles to the implementation of AI in tax management is trust. Tax professionals are expected to “stand by their decisions” and show the work that supports them. EY believes that AI should be held to the same standards.
Leading tax management companies, such as H&R Block, Intuit, and FlyFin, are already using AI in their tax processes. By leveraging the power of AI, these companies are streamlining their operations and providing more accurate and efficient services to their clients.
Conlcusion:
The integration of AI technology is revolutionizing various industries, such as portfolio management, insurance, fraud detection and tax management. Portfolio management is utilizing AI to provide sophisticated analysis and optimization of asset allocations, leading to increased assets for companies like Man Group. Insurance companies are using AI for functions like underwriting, fraud detection, and customer service, with chatbots being a prominent user-facing application.
AI is also playing a crucial role in preventing and detecting fraud in various industries, with leading companies like Google, Amazon, and Microsoft utilizing AI-powered fraud detection services. In tax management, AI is increasing collection, reducing tax evasion, improving calculations, and reducing the time spent on audits, with leading companies like H&R Block, Intuit, and FlyFin already using AI in their processes. Although there are challenges, such as trust and false positives, the benefits of AI far outweigh the drawbacks, and it is poised to be a major player in the future of these industries.
