Revealed – insurers are spending big on AI
Revealed – insurers are spending big on AI | Insurance Business America
Technology
Revealed – insurers are spending big on AI
The tech revolution is coming – and insurers and the finance industry are putting their hands in their pockets
Technology
By
Jonalyn Cueto
As it shifts towards innovation, the US financial sector has emerged as a powerhouse in research and development (R&D) investment, with a surge of 70.4% in spending. The latest data, compiled by R&D specialists at Source Advisors, reveals a trend in the sector for pioneering advancements.
According to the analysis, companies within the finance and insurance industry have ramped up their R&D expenditure, catapulting the total investment to $20.9 billion, a leap from the previous year’s $12.3 billion. This surge not only positions the sector as a frontrunner in innovation but also dwarfs the national average by nearly sevenfold, as per the latest available data from the National Center for Science and Engineering Statistics (NCSES).
The surge in R&D investment is attributed to an increase in spending on new technologies, such as AI.
Moises Romero, senior director of tax controversy at Source Advisors, highlighted the importance of R&D investment.
“Investment in R&D is no longer optional but a strategic necessity to stay ahead in the competitive landscape,” he said. “R&D spend can span a breadth of investment areas, such as design and development of new software components, developing data mining techniques, through to development of risk management systems. With specialist guidance, companies in the finance sector stand to realize substantial savings on their tax bills through R&D tax credits.”
Investing in innovation
Specialist tax experts caution that amid this pursuit of innovation, companies may overlook potential tax savings tied to R&D initiatives. As such, there is a call for finance and insurance firms to evaluate their R&D expenditure vis-à-vis eligibility for R&D tax credits. The average successful claim from the sector stands at a substantial $1.1 million.
The surge in R&D investment is seen as a shift in the sector’s approach, with a notable three-fold rise observed over the past half-decade. Finance and insurance entities now command a share of 1.74% of overall R&D expenditure across the US.
Nathan Flanders, CEO at Mandala Exchange, noted the momentum building in R&D investment, particularly in fintech. “In the rapidly evolving sector of fintech, the allocation of increasing budgets to R&D and innovation is primarily driven by the need to stay ahead in a fiercely competitive market,” he said. “New technologies like blockchain and AI continuously reshape financial services, requiring constant innovation to offer secure, efficient, and user-friendly products.”
He highlighted the importance for companies aligning their R&D investment with strategic objectives to ensure tangible returns on innovation initiatives.
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