FCA Wary of AI in Insurance; Harmonic Aims for Mathematical Breakthrough

Artificial intelligence is transforming the financial sector, with regulators highlighting potential “uninsurable” risks while innovative applications emerge in small business money management and mathematical problem-solving.

As the United Kingdom’s Financial Conduct Authority (FCA) urges caution, China’s MYbank uses AI to boost small business financial planning, and startup Harmonic secures $75 million to develop mathematical superintelligence.

FCA CEO Nikhil Rathi cautioned that AI in the insurance industry could render some individuals “uninsurable,” even as he urged the sector to embrace technological innovation, the Financial Times reported.

Rathi highlighted the potential benefits of AI-driven personalization in insurance but warned of risks, including discrimination and accessibility issues.

“We want safe and responsible use of AI to drive beneficial innovation, but also an open conversation about the risks and trade-offs,” Rathi said, per the report.

The regulator’s comments came amid growing scrutiny of AI applications in financial services. While the FCA has few specific rules governing AI use, it continues to monitor its adoption closely.

Rathi encouraged the industry to experiment with new technologies, suggesting that the benefits to most consumers and long-term economic growth might outweigh potential drawbacks, the report said. He also acknowledged tensions between existing regulations and the demands of a rapidly digitizing financial services market.

The FCA chief’s remarks underscore the balance regulators face in fostering innovation while protecting consumers in an increasingly AI-driven financial landscape.

MYbank unveiled an AI-powered system that predicts cash flow for small- to medium-sized businesses (SMBs) with over 95% accuracy, potentially changing how Chinese SMBs manage money, according to a Sept. 6 press release.

The “Cuckoo System” uses Ant Group’s BaiLing foundation model to forecast when SMBs will buy or sell investment products. This helps banks optimize fund use and boost returns.

MYbank President Feng Liang said in the release that the AI tool addresses SMBs’ need for secure, flexible investments matching their cash cycles.

The system stems from MYbank’s experience with 53 million SMBs. It’s already used by five investment firms for seven SMB-focused products.

Experts see big potential. McKinsey projects China’s bank investment market hitting 50 trillion yuan (about $7.1 trillion) by 2030, with SMBs doubling their share over the next five years, the release said.

MYbank, a digital-only bank launched in 2015, is known for its “310 model” offering rapid, AI-assessed small business loans, per the release.

The move highlights AI’s growing role in finance, especially for underserved sectors like SMBs. By aligning financial products with SMBs’ operational cycles, the AI system aims to maximize efficiency in their financial management and support real economic growth.

Palo Alto, California-based Harmonic raised $75 million in Series A funding to develop what it calls mathematical superintelligence, according to a Monday (Sept. 23) press release.

The round, led by Sequoia Capital with participation from Index Ventures, values the company at $325 million, per the release. Additional investors included Era Funds, GreatPoint Ventures, and celebrities Nikesh Arora and Jared Leto.

Harmonic, founded in 2023, aims to create AI with mathematical abilities surpassing humans. Its Aristotle model achieves 90% accuracy on a leading formal mathematics benchmark, the release said.

Co-founder and CEO Tudor Achim said in the release that mathematical superintelligence could eliminate AI hallucinations through “formal verification” and overcome data limitations via “self-play and synthetic data.”

Potential applications include software engineering, industrial design and medical technology.

Robinhood CEO Vlad Tenev, Harmonic’s co-founder and executive chairman, called mathematical superintelligence “the next frontier in AI,” per the release.

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