The Financial Services Compensation Scheme is looking to use artificial intelligence and automation to cut certain costs.
In its annual report and accounts statement published today (July 1), the FSCS said using AI and automating processes has enabled it to avoid approximately £9m in claims handling costs so far.
This meant like-for-like costs of handling claims were down 3 per cent in 2020/21 as a total of 31,737 claims were automatically processed.
However, while this may seem of little consequence to levy payers faced with increasing levy costs, the FCSC re-assured the industry that it was working hard to bring these costs down too.
Caroline Rainbird, chief executive at FSCS, said: “We transformed several areas to improve our service, including using artificial intelligence and automation to help us process claims more efficiently. Our specialist team rigorously checks the accuracy of the results and makes the final decision on claims.
"AI has saved us a great deal of time and money. Over the year we handled an increase in claims that were more complex than ever before, and we reduced costs by 3 per cent on a like-for-like basis.”
She added: "In 2020/21 92 firms failed and FSCS paid £584m in compensation. While I am proud of our response to the demands this presented, I am saddened that this represents more difficulties for consumers and a rising levy.
"I have said before that the levy is far too high, and we must take swift action with the industry and regulators to tackle the causes of the increase."
In the past year the FSCS paid compensation to customers who had experienced losses from 1,131 failed firms, including 92 firms that failed during 2020/21.
Its compensation costs for the year were £584m, up from £527m in 2019-20 which was financed by levies from 45,227 regulated financial services firms.
The FSCS said several factors caused the levy to increase, including an ongoing rise in complex pension advice claims, compensation payments related to London Capital and Finance and more self-invested personal pension operator failures.
Back in January, the lifeboat scheme had forecast its levy for the year to be £1.04bn, which was a jump of 48 per cent on last year’s total.
However in May, the FSCS reduced its levy for 2021/22 by more than £200m to £833m, as it expected firm failures and some claims to be delayed over the next few years.
Rainbird said: “We have been looking at how we can use our data and knowledge to help provide solutions and are working closely with the FCA on this.
"We meet with the industry regularly to discuss how we can better understand why firms fail and help to reduce future levy bills.”
She said the FSCS continued to work with the wider industry in the fight against scams, sharing its data and knowledge with the Financial Conduct Authority and others to help identify and act against those profiting from consumer misery.