Human in the loop

Human in the loop means that an AI model does the first draft of a piece of work, and a person checks the draft and approves it before it counts. The model reads the documents, gathers the facts and proposes a decision. The person decides. This is how much back-office work is now done, from paying invoices to deciding insurance claims, including the large back-office teams in India.

Here is how it works in general. A case arrives, such as an invoice, an alert or a claim. The model reads every document in the case and pulls out the facts. It drafts a decision and writes down its reasons. A person reads the draft, checks the evidence, and then approves it, corrects it or rejects it. The system records which person approved each decision. Clear, routine cases may be approved automatically, and only the unusual ones, called exceptions, go to a person.

Why keep a person at all? An AI model can be wrong in a way that sounds confident. This is called AI hallucination. Regulators also want a person to oversee decisions that affect a customer, such as refusing a loan or a claim. They also want the company to name who is responsible for each such decision. In India, a 2025 RBI committee report on AI in finance, called FREE-AI, says that the bank or lender that uses an AI system is responsible for its decisions.

Take, for example, a company's accounts team. Accounts payable automation reads each supplier invoice and matches it to the order, and an employee in the accounts team looks only at the invoices that do not match.

Consider a bank's anti-money laundering team. In AML case management, a model gathers a suspicious customer's history and drafts the investigation, and the investigator reviews it before anything goes to the regulator.

Say a doctor sees a patient. An AI medical scribe listens to the visit and drafts the note, and the doctor reads and signs it.

How is human in the loop different from a fully automatic AI agent? An agent may take the action itself, within limits. In human in the loop, the model only proposes, and nothing happens until a person approves. Many companies start with human in the loop and give the software more freedom as they learn how often it is right. That step is described in agentic automation.