The insurance industry is at a crossroads. At its core, it exists to respond to risk, but in today's world, climate volatility, cyberattacks, geopolitical disruption, and inflationary pressure are reshaping the landscape faster than legacy systems can keep up. As the cost and complexity of claims rise, insurers are coming under strain.
Enter AI, widely viewed within the industry as the best route to operational efficiency. The sector leaders that are seeing ROI from using AI are already looking towards the next horizon: using the tech as a strategic tool for transformation and modernization.
Indeed, a widening gap is emerging between insurers who view AI as a tactical add-on and those that are embedding it across their business - from operations and product design to talent strategy and customer engagement. For the latter, AI is becoming a true foundation for reinventing legacy insurance practices, and holds the promise of serious competitive edge once these organization-wide benefits are realized.
From efficiency gains to economic shifts
In recent years, the insurance industry has explored AI largely through the lens of efficiency: faster claims processing, lower expense ratios, and automation of routine workflows. And the returns are real. Intact Financial, for example, has reported $150 million in annualised AI value. Travelers has openly linked improvements in its expense ratio to the deployment of AI-infused automation. But these examples, while encouraging, are just the tip of what AI makes possible.
More interesting is what happens when AI begins to shift the economics of the business itself. With more granular data and predictive modelling, insurers are unlocking dynamic pricing and usage-based models that challenge long-held assumptions about risk pooling and premium setting. Rather than responding after the fact, they're beginning to offer real-time, behaviour-driven protection, changing the way value is delivered to customers.
From products to platforms
AI is also accelerating the move away from one-size-fits-all products toward adaptive, personalised services. With access to telematics, wearables, geospatial intelligence, and behavioral data, insurers can now develop coverage that reflects how people actually live, not just who they are demographically.
This opens up new markets, particularly among underinsured populations, and enables insurers to position themselves not as policy vendors, but as partners in safety, wellbeing, and resilience. The shift from static cover to fluid protection is already underway, and AI is the engine making it possible.
This evolution is clearest among the frontrunners. Some insurers are investing in internal tooling, proprietary models, and upskilled talent not just to streamline existing workflows, but to reimagine what they can offer. Whether it's Manulife operationalizing 45 Gen AI use cases, or Munich Re developing AI-specific insurance products, the throughline is the same: a move from being distributors of standardised cover to building insurance systems that adapt to changing circumstances.
Inside the AI-ready insurer
In the
But capability without culture doesn't scale. That's why internal engagement matters just as much. Manulife's effort to involve over 75% of its workforce in generative AI training and experimentation has both HR and PR benefits, but more importantly, it's a way of ensuring AI fluency becomes part of organisational muscle memory.
The insurers investing now are laying the groundwork for long-term resilience. Those waiting on the sidelines may find themselves at a disadvantage in a range of ways: whether that's losing a foothold in the race to innovate, staying profitable, or keeping on top of regulation.
Moving forward responsibly
At its core, insurance is a trust-based industry, and AI introduces new questions around fairness, explainability, and accountability. Yet fewer than half of the insurers in the Index have published Responsible AI (RAI) principles. Even fewer have been transparent about how AI is being used to make decisions, or what outcomes it's delivering.
In a heavily regulated sector where fairness isn't optional, this opacity is a potential liability. It not only puts insurers at risk of future compliance issues, but could undermine public confidence at a time when digital trust is already fragile.
By contrast, those who lead on transparency stand to differentiate themselves as the pace of AI adoption increases. Zurich, for instance, has adopted clear customer-facing AI pledges and included RAI in investor materials and executive communications. Allianz's early investment in AI-aligned talent strategies is now a model others are seeking to replicate.
Becoming AI-first
Over the past year, much of the insurance industry dialogue surrounding AI has been focused on assessing the ROI of the first wave of Gen AI deployments. While it is no doubt critical to assess the efficacy of these early investments as you build, the organizations that will win in the long run will be the ones that transform their organizations to be "AI-first", to re-think what it means to be an insurer, and re-orientate their organization to make it happen.
