New Report Looks at AI Adoption Across Insurance Sector

A new report from KPMG International has some feedback on AI adoption across the insurance industry;

Nearly half of insurance executives surveyed believe their organizations are among the industry’s AI leaders, yet new KPMG International research finds that confidence may be running ahead of meaningful business transformation.

The report, Unlocking AI value in insurance, finds that 44 percent of respondents place themselves in the top quartile for AI transformation and none consider themselves significantly behind. Yet functional redesign remains rare: no surveyed organization reports having fully redesigned sales and distribution or underwriting around AI, while only three percent have reached that stage in policy servicing and claims management.

Urgency is rising faster than transformation

The findings reveal a growing disconnect between urgency and readiness. While 77 percent believe failing to redesign their enterprise architecture for AI will undermine competitiveness within five years, 71 percent say their primary use of AI remains content generation and routine task automation. Just 29 percent report running front-to-back processes through AI agents or automation, while 68 percent say moving too slowly on AI transformation is a greater risk than moving too fast.

Dr Frank Pfaffenzeller, Global Head of Insurance, KPMG International, said:

“The insurance industry understands that AI has the potential to reshape competition, customer expectations and business models. The challenge is that many organizations remain focused on efficiency gains rather than asking how AI might fundamentally change the kind of insurer they could become. The gap between activity and transformation is where the real opportunity and risk now sit.”

Investment remains focused on efficiency

More than nine in ten insurers (92 percent of respondents) say AI is helping improve productivity and reduce operating costs, compared with only one-quarter (25 percent) using it to drive growth through new products, services and AI-enabled offerings. Nearly half of AI budgets are directed towards operational and back-office efficiency, while just 5-10 percent goes to new products and revenue models.

Measurement has not kept pace with spending. Only 11 percent of insurers surveyed describe their view of AI return on investment as very clear, while 23 percent report limited clarity or no clear view. The report suggests this creates a risk that progress is measured through activity and adoption rather than changes in cost, cycle time, customer outcomes or growth.

Data remains the biggest barrier to scale

Only 11 percent of insurers surveyed say they have the strong data foundations and governance needed to scale AI beyond pilots. A further 55 percent describe themselves as moderately ready, while 21 percent are only partially ready and 13 percent are not ready, citing fragmented data, poor quality, unclear ownership and legacy systems.

Data sits at the heart of the insurance industry’s AI ambitions. It underpins everything from underwriting and pricing to claims processing, fraud detection and customer service. As insurers look to use AI to personalize products, improve decision-making and prevent losses before they occur, the quality, accessibility and governance of their data will increasingly determine who can create new sources of value and who remains focused on efficiency gains alone.

People and ownership gaps threaten progress

Workforce capability and accountability gaps add to the challenge. Just eight percent of insurers surveyed rate their workforce as highly proficient in AI tools, despite 54 percent saying they provide effective AI training. By 2029, 72 percent expect underwriting to operate through a hybrid model with fewer people and redesigned roles, while 36 percent anticipate significant role elimination in claims management and 33 percent in policy servicing.

Technology leaders such as Chief Digital, Technology and Information Officers hold primary accountability for AI in 45 percent of insurance organizations surveyed. However, 43 percent say ownership is centralized but understanding remains uneven beyond leadership, and only 15 percent have AI governance fully integrated into strategic planning.

The next horizon of AI transformation

While much of today’s AI activity is focused on productivity gains and targeted use cases, the report suggests the next phase is likely to center on redesigning customer journeys, operating models and decision-making processes around AI. Over the longer term, AI could enable new approaches to insurance, helping insurers move beyond risk transfer towards more proactive forms of risk management and prevention.

Matthew Smith, Global Lead for Insurance Strategy and Transformation and Partner, KPMG in the UK, said:

“The industry has moved beyond asking whether AI matters and is now focused on how to create value from it. The insurers that make the greatest progress are likely to be those that combine trusted data, clear accountability and workforce readiness with a long-term view of transformation. The real opportunity lies not simply in making today’s processes more efficient, but in rethinking the way of working and how risk is understood, managed and prevented in the future.”

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