The insurance industry is undergoing a transformation similar to the digital overhaul that banking experienced a decade ago. AI adoption has evolved beyond theoretical discussion and proof-of-concept pilots to real-world implementation, impacting every part of the value chain - from underwriting and claims processing to fraud detection and customer service.
Insurers are beginning to realise a fundamental truth: AI will not replace people, but companies that leverage AI effectively will win against those that don’t. It was inevitable really, in an industry built on data, AI’s ability to extract insights, detect patterns, and enhance decision-making is no longer optional, it’s mission-critical.
But governance plays a pivotal role in this transition. Insurers absolutely have to ensure robust oversight of AI, akin to the governance applied to human operations. This includes tight compliance with a wide variety of regulations such as the UK's Consumer Duty, GDPR, and HIPAA in the United States, all of which mandate stringent customer care and data protection standards.
Currently, and I emphasise, currently, the US and UK have adopted pro-innovation stances on AI regulation, which is a massive advantage for the insurance sector. However, insurers must remain vigilant, ensuring that AI applications comply with existing legal frameworks. This includes addressing potential biases, preventing data breaches, and maintaining transparency in AI-driven decisions.
Plus, unlike other industries, insurance faces distinct technical hurdles in AI adoption. Legacy systems, some supporting policies that are decades old, present significant challenges. Remember we are an ageing population, some insurance policies are 60, even 80 years old! Yet, there is still momentum. Insurers are transitioning from theoretical discussions to practical implementations of AI across various functions, including marketing, underwriting, pricing, claims processing, and fraud detection.
I’ve recently seen firsthand how AI can drive measurable impact. A leading LATAM life and health insurer automated the majority of its health reimbursement claims using AI, resulting in higher customer satisfaction and faster claim resolutions, with most claims being settled on the same day they’re submitted. There were also significant cost savings. For a recent piece of research, we spoke to senior claims handlers across a range of insurance companies and they reinforced some of these benefits, with one Head of Claims for a leading insurer in the UK and Ireland telling us “In recent years, customer expectations have really changed. Using AI in claims can help us speed up the process and allow our claims experts to concentrate on helping customers who may require more support or need more urgent assistance.”
As always, internal barriers such as entrenched cultures, outdated systems, and leadership mindsets can impede progress. Successful AI adoption requires clear goal-setting, training, change management, and the integration of best-in-class solutions. It's essential to define expected business outcomes to avoid pilot projects that fail to scale.
In my view, trust in AI-driven claims processing hinges on explainability. Transparency in decision-making processes allows claim handlers to understand and communicate the rationale behind outcomes.
As well as all of this, the insurance industry is grappling with additional challenges such as talent shortages, escalating customer expectations, and rising fraud attempts. In this context, AI is not merely an efficient tool but a necessity. It enables insurers to process claims more swiftly and accurately, detect fraudulent activities and meet the demands of a rapidly changing market.
AI's role extends beyond replacing human tasks, it 100% supports human expertise. By automating routine processes, AI allows insurers to focus on complex cases that require empathy and nuanced judgment. This augmentation is crucial as the industry faces increasing volumes of claims, particularly those related to climate change-induced events, a factor only set to increase. AI works day and night, every day of the week with no annual leave. It’s the only way we’re going to succeed.
The insurance sector's experience with AI offers valuable insights for other regulated industries like healthcare, finance, and legal services. A common misconception is that AI adoption is primarily about efficiency. In reality, it's about enhancing service quality, compliance and customer satisfaction.
For industry leaders aiming to implement AI in heavily regulated environments, the key advice is to balance innovation with rigorous governance. Ensuring that AI systems are transparent, compliant and aligned with the organisation’s values is essential for building trust and achieving sustainable success.
It’s exciting. AI is transforming the insurance industry from a traditional, risk-averse sector to one that is agile, customer-centric and technologically advanced. Embracing AI is no longer optional; it's crucial for insurers aiming to thrive in the modern landscape.
Roi Amir is the CEO of Sprout.ai.
