Insurers Expand AI Use - Report
By: Josh Recamara
AI is helping insurers automate repetitive tasks, Morningstar says
Insurers are increasing their investment in artificial intelligence as they look to improve efficiency, reduce costs and stay competitive, according to a Morningstar DBRS report.
However, the same tools that promise gains in underwriting and claims handling also raise concerns around risk management, governance, and customer outcomes.
A recent survey by Wipro found that North American insurers have more than doubled the share of their IT budgets allocated to AI, rising from 8% in 2024 to over 20% within a few years. Technologies once limited to advanced underwriting, such as machine learning and predictive analytics, are now used across customer service, claims and fraud detection.
Operationally, AI is helping insurers automate repetitive tasks like generating policy templates, summarizing interactions and analyzing documents. These tools aim to free up staff for higher-value work while cutting processing times and overheads. Some insurers report measurable cost reductions tied to AI-driven automation.
Customer service has also seen a shift. Insurers are deploying chatbots and virtual assistants to guide customers through purchasing decisions and basic service needs. In some cases, tools are being used to recommend products based on individual risk profiles or user behavior. However, customer experience can suffer when chatbots handle complex or sensitive issues, such as claims disputes, without escalation paths.
In claims processing, insurers are using AI to assess damage from photos and estimate repair costs, sometimes before an adjuster is involved. During large-scale events, AI models can quickly assess exposure and project potential losses. In fraud detection, algorithms flag claims for further review based on patterns in company or third-party data.
These efficiencies come with trade-offs. Insurers that rely on AI to reject claims or price policies may face legal or reputational challenges if decisions are found to be biased or based on flawed data. Mispricing and inconsistent underwriting can impact profitability and attract regulatory attention.
While larger insurers tend to have governance frameworks in place, Wipro's research shows that some smaller companies lack clear data policies even when AI use is extensive. This gap increases the risk of errors and weakens oversight.
AI adoption is expected to grow, but insurers face increasing pressure to align innovation with responsible risk management. The long-term benefits will depend on how well companies balance automation with transparency, accountability, and customer trust.