The insurance industry is facing pressure from all sides. Customer expectations are rising, as they expect the same sort of nearly instant responses they get when shopping or viewing bank balances online--creating problems for carriers that still rely on manual, paper-driven workflows. Yet regulators are requiring fairness and transparency even as the pace quickens. And newcomers with modern tech stacks are capturing market share.
This is the reality of today's insurance industry. Research published in Frontiers in Artificial Intelligence shows that AI is already transforming underwriting, fraud detection, and claims management. At the same time, customer churn is accelerating due to yearly rising rates, claim severity, and cost increases.
The stakes for success could not be higher. The technology to achieve success already exists, and its adoption is accelerating. Forward-leaning carriers are already leveraging it, gaining efficiency and customer loyalty. If organizations choose not to act, they risk being left behind by both the industry and, most importantly, the policyholders.
Reimagining Insurance in the AI Age
AI brings with it the unbound potential to elevate the way insurers operate. At the core is the ability to extract valuable insights from years of unstructured data. Take underwriting. Traditionally, it has been a data-heavy process; however, when an underwriter is augmented with AI, they can make faster, more accurate risk assessments. This accelerated process is enabled in part by the insurer's expertise and AI's ability to analyze vast datasets and identify emerging trends and patterns that may have otherwise remained buried in their records.
Claims processing is another area that can experience an efficiency boost by leveraging AI. Automated systems powered by AI can analyze claims data more efficiently, speeding up decision-making and reducing the time it takes to settle claims. In an industry where customer experience is paramount, a quicker claims process is one of the keys to both maintaining and improving satisfaction and loyalty.
Some major insurance carriers who have adopted this approach include:
- Lemonade: Using its claims handling AI agent, aptly named AI Jim, Lemonade can resolve simple property claims in seconds or minutes. While there are still claims that will need human intervention, Lemonade makes funds available one to two days after claim approval.
- Allstate: The claims process is often complex and riddled with insurance jargon. To avoid these complexities, Allstate automated communications with AI to improve efficiency, customer experience, and bring empathy back to the industry.
Another financial impact of AI-enhanced systems is their ability to help identify fraud by flagging suspicious patterns and anomalies. This detection ability is critical in protecting insurers from hemorrhaging profits due to fraudulent losses.
Where to Unlock Business Value With AI
For many insurers, daily operations are dominated by routine. This means agents and adjusters spend valuable hours navigating paperwork across siloed and legacy systems, leaving less time for meaningful customer interactions. By embedding AI into core processes, carriers have an opportunity to shift their workforce's focus toward higher-value activities that directly affect satisfaction, loyalty, and retention.
To ensure that this integration is done correctly, carriers should look for areas where AI-driven solutions will provide real returns on investments, including:
- Repetitive tasks: Today, adjusters spend hours on data entry and form processing. AI can automate intake, document classification, and updates, freeing time for customer service.
- Real-time decision support: Adjusters must piece together information from multiple sources while customers wait. AI can surface policy details, claim history, and regulatory guidance instantly during conversations.
- Cross-system orchestration: Staff often toggle between claims platforms, CRMs, and document repositories. AI can connect these systems and present a unified view, speeding up responses.
- Complex pattern recognition: Fraud detection still depends on manual review of anomalies. AI can flag suspicious patterns early, guiding investigators to high-risk cases more efficiently.
- Where humans & AI can collaborate: Employees are stretched thin between admin work and customer care. By handling repetitive tasks, AI empowers adjusters to focus on empathy, trust-building, and problem-solving.
By shifting the balance from routine to meaningful work, AI enables insurers to improve both operational efficiency and customer loyalty.
Meeting Today's Expectations
Customer expectations have reached a breaking point. Policyholders demand instant support, yet too often encounter rigid scripts instead of real solutions. A 2025 study by J.D. Power found that 57% of customers are shopping for insurance year over year, a staggering jump from 49% in 2024.
It's not a complex equation: Insurers with superior customer experience see higher returns by unleashing human expertise for relationships, judgment, and empathy—not by eliminating jobs. To build on positive customer experiences, insurers should leverage AI to instantly handle claims while meeting rising standards for compliance, privacy, and fairness. The path forward is clear: innovation depends on strategic human-AI orchestration.
