AI can cut insurer costs 20% but adoption lags across sector

Firms using the technology can also lift premiums by around 3% to 5%.

Insurers are under pressure from rising claims costs, inflation and more volatile risks, and are turning to artificial intelligence (AI) to protect margins and grow premiums, according to a March 2026 report by Boston Consulting Group. 

The report says these pressures are forcing a reset of the property and casualty insurance model. Claims inflation and higher loss volatility are reducing profitability, whilst competition and distribution changes are making growth harder. 

Insurers are increasing spending on AI, with investment expected to rise from about 0.6% of revenue in 2025 to 1.9% in 2026. 

However, only over a third of property and casualty insurers realise the importance of artificial intelligence in various workflows.

Those that adopt AI more fully are seeing measurable financial impact.

The report says insurers can achieve around 20% cost reductions and increase gross written premiums by about 3% to 5%. 

AI is also helping cut claims handling costs and detect fraud or overpayments earlier. 

In underwriting and claims, AI is being used to automate routine work, speed up decisions and improve pricing accuracy. 

This allows insurers to process more policies without increasing staff and to reduce errors in risk selection. 

Many insurers are still using AI in small, separate projects rather than across the business, which reduces its impact. There are also upfront costs and operational changes needed to fully adopt the technology.