Insurers can cut costs 20% with AI, but most aren't doing it
Property and casualty insurers using artificial intelligence are reducing operating costs by about 20% and lifting premiums by 3% to 5%, according to a March 2026 report by Boston Consulting Group. Yet fewer than one-third of insurers across the sector say they recognize AI's importance to their workflows.
The gap between potential and practice reflects a broader challenge. Rising claims costs, inflation, and volatile risks are squeezing margins. Competition and shifts in how insurance reaches customers are making growth harder. Insurers see AI as a way to protect profitability, but adoption remains scattered.
Where insurers are spending
Investment in AI is climbing. Insurers are expected to increase spending from 0.6% of revenue in 2025 to 1.9% in 2026. Those committing to broader adoption are seeing measurable returns on that investment.
In underwriting and claims, AI automates routine decisions, speeds up approvals, and improves pricing accuracy. Insurers can process more policies without hiring additional staff. The technology also catches fraud and overpayments earlier, reducing claims handling costs.
Why adoption lags
Most insurers treat AI as isolated projects rather than integrated tools across the business. That fragmented approach limits impact. Upfront costs and the operational changes required to fully deploy the technology also slow rollout.
For insurers facing margin pressure, the economics are clear. The question is whether they can execute the changes needed to realize those gains. Learn more about AI for Insurance or explore how AI Agents & Automation can streamline workflows.
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