Consumer confidence in AI within the insurance industry slid to 40% in 2026, down from 46% a year earlier, according to Smart Communications' annual Customer Experience Benchmarks report. The decline signals a mounting trust deficit that could push policyholders to switch providers if insurers fail to balance AI adoption with transparency and security.
Only 39% of consumers are confident that AI tools handle their information securely, and the same share believe AI would use their information ethically. A striking 85% of respondents said it is very important that insurers disclose when AI is used in communications. These findings underscore the challenges facing AI for Insurance as customer skepticism grows.
"This research indicates that organizations are reaching a tipping point," said Leigh Segall, CEO of Smart Communications. "Customer expectations continue to rise, but many businesses are struggling to keep pace. Consumers are telling us they will switch providers when communications fall short or break down across channels, and they are becoming more selective about how and where they trust AI. For regulated industries, where interactions often involve healthcare decisions, insurance claims, financial guidance or government services, the stakes couldn't be higher. The organizations that succeed will be those that simplify complex interactions, apply AI responsibly and transparently, and create experiences that build trust at every step."
What consumers want from AI
Despite the wariness, customers are open to AI if it delivers clear benefits. Faster response times topped the list of priorities, cited by 48% of insurance customers. Higher accuracy followed at 41%, and 37% pointed to cost savings. These preferences suggest that insurers can win back trust by focusing AI efforts on measurable improvements in speed and reliability.
The gap between promise and performance
Many insurers have invested in AI for Customer Support, yet the technology often falls short of expectations. While 56% of consumers believe AI and generative AI will improve the customer experience within five years, only 38% currently find AI-powered tools helpful for resolving questions or completing tasks. One-third of respondents said they would be more willing to accept AI in communications if it offered improved data security.
Privacy fears and the human touch
Data privacy and security remain the dominant concern for 48% of consumers, tied with the 48% who worry about a lack of human oversight. The trust gap is stark: 71% of consumers trust their insurer to handle personal data responsibly, but only 43% trust insurers to use AI responsibly in a way that benefits them. This disconnect highlights the need for insurers to communicate exactly how AI systems use and protect customer information.
Why this matters for insurance professionals
The 2026 data makes one thing clear: customers are not rejecting AI outright, but they are demanding guardrails. Insurance professionals must prioritize transparent disclosure of AI use, demonstrate concrete improvements in response times and accuracy, and maintain visible human oversight. Failing to do so risks losing customers to competitors who get the balance right. The firms that treat trust as a core component of their AI strategy-not an afterthought-will be the ones that retain policyholders in an increasingly skeptical market.
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