AM Best, a global credit rating agency focused on the insurance industry, surveyed carriers and managing general agents (MGAs) to assess the growing influence of artificial intelligence (AI) across the industry.
The results show that nearly 60% of respondents expect AI to materially reshape their business models within the next one to three years.
However, AM Best emphasized that the biggest barriers to adoption remain data preparation, cybersecurity and privacy concerns, and the difficulty of integrating AI with legacy systems.
The findings are contained in AM Best’s Best Segmentation Report, titled: Artificial intelligence appears to be ready, but most insurance companies are not. Based on Best performance review feedback from more than 150 insurance companies and MGAs, AM Best reports that AI adoption is already well underway, with 41% of organizations confirming active use of AI in core business functions.
About one-fifth of respondents said their organization had reached an advanced stage of implementation, while the majority said a formal AI policy was already in place. AM Best also noted that insurers appear to be less concerned about organizational resistance or third-party model risk, but still see system vulnerabilities and data quality issues as key challenges.
AM Best Industry Research Analyst Kaitlin Piasecki commented: “AI systems rely heavily on high-quality, clean, and well-structured data. Legacy systems can pose significant obstacles when implementing AI because they are simply not built for this type of data integration. Many of these legacy systems are outdated and store data in inconsistent formats that lack standardization.”
Sridhar Manyem, senior director of industry research and analysis at AM Best, said: “AI systems can produce unreliable outputs when the underlying data is of poor quality, legacy systems are fragmented, poorly governed or lack proper context. Insurers that invest in legacy system modernization and have strong data governance will find it easier to integrate AI into their workflows.”
AM Best’s research also shows that about two-thirds of respondents intend to increase investment in artificial intelligence in the next 12 to 24 months. Key priorities identified include improving employee productivity, reducing operating expenses and enhancing underwriting processes, particularly in terms of risk selection and pricing. Among companies that have deployed AI, 63% reported slight improvements in employee productivity and satisfaction, while 11% observed significant improvements. Overall, 31% of respondents do not expect significant changes to staffing levels, while 37% expect employees to be reallocated to higher value functions.
Jason Hopper, associate director of industry research and analysis at AM Best, added: “Given that the technology is still relatively new, it is difficult to measure the return on investment of AI at this stage; cost benefits may take years to realize.” “Insurance roles, especially those that require judgment, critical thinking and responsibility, respondents believe that AI cannot yet fully replicate.”