The Use of AI in the Insurance Industry
Artificial intelligence (AI) is rapidly reshaping the insurance industry by automating tasks, enhancing efficiency and transforming the role of insurance professionals. Traditionally, insurance professionals have been responsible for manual data entry, administrative tasks and client assessments. AI streamlines these processes, enabling them to focus on high-value activities such as risk analysis, portfolio management and providing bespoke advice to clients.
AI-powered automation has also led to significant cost reductions by eliminating repetitive tasks such as document analysis and data input. This translates into faster quote processing, improved risk assessment and potentially lower premiums for customers. A recent KPMG study found that insurers expect a moderate to very high return on AI investment, with unanimous agreement that AI adoption will provide a competitive edge.
However, AI’s integration into insurance is not without challenges. Ethical concerns, such as algorithmic bias, data privacy and transparency, must be addressed to ensure fair outcomes for consumers. Regulators are closely monitoring AI’s impact to prevent discriminatory practices and ensure AI systems deliver reliable results.
International Overview of AI Regulation in Insurance
The global regulatory landscape for AI in insurance is evolving rapidly. In 2024, the European Union introduced its AI Act , providing a comprehensive framework for AI governance. The AI Act aims to ensure safe and transparent AI usage while maintaining innovation. Insurers operating in the EU must comply with these regulations, which emphasise risk management, data protection and accountability.
Other regions are also shaping AI policies. The United States has introduced state-level regulations, while Japan and Singapore are actively developing AI regulatory frameworks. Given AI’s rapid evolution, regulators worldwide are expected to refine and expand their legal frameworks to address emerging risks.
The UK Overview and Keir Starmer’s Speech
Unlike the EU, the UK has opted for a sector-based approach to AI regulation, focusing on managing risks rather than enforcing a single, unified regulatory framework. However, the landscape is shifting. On March 4, 2025, the Artificial Intelligence (Regulation) Bill passed its first reading in the House of Lords. This bill seeks to establish an AI Authority that will oversee sector-specific regulators to ensure consistency in AI governance.
The UK government’s interest in AI extends beyond regulation. In a speech on March 14, Prime Minister Keir Starmer outlined plans to leverage AI within the civil service to drive efficiency and generate £45 billion in savings. The initiative aims to replace certain administrative roles with AI-powered automation, mirroring trends in the insurance sector.
Insurance industry leaders, such as Concirrus, recognise the similarities between AI’s impact on government operations and its role in insurance. AI’s ability to streamline underwriting and broking, enhance risk assessment and lower costs is poised to revolutionise the industry. However, as the PM’s AI push gains momentum, insurers must proactively integrate AI to remain competitive.
Future Directions
As AI adoption accelerates, insurers face a crucial decision: embrace AI-driven innovation or risk falling behind. AI is not just a tool for cost-cutting. It is a powerful driver of efficiency, customer experience and market advantage.
In the near future, insurers will need to focus on several key areas:
- Regulatory Compliance: As AI laws evolve, insurers must stay ahead of regulatory changes to ensure compliance with new frameworks.
- Ethical AI Development: Addressing concerns like algorithmic bias and data protection will be essential to maintain consumer trust and avoid legal challenges.
- Workforce Transformation: Rather than replacing human roles, AI will shift responsibilities, requiring insurers to invest in training and upskilling employees to work alongside AI systems.
- Innovation and Competitive Strategy: Companies that integrate AI effectively will benefit from improved efficiency, faster decision-making and better risk assessment, giving them an edge in an increasingly digital marketplace.
As the UK government leads the charge in AI-driven reform, the insurance sector must follow suit. The discussion is no longer about whether AI will transform insurance but rather how quickly and effectively insurers can harness its potential to thrive in a rapidly evolving industry.
