Insurers Eye AI Gains as Data, Security Hurdles Persist

An AM Best survey of insurers and managing general agents (MGAs) shows widespread expectations that artificial intelligence (AI) will reshape the industry, though significant operational barriers remain. Nearly 60 percent of respondents said AI will significantly transform their business models within 1 to 3 years, according to the Best's Segment Report, "Artificial Intelligence Appears to be Ready, But Most Insurers Are Not."

The survey, which includes responses from more than 150 rated insurers and MGAs with a Best's Performance Assessment, indicates that adoption is already underway. Forty-one percent of respondents said their organizations are actively using AI across core business areas, while nearly twenty percent reported being at an advanced stage of implementation. A majority also said their companies have formal AI policies in place.

Despite this momentum, respondents identified data readiness, security and privacy concerns, and integration with legacy systems as the most significant obstacles to broader deployment. The potential for breaches of AI systems and inconsistent or unstructured data were cited as key risks, outweighing concerns about change resistance or third-party model risk.

"AI systems are heavily dependent on high-quality, clean, and well-structured data. Legacy systems can create significant barriers when implementing AI because they simply were not built for this type of data integration. Many of these legacy systems are outdated and store data in inconsistent formats lacking standardization," said Kaitlin Piasecki, industry research analyst, AM Best.

"AI systems can produce unreliable outputs when underlying data is of poor quality, fragmented across legacy systems, insufficiently governed, or lacking appropriate context. Insurers that have invested in modernizing their legacy systems and have robust data governance will find it easier to integrate AI into their workflow," said Sridhar Manyem, senior director, industry research and analytics, AM Best.

Investment in AI is expected to grow, with roughly two-thirds of respondents planning to increase spending over the next 12 to 24 months. Key objectives include improving employee productivity, reducing operating costs, and enhancing underwriting capabilities for risk selection and pricing.

Among organizations that have already implemented AI, 63 percent reported modest gains in workforce productivity and satisfaction, while 11 percent cited significant improvements. Workforce impacts appear limited for now, with 31 percent expecting no material staffing changes and 37 percent anticipating redeployment of employees to higher-value tasks.

"Given that this technology is still relatively new, a return on investment in AI would be difficult to measure at this stage; the cost benefits will likely take years to materialize," said Jason Hopper, associate director, industry research and analytics, AM Best. "Insurance roles, especially those that require judgment, critical thinking, and accountability, were ones respondents felt AI wouldn't yet be able to fully replicate."

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