AM Best, a global credit rating agency specialising in the insurance sector, has surveyed carriers and managing general agents (MGAs) to evaluate the growing influence of artificial intelligence (AI) across the industry.
The results indicate that almost 60% of respondents anticipate AI will materially reshape their business models within the next one to three years.
However, AM Best highlights that the most significant obstacles to adoption remain data readiness, cybersecurity and privacy concerns, and the difficulty of integrating AI with legacy systems.
The findings are set out in AM Best’s Best’s Segment Report, titled, Artificial Intelligence Appears to be Ready, But Most Insurers Are Not. Drawing on responses from more than 150 insurers and MGAs with a Best’s Performance Assessment, AM Best reports that adoption is already well underway, with 41% of organisations confirming active use of AI in core business functions.
Around one in five respondents stated that their organisations have reached an advanced stage of implementation, while most indicated that a formal AI policy is already in place. AM Best also notes that insurers appear less concerned about organisational resistance or third-party model risk, but continue to view system vulnerabilities and data quality issues as key challenges.
“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 Many of these legacy systems are outdated and store data in inconsistent formats lacking standardisation,” commented Kaitlin Piasecki, Industry Research Analyst at AM Best.
Sridhar Manyem, Senior Director of Industry Research and Analytics at AM Best, said: “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 modernising their legacy systems and have robust data governance will find it easier to integrate AI into their workflow.”
AM Best’s research also shows that around two thirds of respondents intend to increase their investment in AI over the next 12 to 24 months. The main priorities identified include enhancing employee productivity, reducing operational expenditure, and strengthening underwriting processes, particularly in risk selection and pricing. Among firms already deploying AI, 63% reported modest gains in workforce productivity and satisfaction, while 11% observed notable improvements. Overall, 31% of respondents expect no significant change in staffing levels, whereas 37% anticipate staff being reassigned to higher-value functions.
“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 materialise,” added Jason Hopper, Associate Director of Industry Research and Analytics at 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.”
