McKinsey & Company, a management consulting firm, argues that artificial intelligence (AI) represents one of the most significant opportunities for value creation within the insurance industry.
In its analysis, McKinsey & Company maintains that the sector’s structural characteristics, including fragmented workflows and extensive repositories of structured and unstructured data, position it well for accelerated technology adoption over the coming years.
McKinsey & Company states that private investors are already directing considerable capital towards selected insurance subsectors, notably distributors, managing general agents (MGAs), software providers and third-party administrators (TPAs).
In the firm’s view, understanding how artificial intelligence is likely to influence these areas is essential for investors seeking to strengthen portfolio performance and create sustainable differentiation. The firm frames this assessment around both current adoption patterns and the longer-term strategic implications of generative and agent-based systems.
According to McKinsey & Company, although overall deal volumes eased in 2025, insurance has continued to attract investment due to its resilience across economic cycles. The firm reports that brokers account for approximately 70% of total transaction volume and experienced a year-on-year decline of about 20 per cent, reflecting increased selectivity in a more mature consolidation environment.
By contrast, MGAs, representing roughly 5% of deal activity, have remained consistently attractive in McKinsey & Company’s assessment because of their capital-light structures and comparatively strong margins supported by specialist underwriting and distribution capabilities.
The firm also highlights sustained investor interest in TPAs, which have recorded average annual growth of around 15% over the past five years, underpinned by recurring revenues and embedded client relationships. In addition, McKinsey & Company identifies insurance software providers, including core systems and analytics platforms, as appealing assets given their subscription-based revenue models and their role as enabling infrastructure across the insurance value chain.
From a geographical perspective, McKinsey & Company reports that the United States accounts for the majority of private equity transactions, reflecting both the scale of the market and the maturity of private ownership. The firm notes that invested capital in Europe has declined at an average annual rate of approximately 18% between 2020 and the first half of 2025.
Over the same period, McKinsey & Company observes that private equity investment in the United States expanded at an annual rate of 26% from 2022 to 2025, exceeding growth in the United Kingdom and continental Europe.
Central to McKinsey & Company’s analysis is the proposition that insurance sits on extensive data assets while still relying heavily on manual processes. At the same time, insurers face rising exposure to complex and evolving risks, including cyber threats and climate-related events. In McKinsey & Company’s assessment, these dynamics create strong incentives for technology deployment.
The firm describes a progression in artificial intelligence capabilities, beginning with established predictive analytics in areas such as fraud detection, pricing and risk modelling, extending to generative AI applications in document-heavy processes such as policy issuance and claims handling, and advancing towards more autonomous agent-based systems capable of managing end-to-end workflows.
McKinsey & Company emphasises that artificial intelligence is more likely to reshape established operating models than to displace them entirely. The firm advises investors to focus on identifying which assets are advancing meaningfully in their AI adoption and how this progress translates into competitive advantage.
In this context, McKinsey & Company estimates that generative AI could generate between $50 billion and $70 billion in additional insurance industry revenue, with particular impact across marketing, customer operations and software engineering. The firm also notes that investors who systematically prioritise operational value creation tend to achieve internal rates of return that exceed peers by two to three percentage points, suggesting that disciplined AI integration may become an important driver of future outperformance.
In the broking segment, McKinsey & Company observes that value creation is shifting from consolidation alone towards vertical integration, improved placement capabilities and enhanced advisory services supported by data. The firm contends that artificial intelligence is positioned to support brokers rather than replace them, enabling more informed client guidance and improved operational efficiency.
McKinsey & Company points to early generative AI applications such as automated submission processing, appetite matching and digital assistance for renewals and cross-selling. Over time, the firm anticipates that more advanced systems may manage straightforward renewals with limited human involvement. Case evidence cited by McKinsey & Company suggests that AI-enabled engagement can increase cross-selling and significantly reduce client attrition through more targeted communication strategies.
Turning to MGAs, McKinsey & Company reports that US premium volumes channelled through these platforms have grown at approximately 14% annually over the past decade, with direct premiums rising from $47 billion in 2020 to $97 billion in 2024. The firm attributes continued private equity interest to favourable economics and scalability. McKinsey & Company identifies multiple AI applications within underwriting, including faster submission handling, refined segmentation, enhanced risk scoring and automated documentation.
The firm also notes early adoption of semi-autonomous underwriting processes capable of quoting and binding simpler risks with minimal intervention. In selected cases reviewed by McKinsey & Company, quoting times have been reduced from several weeks to a matter of days, and in some commercial lines from multiple days to only a few hours.
In the software segment, McKinsey & Company highlights sustained investment growth of roughly 20% annually over five years to mid-2025. The firm observes that insurers are reconsidering legacy architectures and increasingly favouring modular, interoperable environments that support multiple AI applications.
McKinsey & Company suggests that this shift creates opportunities for both specialist AI providers and core platforms capable of enabling open integration. In its view, vendors that facilitate connectivity between data, models and automated agents may become central components of the future insurance technology landscape.
For TPAs, McKinsey & Company acknowledges strong investor interest and steady transaction growth. The firm argues that TPAs’ access to detailed servicing data positions them well to deploy artificial intelligence to enhance speed, consistency and service quality.
However, McKinsey & Company cautions that prevailing commercial models, often linked to headcount or activity levels, may constrain the financial upside of automation. In its assessment, future differentiation will depend not only on technological adoption but also on evolving pricing structures and maintaining cost competitiveness.
McKinsey & Company outlines four investor priorities. First, the firm recommends embedding AI assessment throughout the investment life cycle, from due diligence to portfolio oversight. Secondly, McKinsey & Company advises developing a consistent, firm-wide framework to evaluate use cases, governance and performance metrics.
Thirdly, the firm encourages scenario planning to assess varying adoption trajectories and align capital allocation with technological readiness. Finally, McKinsey & Company stresses the importance of anticipating workforce implications, noting that substantial portions of non-physical work could be affected by automation and will require reskilling and organisational adaptation.
