While artificial intelligence (AI) is delivering tangible gains for property and casualty (P&C) insurers, retail P&C distribution is the area most vulnerable to near-term disruption due to its high transaction volumes, routine processes and the commoditised nature of its services, according to Moody’s Ratings.
In a recent report, Moody’s outlined that AI holds the promise of significant long-term benefits for banks, insurers and asset managers, although measurable gains remain modest so far.
The report examines how AI introduces costs, creates divergence and reshapes risk across the financial institution space.
Specifically for the insurance sector, Moody’s noted that AI is delivering some gains in underwriting, pricing, claims management and capital and reserving analysis.
AI promises to lower operating costs and improve underwriting productivity for P&C insurers; however, retail P&C distribution is the area most vulnerable to near-term disruption.
Meanwhile, the impact on life insurers will be more muted, reflecting their complexity, longer-dated liabilities and stricter conduct requirements.
Moody’s said the insurance industry has generally been cautious about applying AI to core underwriting and reserving decisions. Overall, AI-related benefits for insurers will likely be material but incremental.
The report highlighted that successful AI deployment hinges on building AI-native architectures, a capability that favours larger players with strong data infrastructure and financial firepower. Smaller firms can compete through greater agility, but the structural advantage tilts sharply towards scale.
Moody’s stressed that AI creates new vulnerabilities faster than it reduces existing ones. While AI mitigates risks tied to human-intensive processes, it introduces material new exposures, including operational, regulatory and litigation risks; greater vendor dependence; governance complexity; and heightened tail risks around data privacy, quality and security. Insurers also face escalating exposure to cyberattacks, fraud and deposit volatility.
