US Insurers to More than Double AI Investment in the Next 3-5 Years: Wipro Report Looking into the future, insurers expect AI to transform underwriting, with 68 per cent indicating that it will bring enhanced risk assessment accuracy and cost savings

As insurance firms look to leverage artificial intelligence (AI) to transform their core processes, 81 per cent of firms are planning to increase AI spending within the next year and most firms are looking to more than double their AI budgets – from 8 per cent today to 20 per cent in the next 3-5 years, according to a report titled 'The AI Advantage: Building Tomorrow's Insurance Enterprise' by Wipro.

The report includes responses from 100 business leaders from US insurance companies with revenues surpassing USD 500 million, reveals an industry actively embracing AI's potential. The findings are relevant for the Indian IT services industry as banking, financial services and insurance (BFSI) is one of the largest verticals for most of the players.

Almost all (92 per cent) of respondents agree that AI is essential for maintaining their competitive edge in customer experience and personalization. However, the findings point to a two-speed market, where larger firms lead AI adoption - with their robust governance frameworks and vast data resources - while many mid-sized and smaller firms face hurdles from legacy systems to limited AI expertise.

Underwriting is one of the main areas where insurers are aiming to derive value from AI. With its ability to process large volumes of structured and unstructured data, AI is increasingly helping insurers realize enhanced efficiencies and precision in underwriting. While all insurers are working to integrate AI into the underwriting process, only less than half (46 per cent) say they have extensively implemented AI systems into their underwriting workflows.

Looking into the future, insurers expect AI to transform underwriting, with 68 per cent indicating that it will bring enhanced risk assessment accuracy and cost savings, 65 per cent saying that it will enhance compliance with regulatory requirements, and 62 per cent anticipating improved customer satisfaction and retention using AI.

One of the main challenges in AI adoption is external and internal risks, according to the findings of the survey. While AI enables faster and more accurate decisions, it also introduces risks of bias and reputational damage. Alarmingly, 21 per cent of insurers – 44 per cent of smaller firms still lack formal AI usage policies, leaving them exposed to compliance challenges as AI regulations evolve.

Integration is another pressing concern for AI adoption in insurance, with 71 per cent of insurers citing difficulties merging AI with legacy systems. In tackling this challenge, most (65 per cent) firms are adopting a phased approach to implementation to mitigate risk and ensure smoother integration.

Inter-departmental collaboration is emerging as a top priority as firms look to reap the maximum benefits from AI implementation. Forty-one percent of firms say that they are reinforcing cross-functional collaboration between AI experts and underwriters. Meanwhile, almost half (47 per cent) of the respondents say they are investing in upskilling their workforce and hiring AI talent to ensure they have the right skillset for an AI-first era.

"AI adoption is no longer optional, it is essential to future success," said Ritesh Talapatra, Vice President and Sector Head for Capital Markets and Insurance, Wipro. "As firms that drive enterprise-wide AI adoption start to reap the flywheel effects, those slower to adapt will risk being left behind. Investing in a strong data, governance and technical foundation, and aligning AI initiatives to shared business objectives will be critical to success. For firms starting on the journey, prioritizing quick wins and investing in building the foundation necessary for scale will be the key. Ultimately, the industry will need to recognize that AI is not just an innovation, it is the new foundation of success in insurance."