Nearly half of insurance executives surveyed place themselves in the top quartile for AI transformation, despite limited business redesign, data readiness and measurable returns.

Key Findings

• Forty-four percent of respondents place themselves in the top quartile for AI transformation, yet functional redesign and reimagining remain rare across core insurance services.
• Seventy-seven percent believe failing to redesign their enterprise architecture for AI will undermine competitiveness within five years, but 71 percent still use AI mainly for content generation or routine task automation.
• Nearly half of AI budgets go to operational and back-office efficiency, compared with only 5-10 percent for new products and revenue models; just 11 percent have a very clear view of AI return on investment.
• Only 11 percent report strong data foundations and governance to scale AI, while just eight percent rate their workforce as highly proficient in AI tools.

Nearly half of insurance executives surveyed believe their organizations are among the industry’s AI leaders, yet new KPMG International research finds that confidence may be running ahead of meaningful business transformation.

The report, Unlocking AI value in insurance, finds that 44 percent of respondents place themselves in the top quartile for AI transformation and none consider themselves significantly behind. Yet functional redesign remains rare: no surveyed organization reports having fully redesigned sales and distribution or underwriting around AI, while only three percent have reached that stage in policy servicing and claims management.

The findings reveal a growing disconnect between urgency and readiness. While 77 percent believe failing to redesign their enterprise architecture for AI will undermine competitiveness within five years, 71 percent say their primary use of AI remains content generation and routine task automation. Just 29 percent report running front-to-back processes through AI agents or automation, while 68 percent say moving too slowly on AI transformation is a greater risk than moving too fast.

More than nine in ten insurers (92 percent of respondents) say AI is helping improve productivity and reduce operating costs, compared with only one-quarter (25 percent) using it to drive growth through new products, services and AI-enabled offerings. Nearly half of AI budgets are directed towards operational and back-office efficiency, while just 5-10 percent goes to new products and revenue models.

Measurement has not kept pace with spending. Only 11 percent of insurers surveyed describe their view of AI return on investment as very clear, while 23 percent report limited clarity or no clear view. The report suggests this creates a risk that progress is measured through activity and adoption rather than changes in cost, cycle time, customer outcomes or growth.

Only 11 percent of insurers surveyed say they have the strong data foundations and governance needed to scale AI beyond pilots. A further 55 percent describe themselves as moderately ready, while 21 percent are only partially ready and 13 percent are not ready, citing fragmented data, poor quality, unclear ownership and legacy systems.

Data sits at the heart of the insurance industry’s AI ambitions. It underpins everything from underwriting and pricing to claims processing, fraud detection and customer service. As insurers look to use AI to personalize products, improve decision-making and prevent losses before they occur, the quality, accessibility and governance of their data will increasingly determine who can create new sources of value and who remains focused on efficiency gains alone.

Workforce capability and accountability gaps add to the challenge. Just eight percent of insurers surveyed rate their workforce as highly proficient in AI tools, despite 54 percent saying they provide effective AI training. By 2029, 72 percent expect underwriting to operate through a hybrid model with fewer people and redesigned roles, while 36 percent anticipate significant role elimination in claims management and 33 percent in policy servicing.

Technology leaders such as Chief Digital, Technology and Information Officers hold primary accountability for AI in 45 percent of insurance organizations surveyed. However, 43 percent say ownership is centralized but understanding remains uneven beyond leadership, and only 15 percent have AI governance fully integrated into strategic planning.

While much of today’s AI activity is focused on productivity gains and targeted use cases, the report suggests the next phase is likely to center on redesigning customer journeys, operating models and decision-making processes around AI. Over the longer term, AI could enable new approaches to insurance, helping insurers move beyond risk transfer towards more proactive forms of risk management and prevention.