A new report from Boston Consulting Group (BCG) highlights that while insurers are investing heavily in AI, many still fail to realize its full potential. The report warns that spreading resources too thinly across numerous functions risks wasting valuable opportunities. Instead, insurers are advised to concentrate AI investments on high-impact areas that can significantly improve profit and loss.
BCG’s analysis underscores the importance of concentrating AI efforts in specific, high-value areas before broadening initiatives across other functions. According to the firm, areas such as underwriting, customer service, claims management, and sales are where AI delivers measurable results when implemented at scale.
For example, in commercial property and casualty insurance, particularly in the U.S. and UK, AI can boost efficiency in complex lines of business by up to 36%. This is mainly due to AI’s ability to augment human decision-making in underwriting. The integration of previously inaccessible unstructured data in underwriting decisions has also been shown to improve loss ratios by as much as three percentage points.
In customer service, equipping staff with AI-powered tools has resulted in productivity improvements exceeding 30%. AI-powered knowledge assistants – systems that provide quick access to critical information – account for nearly two-thirds of these productivity gains.
AI in Claims and Cloud Migration
BCG also highlights how AI adoption has delivered significant returns in claims management. Automation tools are transforming processes such as first-notice-of-loss data capture, document processing, and triaging. These improvements have led to a 20% reduction in costs and a 50% increase in processing speeds.
For basic claims, automation now enables real-time resolution in 70% of cases, cutting operational costs by up to 50% and improving customer satisfaction through faster, more transparent service.
On the sales side, AI’s role varies depending on the distribution model. In direct channels, AI-powered agents process large volumes of leads, guiding customers toward the most appropriate sales paths. In broker-based models, AI automates administrative tasks that typically take up over half of an agent’s time, boosting productivity and allowing agents to focus on higher-value client work.
AI is making a major impact in information technology. One European insurer has rolled out an AI-led “smart migration” program, designed to transition more than half of its product base from legacy systems to cloud platforms. This initiative is expected to cut migration time by 50% and reduce associated costs by 30%.
Optimizing AI’s Potential Requires Rethinking Operating Models
BCG advocates for a strategic overhaul of operating models to maximize AI’s potential. Insurers need to track AI outcomes directly through their profit and loss sheet and avoid treating AI as a passive addition.
One of the biggest risks insurers face is the failure to build human capabilities alongside their AI investments. BCG recommends allocating 10% of resources to algorithms, 20% to technology and data, and the remaining 70% to the human dimension, which includes training, role development, workflows, and cross-functional collaboration between IT and business teams.
Reworking Internal Structures
Too often, insurers fail to align their AI tools with broader strategic goals, resulting in disconnected systems with limited impact. BCG argues that AI cannot replace the need for clear business direction. However, it can dramatically accelerate growth and efficiency if applied correctly.
“Most companies fall short by not redesigning their operating models and failing to track value directly through the P&L,” BCG stated. Success with AI, the report asserts, comes from reshaping operations around AI and empowering employees to use these systems effectively.
In conclusion, AI in insurtech is not just about innovation – it’s about applying AI deliberately and targeting high-impact areas. Insurers that focus on these areas, reshape their operations accordingly, and invest in the human aspect will be the ones that see substantial returns.
