How AI is reshaping the insurance industry
Wide-scale adoption of artificial intelligence is transforming the modern insurance industry from a primarily reactive business to a proactive risk-management and life partner that clients can rely on for personalized, empowering advice and services. At least, this is what Joe Khoury, managing director and partner, Boston Consulting Group’s Insurance Practice, believes.
“AI is shifting insurance from being primarily a reactive risk-transfer business toward becoming a proactive risk-prevention partner. Insurers are no longer just paying claims; they are increasingly using AI-driven insights to anticipate risks, offer mitigation services and personalize products in real time,” Khoury said.
He suggested that in the next five to 10 years, insurers will begin to function more like risk managers and life partners than product providers as AI enables real-time, contextual interventions. For example, a homeowner could receive a personalized alert from their insurer advising them to turn off a valve before a pipe bursts, or a diabetic policyholder could receive AI-driven lifestyle coaching bundled with their coverage.
This prediction comes into sharper focus every day, as some carriers are already leveraging technology for vehicle telematics that not only provides an insurer with information but also actively coaches drivers toward safer behavior. And others, such as John Hancock’s Vitality program, encourage policyholders to live a healthy lifestyle through special benefits and rewards.
In this way, “risk prevention as a service” could become a significant new revenue stream for innovative carriers ready to embrace an AI-powered future.
“Over time, AI could blur the line between insurer, health care provider and consumer tech company. Whoever controls the customer interface and data ecosystem will define the value chain,” Khoury said.
At the same time, AI can potentially level the playing field between some of the largest firms and mid-tier insurers, effectively “democratizing advanced capabilities for regional players” as it gives them access to powerful analytics once reserved for major corporations.
However, today’s insurance industry has many hurdles to overcome before it can fully realize the many possibilities offered by AI.
What hurdles do insurers face with AI?
AI leaders and experts such as Khoury believe insurers face five major challenges when it comes to fully embracing AI:
1. Adoption and scale
2. Talent
3. Regulation, ethics and trust
4. Data ecosystems
5. Internal reluctance
Pilot purgatory
Khoury noted that although many insurers are keenly interested in AI, “many insurers are stuck in ‘pilot purgatory’” — they started enthusiastically with pilot projects but never managed to successfully scale those efforts.
In fact, the 2024 BCG Build for the Future Global Study and Digital Acceleration Index scored insurance at a high 42 AI maturity. This indicates a strong interest in AI adoption, and the only industry with a higher score was tech, media and telecom at 46. BCG noted this score marks “active experimentation.”
That same report found that only 7% of insurance companies managed to scale after that pilot stage, however. It noted that while the pilot phase starts strong, insurers soon “scale back,” as “even when successful on their own terms, these projects raise concerns about the impact they will have on the rest of the company and existing ways of doing business.”
Khoury emphasized that scaling from dozens of pilots to enterprisewide deployment is critical for insurers to realize the full value potential of AI.
AI translators
The insurance industry also needs what Khoury referred to as “translators — professionals who understand both insurance operations and AI capabilities.”
But that is a unique challenge for the industry, as tech-savvy professionals are often more drawn to high-tech careers. A 2025 study conducted by agentic AI platform Counterpart and the Young Risk Professionals organization underscored this issue. It found the insurance industry’s slow adoption of AI is keeping young professionals from seeing insurance as a top career choice.
“If you look at the results from our YRP survey, around 70% of Generation Z workers believe that AI will improve their workflows, but only less than 10% are strongly encouraged to use it. So there’s a big gap happening between what we’re seeing in the broader economy versus what’s happening in insurance,” Tanner Hackett, Counterpart CEO, noted.
Experts on a panel hosted by insurance software solutions company Send suggested the insurance industry must figure out how to change the perception that it is a “boring,” antiquated industry and effectively “bring sexy back” if it hopes to attract young professionals with AI skills.
They acknowledged that the rapid advance of AI is expected to change job roles and create new skills, urging insurers not to ignore the fact that younger professionals want to and expect to use technology in their daily tasks.
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