Kathmandu. Insurance companies are under pressure from rising claims costs, inflation and high-risk volatility. Companies are using artificial intelligence (AI) to secure margins and increase premiums.
According to a March 2026 report by the Boston Consulting Group, these pressures are forcing a reshape of the property and casualty insurance model. High claims and high deficit volatility are eroding profits. However, competition and changes in distribution are making growth difficult.
Insurance companies are ramping up spending on AI, and investments are expected to account for about 0.6% of revenue in 2025 to 1.9% in 2026. However, only a third of property and casualty insurance companies have understood the importance of AI in various workflows. Those who fully embrace AI are seeing significant financial implications.
Reports indicate that insurance companies can reduce expenses by about 20% and increase total premiums by about 3% to 5%. AI is also helping to reduce claims handling costs and detect fraud or overpayment in advance.
AI in underwriting and claims is being used to automate routine tasks, increase decision-making speed, and improve pricing accuracy. This allows insurance companies to process more policies without overstaffing and reduce risk selection errors.
Many insurance companies are still using AI in smaller and more isolated projects than in the entire business. Which reduces its effect. Full adoption of the technology also requires initial cost and operational changes. –Agency
