Kathmandu. Insurance companies are increasing spending on artificial intelligence (AI) to reduce claims costs and improve actuariality. However, many companies are still struggling to get good returns due to outdated systems and fragmented data.
A March report by Boston Consulting Group Inc said that AI investments in property and casualty insurance companies are expected to account for 1.9 percent of revenue in 2026, more than three times in 2026 from a year earlier. Insurers that deeply integrate AI into their operations can reduce costs by about 20 per cent and increase total premiums by up to 5 per cent, the consultant said.
Insurance companies are already using AI to automate routine tasks, improve pricing accuracy, and detect fraud earlier. Limiting its financial impact, Boston Consulting said, “However, many companies do this in isolated areas of their business. ’
In a separate survey conducted by AM in April, Best Companies Inc. found that nearly 60 percent of insurance companies expect AI to change their business models between 2027 and 2029. Caitlin Piasecki, industry research analyst at AM Best, said in the report, “Legacy systems can pose major obstacles when implementing AI. Because they weren’t designed for this kind of data integration. ’
“When data is scattered or poorly organized, AI doesn’t provide reliable results,” said Sridhar Manyam, senior director of industry research and analytics at AM Best.
Despite the challenges, interest in technology remains strong. According to AM Best, two-thirds of the world’s insurance companies plan to increase AI investments from 2026 to 2028.
Among insurance companies already using AI tools, 63 percent said there was a slight improvement in productivity. While 11 percent said they had seen significant gains in the productivity of each of their employees. –Agency
