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Reimagining Insurance in the Age of Artificial Intelligence

Author

Abhi Bakre
Partner, AI Strategy and Transformation; Life, Annuities, and Group Insurance
IBM Consulting

December 2025

For decades, life and annuity, and group insurers have pursued productivity — streamlining operations, automating manual tasks, and centralizing functions to control cost. These efforts created stability and efficiency, often delivering meaningful savings in an industry where margins are thin.

But the ground has shifted. Macro forces are reshaping the market: aging populations and longer lifespans are widening the retirement and protection gap; employers are demanding more flexible, digital-first benefits to compete for talent; and policyholders expect experiences on par with leading consumer technology. At the same time, new entrants and disruptors are testing the boundaries of speed, personalization and cost.

Insurers are locked in a race for productivity — cutting cycle times, automating workflows, and lowering costs. These gains are real, but they are also table stakes. The greater and largely untapped opportunity is growth: using artificial intelligence (AI) to accelerate product launches, win large-case takeovers, improve persistency, and differentiate customer and broker experiences.

Productivity Baseline

IBM’s Insurance in the AI Era study shows that insurers still direct about 40 percent of their AI investments toward operational efficiency. That focus has impact:

  • Reduced claims processing times by 18.6 percent
  • Accelerated time to market for new products by 15.4 percent
  • Increased client retention by 14 percent and Net Promoter Score (NPS) by 48 percent through generative AI (GenAI) in client-facing systems

These improvements matter. Faster claims build trust, quicker product launches create agility, and better retention strengthens profitability. But they are only the baseline. In 18 months, every carrier will be touting faster claims and cheaper servicing. Those gains will quickly become invisible. The only carriers who stand apart will be the ones using AI to grow markets and redefine the client experience.

The GenAI Divide

The risk of stopping at productivity is clear. MIT NANDA’s The GenAI Divide (2025) found that despite billions in enterprise investment, 95 percent of AI pilots fail to deliver measurable ROI. Why? Many organizations adopt generic GenAI tools like ChatGPT or Copilot, which boost individual productivity but rarely translate into enterprise outcomes.

The study highlights that only a small subset of enterprises succeed by building learning-capable systems — AI that adapts to context, integrates with workflows, and continuously improves. Meanwhile, a “shadow AI economy” has emerged: Over 90 percent of employees report using unsanctioned AI tools to get their work done.

AI transformation is first and foremost a change journey. The technology is ready, but people, roles, and culture must evolve to unlock its value. Without workforce change, AI delivers pilots; with it, AI delivers enterprisewide impact. For life and annuities, and group carriers, this means redesigning roles, rethinking broker and client interactions, and building a culture of trust and adoption that allows AI to move beyond efficiency into growth.

Growth Opportunities

The growth levers are clear:

  • In group insurance, digital onboarding and billing simplification reduce friction and open the door for large-case takeovers. Personalized employer servicing builds loyalty and improves persistency.
  • In life and annuity, accelerated underwriting and issuance shorten the path from prospect to policyowner, while AI-assisted claims and servicing improve client satisfaction and retention.
  • Across both, AI opens new revenue opportunities: modular product designs to compete in voluntary and worksite benefits, AI-driven cross-sell and upsell strategies for deeper wallet share, and ecosystem partnerships that embed insurance into payroll, human resource information systems (HRIS), and benefits platforms.

Growth in these markets will be defined not by cost efficiency but by experience and reach. Carriers that use AI to expand distribution, anticipate client needs, and deliver personalized, transparent interactions will grow faster than those that stop at productivity.

Case in Point

We at IBM are working with a leading carrier to radically reimagine its business. The initial scope is focused, but the impact is already clear. Digital workers are replacing repetitive tasks, freeing capacity across operations. Human talent is being redeployed into strategic, client-facing roles. Workflows are being streamlined around customers and brokers to cut friction in onboarding, servicing and claims.

The carrier is beginning to measure success in new ways — shifting from cost per policy to growth per client. Even in its early phases, the program is creating the conditions for market-leading performance and setting the foundation for broader enterprise transformation.

Leadership Agenda

Nearly 20 percent faster claims and 15 percent quicker product launches matter, but they are not what will define the next decade. The carriers that use AI to open new markets, deepen client and broker relationships, and create experiences that competitors cannot match will seize the real prize — growth.

For life, annuities and group insurance executives, the implications are clear:

  • Productivity is table stakes. Efficiency gains are the warm-up lap, not the finish line.
  • Growth is the untapped prize. Retention, distribution strength, and differentiated experiences are the true measures of leadership.
  • Distribution is the growth lever. AI must strengthen — not sideline — brokers, advisors, and agents, giving them better insights, transparency and client tools.
  • Trust is the growth enabler. Clients and brokers won’t reward speed alone. They reward carriers who combine AI with fairness, transparency and accountability.
  • Choices today determine position tomorrow. Carriers who pivot now — using AI as a growth engine, not just an efficiency play — will reset their competitive trajectory.

Leadership in this era requires bold decisions. It means embedding AI into operating models, modernizing the technology stack, and strengthening the data foundations that allow AI to learn, adapt and scale. It requires building trust with regulators and clients, and cultivating the skills and governance that enable enterprisewide adoption. Most of all, it means orienting the business toward growth as the destination.

Call to Action

Life and annuity, and group insurers have a unique opportunity. By moving beyond a productivity lens and deploying AI as a growth engine, they can reshape market position — capturing share, boosting retention, and winning loyalty in ways cost savings alone never could.

The data are compelling. The technology is ready. The workforce is eager. The only question is how leaders choose to use it.

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