Overview
More than nine in ten insurers, or 92% of respondents, say AI is improving productivity and reducing operating costs. Only 25% are using the technology to pursue growth through new products, services and AI-enabled offerings, according to KPMG International’s report.
Spending patterns show the same imbalance. Nearly half of insurers’ AI budgets are directed toward operational and back-office efficiency, while only 5% to 10% goes to new products and revenue models.
Measurement hasn’t kept pace with that spending. Just 11% of insurers surveyed describe their view of AI return on investment as very clear, while 23% report limited clarity or no clear view.
The report warns that weak measurement leaves insurers at risk of tracking activity and adoption instead of actual business results. More useful measures include changes in operating cost, cycle time, customer outcomes and revenue growth.
Dr Frank Pfaffenzeller, Global Head of Insurance, KPMG International, said:“The insurance industry understands that AI has the potential to reshape competition, customer expectations and business models. The challenge is that many organizations remain focused on efficiency gains rather than asking how AI might fundamentally change the kind of insurer they could become. The gap between activity and transformation is where the real opportunity and risk now sit.”
Data remains the biggest barrier to scale
Only 11% of insurers surveyed say they have the data foundations and governance needed to scale AI beyond pilot programs. Another 55% describe themselves as moderately ready, while 21% are only partially ready and 13% say they aren’t ready.
The problems include fragmented data, poor data quality, unclear ownership and legacy systems. These issues matter across underwriting, pricing, claims, fraud detection and customer service, where AI performance depends heavily on the quality and accessibility of the underlying information.
As insurers expand AI use, data quality will have a greater influence on where the technology produces value. Companies with stronger foundations are better positioned to use AI in decision-making, product development and risk prevention, while weaker data environments are more likely to keep AI concentrated on efficiency work.
People and ownership gaps threaten progress
Workforce capability remains another constraint. Only 8% of insurers rate their employees as highly proficient with AI tools, despite 54% saying they provide effective AI training.
Insurers also expect AI to change staffing models. By 2029, 72% expect underwriting to operate through a hybrid structure with fewer people and redesigned roles. Some 36% expect significant role elimination in claims management, while 33% expect the same in policy servicing.
Responsibility for AI also remains concentrated in technology functions. Chief Digital, Technology and Information Officers hold primary accountability for AI at 45% of the insurance organisations surveyed.
Even where ownership has been centralised, understanding across the business remains uneven. Some 43% say AI responsibility is centralised but knowledge outside leadership is still inconsistent, and only 15% have fully incorporated AI governance into strategic planning.
Insurers look beyond efficiency gains
Most AI activity today remains focused on productivity and specific operational use cases. The report expects the next phase to involve redesigning customer journeys, operating models and decision-making processes around AI rather than adding the technology to existing workflows.
Over a longer period, AI could also change how insurers approach risk itself. Instead of focusing mainly on risk transfer after an event, insurers are exploring more proactive models built around risk identification, prevention and earlier intervention.
The difference between those paths is substantial. Current investment is still concentrated on reducing cost, while a much smaller share is being directed toward products and revenue opportunities. KPMG’s findings suggest insurers will need stronger data, clearer ownership and better measurement if they want AI spending to move beyond efficiency and produce broader business growth.
“The industry has moved beyond asking whether AI matters and is now focused on how to create value from it. The insurers that make the greatest progress are likely to be those that combine trusted data, clear accountability and workforce readiness with a long-term view of transformation. The real opportunity lies not simply in making today’s processes more efficient, but in rethinking the way of working and how risk is understood, managed and prevented in the future”, Matthew Smith, Global Lead for Insurance Strategy and Transformation and Partner, KPMG in the UK, said.
The research was conducted between 20 and 29 May 2026 with insurance leaders across 20 countries and six regions, representing organizations with 500 or more employees across all major insurance sub-sectors. The report also draws on KPMG’s Transforming the Enterprise 2026 research, which included 53 insurance respondents in senior transformation leadership roles.
