McKinsey & Company argues artificial intelligence ranks among the largest value creation levers in insurance today. The firm points to the industry’s structural setup, fragmented workflows, vast stores of structured and unstructured data, legacy systems still humming in the background, as fertile ground for rapid deployment.
Insurance runs on data yet leans on manual effort. Underwriters review submissions line by line. Claims handlers sift through documents.
According to McKinsey & Company, this imbalance creates economic pressure to automate, especially as carriers confront cyber exposure and climate-driven losses with growing frequency.
Private capital has noticed. Investors continue to channel funds into distributors, managing general agents, software vendors and third-party administrators.
McKinsey & Company frames artificial intelligence as a filter for capital allocation, not hype, not side experimentation, but operational discipline tied to margin expansion and portfolio lift.
Deal volumes cooled in 2025, though insurance retained investor interest due to earnings stability across cycles.
Brokers account for about 70% of transaction activity, with year-on-year volume down roughly 20% as consolidation matured and buyers grew selective. Scale alone no longer satisfies return hurdles.
MGAs represent near 5% of deal flow and remain attractive due to capital-light structures and underwriting margins built on specialist expertise.
In the U.S., premiums routed through MGAs grew about 14% annually over the past decade. Direct premiums increased from $47 bn in 2020 to $97 bn in 2024. That growth profile pulls private equity back to the table.
TPAs recorded average annual growth near 15% over five years, supported by recurring revenue and embedded client relationships. Software providers, spanning core systems and analytics platforms, draw attention due to subscription models and their position inside insurer infrastructure. Sticky revenue counts.
Geographically, the United States dominates private equity activity, reflecting market depth and ownership maturity. Invested capital in Europe declined at an average annual rate near 18% from 2020 to the first half of 2025.
Over roughly the same window, U.S. private equity investment expanded at a 26% annual rate from 2022 to 2025, outpacing the United Kingdom and continental Europe.
McKinsey & Company maps AI capability in stages. Predictive analytics already supports fraud detection, pricing and risk modelling. Generative systems now process documents across policy issuance and claims.
Agent-based architectures, still emerging, promise to manage end-to-end workflows with limited human oversight.
We think the shift won’t erase incumbents. McKinsey & Company advises investors to identify which portfolio companies move beyond pilots into embedded AI execution and how those deployments translate into measurable advantage.
The firm estimates generative AI could add $50 bn to $70 bn in incremental industry revenue. Marketing, customer operations and software engineering stand out as primary contributors.
Investors who prioritize operational value creation outperform peers by two to three percentage points in internal rate of return.
According to Beinsure analysts, disciplined AI rollout rather than scattered experimentation separates winners from the pack.
In broking, value creation drifts away from roll-up logic toward vertical integration and improved placement informed by data.
AI supports brokers through automated submission intake, appetite matching and renewal prompts. Early deployments show higher cross-sell ratios and lower attrition when engagement becomes targeted rather than generic. Straightforward renewals may shift to low-touch processing over time.
Within MGAs, artificial intelligence compresses underwriting timelines. Use cases include accelerated submission triage, refined segmentation, risk scoring and automated documentation.
Semi-autonomous underwriting engines now quote and bind simpler risks with limited intervention. McKinsey cites cases where quoting times fell from weeks to days, and in certain commercial lines from days to hours.
Software investment rose around 20% annually over five years through mid-2025. Insurers reassess legacy architecture and move toward modular environments built for interoperability.
Vendors enabling connectivity across data layers, models and automated agents position themselves as infrastructure providers rather than feature suppliers.
TPAs hold detailed servicing datasets. That access supports AI deployment to improve speed and consistency across claims and policy administration.
Yet commercial models tied to headcount or activity volume restrict automation upside. If pricing remains linked to labor inputs, margin expansion stalls.
Future differentiation hinges on two levers. Technology adoption, yes. Pricing structures and cost discipline alongside it. AI alone won’t shift returns. Execution will.
