A new McKinsey report titled How AI will reshape the economics of insurance: A CEO’s guide to strategy indicates that artificial intelligence could finally reverse two decades of rising insurance expenses. Despite substantial technology investments since 2005—which improved labor productivity by 14% in property and casualty insurance and 24% in life insurance—global insurance cost ratios are currently around 10% higher than they were two decades ago due to mounting tech spending, compliance burdens, and legacy system complexities.
According to McKinsey, AI offers a breakthrough by driving simultaneous efficiencies across underwriting, claims, and customer servicing, already achieving 20% to 40% reductions in onboarding costs and 10% to 20% gains in agent productivity. The report also highlights that AI-driven tools could transform distribution—which accounts for up to 25 cents of every property and casualty premium dollar—by assisting customers with policy comparisons and renewals, though human intermediaries will remain vital for complex commercial and specialized coverages.
