The insurance industry, like many others, is in the midst of a reinvention thanks to Artificial Intelligence (AI).
Surveys conducted by the National Association of Insurance Commissioners showed that in 2022 and 2023, 88% of auto insurance companies, 70% of home insurance companies, and 58% of life insurance companies were currently using or planned to use AI in their operations. Major carriers have announced significant investments in AI, promising radical transformation through pricing algorithms and risk assessment models.
In my opinion, for all the focus on these complex back-office applications, the real AI breakthrough in insurance is happening elsewhere: the customer’s experience. While insurers focus on implementing AI for pricing optimization, a quieter but potentially more impactful transformation is underway.
InsurTech companies are in the process of deploying Agentic AI – autonomous systems that understand, decide, and act on behalf of customers – to fundamentally reimagine service delivery. Gartner predicts that by 2028, Agentic AI will be responsible for 15% of daily work-related decisions. When it comes to insurance, this shift isn’t just changing how customers interact with insurance companies; it’s delivering immediate business value while positioning forward-thinking providers for sustainable competitive advantage.
The Misplaced Focus on AI for Pricing
The insurance industry’s traditional approach to AI investment reflects its historical priorities. Actuarial precision and risk assessment have always been core competencies, so it’s natural that AI applications would arise in these areas first. Today, data scientists build increasingly sophisticated models to microsegment customer risk profiles, optimize pricing, and detect fraud.
While these applications promise significant value, they face substantial challenges: Regulatory scrutiny around pricing fairness and algorithm transparency creates implementation hurdles. The complexity of these systems requires specialized talent and significant data cleanup. Most importantly, the gap between theoretical potential and practical implementation is still substantial.
Even when successfully deployed, pricing algorithms face diminishing competitive returns. As competitors adopt similar technologies, pricing advantages become temporary. In highly regulated insurance markets where rate changes require approval, any pricing edge becomes further constrained.
Perhaps most importantly, customers will almost always find something to critique about pricing, no matter how sophisticated the algorithm or competitive the rate. The reality is that while insurers and actuaries value AI-driven pricing precision, consumers primarily tie pricing to perceived value. . What truly differentiates insurers isn’t incremental price advantages but delivering exceptional value through superior customer experiences that justify the price point. By focusing on Agentic AI in customer interactions, insurers can align with consumer expectations and deliver not just competitive pricing, but pricing with higher perceived value due to the improved experience surrounding it. This approach recognizes that customers don’t buy based on actuarial excellence – they buy based on how they feel about the entire insurance relationship.
The future of insurance isn’t about AI replacing agents and adjusters. Rather, it’s about creating a seamless partnership where AI handles routine processes while humans focus on complex decisions and emotional support.
The Customer Experience Opportunity
Agentic AI is transforming service delivery across the insurance value chain and it’s important to note that these AI agents handle far more than basic chatbot functions. They conduct natural conversations across voice and digital channels, support decision-making in claims with minimal human intervention, and provide personalized policy recommendations based on customer needs.
The advantage of service-focused AI applications lies in their implementation flexibility. Unlike pricing algorithms that require comprehensive deployment, customer experience improvements can start with a limited scope and expand over time. A company might begin with AI-assisted email support, then add voice capabilities, and eventually expand to claims decision-making as they build confidence and expertise. These applications face fewer regulatory hurdles since they focus on enhancing service rather than changing underwriting decisions. The result is meaningful competitive differentiation in a market where products often appear similar to consumers. When customers experience seamless, responsive service – especially during claims, the moment of truth in insurance – they become advocates rather than just policyholders.
Note – the benefits extend beyond customer satisfaction. By automating routine processes, insurance providers free their human experts to focus on complex cases and high-value interactions. This enhances operational efficiency while creating a more engaging work environment for insurance professionals.
The Future Balance: Human and AI Collaboration
I believe the most successful implementations recognize that AI should enhance rather than replace human capabilities. Insurance remains a fundamentally human business where trust and empathy matter. The goal is not to eliminate the human element but to deploy it more effectively.
The future of insurance isn’t AI replacing agents and adjusters. Rather, it’s a seamless partnership where AI handles routine processes while humans focus on complex decisions and emotional support. But this partnership requires thoughtful experience designed to create smooth transitions between AI and human touchpoints. This experience is critical because customers perceive greater value when their interactions feel effortless, regardless of whether they’re engaging with AI or human agents. When a customer inquiry exceeds an AI agent’s capabilities, the handoff to a human specialist should feel natural and include all relevant context.These thoughtfully-designed transitions uphold the perception of value that ultimately justifies the price in consumers’ minds.
Transparency also builds trust. Customers should understand when they’re interacting with AI versus humans and have visibility into how their information is being used. This openness, combined with consistently helpful service, turns AI from a potentially suspicious technology into a valued assistant.
From a compliance perspective, this balance becomes even more critical. Licensed insurance professionals must handle certain regulated activities like providing specific coverage advice or making underwriting decisions. Agentic AI serves as a powerful tool to augment licensed individuals—handling initial information gathering, answering common questions, and preparing documentation—while ensuring properly credentialed staff manage regulated interactions. This compliance-conscious approach maintains regulatory integrity while still leveraging AI’s efficiencies.
Recommendations for Insurance Leaders
Insurance executives navigating this landscape should consider a phased approach:
- Start with customer pain points. Identify the most common friction points in your customer journey and evaluate whether AI can address them. Look for high-volume, routine interactions that would benefit from automation.
- Measure what matters. Look beyond technical capabilities to metrics that reflect business impact: customer satisfaction scores, retention rates, operational efficiency, and revenue generation.
- Design for collaboration. Build systems that facilitate seamless handoffs between AI and human specialists. Train your team to work effectively with AI assistance.
- Build flexible foundations. Implement solutions that can scale and evolve as AI capabilities advance and customer expectations change.
- Maintain human oversight. Ensure humans review AI decisions regularly and can override them when necessary. This maintains accountability and helps the system improve.
While many insurers continue focusing their AI investments on incremental pricing improvements, the true innovators are reimagining the entire customer experience. They’re creating intelligent systems that understand customer needs, streamline interactions, and deliver service in ways that were impossible just a few years ago.
The future of insurance belongs not to those with marginally better pricing algorithms, but to those who use AI to transform the customer experience.
About the Author
Matheus Riofli is Co-founder & CEO at Tint. Tint empowers tech platforms to offer intrinsic embedded insurance – protecting their users from the inherent risks of using their platforms. We offer infrastructure to support a wide range of embedded programs and provide expert guidance – helping companies build efficient, compliant and profitable programs.
