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US insurers to more than double AI investment in 3-5 years: Wipro report

A survey of 100 business leaders from US insurance companies with revenues over $500 million indicates that the industry is adopting artificial intelligence (AI), according to a report by Wipro. The report finds that 81 per cent of insurance companies plan to increase their AI spending in the next year. Most firms aim to raise the share of AI in their IT budgets from the current 8 per cent to 20 per cent over the next three to five years, as they work to integrate AI into core processes. 'Investing in a strong data, governance and technical foundation, and aligning AI initiatives to shared business objectives will be critical to success. For firms starting on the journey, prioritising quick wins and investing in building the foundation necessary for scale will be the key,' said Ritesh Talapatra, Vice-President and Sector Head for Capital Markets and Insurance, Wipro Limited. 'Almost all, 92 per cent, of respondents agree that AI is essential for maintaining their competitive edge in customer experience and personalisation,' the report stated. AI integration The report indicates a two-speed market in AI adoption. Larger firms are ahead due to established governance structures and access to extensive data, while mid-sized and smaller firms face challenges such as legacy systems and limited AI expertise. AI is helping insurers to streamline workflows. 'AI is increasingly helping insurers realise enhanced efficiencies and precision in underwriting. While all insurers are working to integrate AI into the underwriting process, only less than half, 46 per cent, say they have extensively implemented AI systems into their underwriting workflows,' the report said. Sixty-eight per cent of insurers expect AI to improve underwriting by increasing risk assessment accuracy and reducing costs. Additionally, 65 per cent believe it will support compliance with regulatory requirements, while 62 per cent anticipate that AI will help improve customer satisfaction and retention. Challenges The survey identifies both external and internal risks as key challenges in AI adoption. While AI supports quicker and more accurate decisions, it also brings potential risks such as bias and reputational issues. The findings show that 21 per cent of insurers, including 44 per cent of smaller firms, do not have formal AI usage policies, which may lead to compliance issues as regulations develop. Integration of AI with existing systems is also a significant concern. According to the report, 71 per cent of insurers face difficulties in merging AI with legacy infrastructure. To address this, 65 per cent of firms are using a phased implementation strategy to manage risk and ensure smoother integration.