Earlier this year, State Farm Insurance agents voiced concerns about new company changes, especially those involving artificial intelligence. Some claimed these moves were aimed at cutting jobs and replacing human workers with machines. However, the situation is more complex than it seems. Major insurers such as State Farm and Country Financial are not only adopting AI tools but doing so across various levels of their businesses.
AI has been steadily entering insurance offices for several years, even if the changes are not dramatic overnight. According to the National Association of Insurance Commissioners, 84% of health insurers are currently using AI or planning to do so. The number is 88% for auto insurers and 70% for home insurers. The adoption of AI is not limited to front-line agents—insurance companies are also reshaping internal operations with the technology.
AI is helping insurance companies prevent problems, not just fix them
Gunratan Lonare, a professor at the Katie School of Insurance and Risk Management at Illinois State University, explained that AI is no longer just a potential future trend—it is already deeply embedded in the insurance sector. Lonare highlighted how improvements in data collection and computing power have enabled companies to analyze events and identify patterns that were previously difficult to detect. This development is transforming how the industry addresses issues, moving from a reactive model to a proactive one where problems are anticipated and avoided.
Pete Miller, CEO of the Institutes Risk and Insurance Knowledge Group, a nonprofit dedicated to educating and connecting professionals in the field, described the shift clearly. “It's really helping the industry shift from a detect-and-repair sort of approach to a predict-and-prevent approach,” he said, emphasizing the role of AI in making insurance more efficient and forward-thinking.
Productivity grows, but adoption remains uneven
Julia Lamm, a workforce transformation partner at PwC, shared insights into how AI is affecting productivity. She explained that her clients are reporting modest increases of 4-5% from AI tools that assist with report writing and information retrieval. However, not all companies have completely revised how their operations work. Many have identified a long list of AI applications but are still relying on traditional methods for certain tasks.
Lamm noted some pushback from employees and leaders who question whether AI is truly beneficial. “I've seen resistance where we've worked with clients to adopt this, where they're saying, ‘Is it really easier for me to use that for the work rather than just do it myself?’” she said, pointing out skepticism among users who may prefer the control they feel when handling tasks manually.
Some progress is being made, with certain insurers beginning to use AI to create new software tools rather than building them from scratch. This approach can save time and resources. But full adoption remains slow.
Miller pointed out a different perspective. “I started out my work life as a coder, and in this world I can create apps so quickly that it's … very difficult to me to have a competitive advantage long run,” he said, reflecting on how AI is changing the value of traditional skills over time.
Human empathy still matters in claims and customer support
Lamm explained that many insurers are not fully automating every process, particularly in customer-facing areas. Company culture and priorities often dictate this, especially when it comes to maintaining a good customer experience.
This balanced approach is exactly what companies like State Farm and Country Financial are pursuing. Even as they expand AI adoption, they continue to involve people in key customer interactions. This ensures that clients still receive the care and understanding they expect, especially during sensitive situations like claim processing.
As artificial intelligence budges its way into the business world, insurance companies are grappling with the changes to the kind of work that happens, the types of workers they need and how to develop them. AI will affect several broad areas of the insurance sector, fraud detection, risk assessment and damage assessment. Gunratan Lonare, a professor at the Katie School of Insurance and Risk Management at Illinois State University, said in the future, AI will take over low-risk claims assessment. “Instead of a human looking at this small stuff, AI can see, OK, what's the length and size and age of the house? It can capture all the data. It can also capture the context. Was the roof damaged because someone hit a stone, or because of a hailstorm or something else?” said Lonare. AI can also assess the severity of damage, he said. This reserves extra human capacity for more complex damage cases.
Insurance companies have been doing data analysis to root out fraudulent claims for a long time. Pete Miller is the CEO of the Institutes Risk and Insurance Knowledge Group, a not-for-profit organization which educates and connects people in the industry. Miller said AI can improve that analysis to root out organized crooks in a big way. “There are sophisticated fraud rings in several parts of the insurance value chain around perhaps attorneys or doctors,” said Miller. “There's a patterning that everything's going to this doctor and this attorney ring.”
Increasingly, some foreign governments in eastern Europe and other places are getting into insurance fraud as part of an overall suite of cybercrime initiatives. “There are some nation states that are supporting hackers that might set up fraudulent websites,” said Miller. “They can make search engine optimization such that it goes to this fraudulent website, and the person actually thinks it’s their insurance company.” The customer enters their data on the fraudulent site, and it gets sold on the dark web. He said the hackers typically set up these websites in advance of a severe weather event like a hurricane. The scary part, he said, is that's happening even before an insurance company gets notice of a loss or claim. That makes it harder for insurance companies to detect, although at least one AI company has a tool that may help under that scenario, he said.
ISU’s Gunratan Lonare said “good AI” is competing with “bad AI” in a kind of arms race. “People can use AI to come up with exaggerated accidents, even fake video…fake images. If you have small damage, AI can make it bigger damage, and AI can completely change the video,” said Lonare. “Now, the question is, how your AI is better than the fraudsters' AI?”
Insurers have for some years had the ability to monitor driving habits of policy holders with sensors the policy holders may agree to have on their vehicles. AI will make those “telematics” of how safely and how much people drive more robust, according to Miller. AI will also help insurance agents develop better risk profiles for home policy holders. That can produce variations in rates. Miller said it can also be used to prevent losses. “I've seen simulations around wildfire, for example. …Here's your house as it exists today, including the surrounding vegetation. Here's the impact of wildfire coming through. Conversely, if you remove vegetation for a safety barrier, here's the impact on your house, and it's likely to be better,” said Miller.
The insurance industry has a long-running workforce shortage and challenges in attracting new workers to a business perhaps unfairly stereotyped as boring. AI could both help and hurt that situation. Lonare said AI technology shifts may increase the competition for some of the more marketable skill sets. For instance, data scientists and IT professionals in one field can move to another with relative ease.
Julia Lamm is a principle in workforce solutions for PricewaterhouseCoopers International who specializes in the insurance sector. Lamm said insurance companies are risk averse and may not be adopting AI as fast as businesses in other sectors. Lamm said the early adopters will have an advantage in hiring the kind of workers needed in this new AI world. On the flip side, since AI does away with many routine repetitive tasks, Miller with The Institutes said insurance may escape its stereotype as an unexciting field. The change in the nature of work to do this fraud detection, create effective software and check on AI processes poses new questions for insurance companies about how they develop employee expertise, the fund of experience on which an employee bases judgment calls and transfers knowledge. For example, if you don’t come up by serving your time in the claims division for a while before moving on to another area, companies will have to find another way to teach work.
