Insurers and reinsurers plan to more than double their spending on artificial intelligence over the next three years as they pursue efficiency improvements and revenue gains.

That is one of the finds of a report by S&P Global Ratings, which sheds light on how re/insurers are using generative AI and the challenges of adopting the new technology, and notes that AI has not yet materially impacted profitability.

S&P said the median insurer in its global survey sample of 121 businesses expected efficiency gains of 6 per cent to 7 per cent and revenue improvements of 4 per cent to 5 per cent, by 2028.

The report states that 83 per cent of surveyed insurers said they are in the early or intermediate stages of their AI journey.

Top-priority initiatives include AI-enabled support functions to enhance workforce productivity, improved customer solutions, and enhanced risk management. These initiatives could drive improvements in customer retention, distribution effectiveness, cross-selling, and risk selection, S&P states.

The credit rating agency sees governance as a key factor in how effectively insurers are able to harness AI’s potential, and to deal with concerns over security, data privacy risks, and regulatory compliance.

“These challenges underscore the importance of AI governance; nearly all insurers surveyed have established or are developing AI governance frameworks, while almost two-thirds maintain AI model inventories,” the report states.

“We view this focus on governance as a signal of industry maturity and a recognition that governance weaknesses could inhibit effective AI scaling, potentially resulting in model inaccuracies, regulatory breaches, and costly remediation efforts that could negatively impact credit quality.”

S&P argues that “the differentiating factor will increasingly be insurers’ ability to scale AI effectively while maintaining robust governance and risk controls.

“Consequently, variations in AI readiness, governance maturity, and data capabilities may increasingly influence competitive advantage, risk exposure, and ultimately creditworthiness.”

S&P added that while the magnitude and timing of AI-related profitability gains remain uncertain, improvements in customer experience, underwriting efficiency, and claims handling were already increasingly visible across the industry.

The report concludes: “Over time, insurers that successfully translate AI investment into sustainable operational improvements while managing the associated risks may strengthen their competitive positioning; conversely those that struggle to scale AI responsibly could face growing operational challenges and missed opportunities.”