How AI is Transforming the Insurance Industry

Artificial intelligence (AI) is changing the way the world works, and it’s happening fast. This includes the use of AI in insurance. However, the 2025 NobleOak Life Insurance Pulse Report* showed that Australians have mixed feelings about the use of AI in insurance:

• 57% of respondents felt comfortable or neutral about life Insurance companies using AI to process their applications.
• 26% stated they would not consider taking out a life insurance policy with a company that uses AI, despite it potentially saving time and lowering their premiums.
• Men generally reported higher comfort levels with AI than women did, and younger age groups showed greater acceptance of AI technologies.

Despite varied consumer sentiments, some insurance companies are using AI in unexpected ways to provide better, faster, and more accurate service. In this guide, we’ll look at what this means for life insurance, and where the technology is heading in the future.

What is AI in insurance?

AI technologies can make insurance simpler and more efficient. The most common use of artificial intelligence in insurance is to improve and speed up analytical processes so that insurance providers can deliver better products and faster service.

Here are examples of AI technologies that some companies are currently using:

• Machine Learning: Machine learning systems analyse large volumes of data to identify patterns and predict future risks. This helps insurers price their policies more accurately, leading to fairer premiums.
• Natural Language Processing (NLP): With NLP, AI can understand and interact with human language. Insurers use this technology for chatbots and customer service, so that customers can get answers quickly.
• Predictive Analytics: Predictive analytics tools use historical and real-time data to forecast future events. These insights allow insurers to better assess risks, plan for future claims and create more personalised policies.
• Image Recognition: AI-powered image recognition can automatically analyse photos and videos (such as damage assessments from car accidents). This means that claims and payouts can be processed faster.
• Fraud Detection Algorithms:  Insurers need to spot fraud as soon as possible. AI algorithms can scan for unusual patterns in claims and highlight potential scams. These tools reduce losses and keep insurance premiums more affordable for honest customers.

How AI is used in the insurance industry

Artificial intelligence is showing up in nearly every part of the insurance business. In this section, we’ll look at a few ways the industry is leveraging AI technologies.

Risk modelling & data forecasting

A common use of AI in the insurance industry is to predict risks. By looking at information like health records and lifestyle factors, insurers can make more accurate estimates about a policyholder’s health risks. This helps them adapt to changing economic conditions and create better long-term pricing.

Claims processing & automation

AI is changing claims processing timeframes. AI systems can review a claimant’s documents and check their coverage much faster.

Fraud detection & prevention

AI is good at spotting fishy claims. It notices unusual patterns that humans might miss. The system gets smarter with each case it handles, helping insurance companies save money that would otherwise be lost to fraud. These savings can be passed onto customers by way of lower premiums.

Customer service & chatbots

Need to chat with your insurance company right away, without waiting on hold? Now you can, thanks to AI chatbots. Some insurers are using these virtual assistants to answer questions and provide policy info 24/7.

Personalised pricing & policy recommendations

AI can help create tailored plans for customers and policy recommendations.

Benefits of AI in insurance

Artificial intelligence is transforming the insurance business by making processes faster and more efficient. Here are some of the ways that AI is improving the industry, for both companies and customers:

• Saves time and money: AI in the insurance industry automates routine tasks, reducing paperwork and speeding up processes. This helps insurers save money by reducing overheads, which can lead to lower costs for customers.
• More accurate risk assessments: AI analyses huge amounts of data to assess risks more precisely. This means more accurate underwriting, fairer pricing and better coverage tailored to each customer.
• Better fraud protection: AI can spot suspicious patterns faster than humans. It also strengthens cybersecurity to keep customer data and money safe.
• More personalised customer experiences: By using advanced technologies, AI in the insurance industry can better understand customer needs and suggest tailored policies. Chatbots and smart tools also provide instant, helpful customer support.

Challenges of AI in insurance 

While new technology has the potential to revolutionise our lives, the rise of artificial intelligence in the insurance industry brings up challenges – from safeguarding data to making sure that policy decisions are fair.  Also, maintaining the human face of life insurance is important, especially at time of claim, when customers are facing some of their biggest life challenges. Here are some of the key areas that insurers are focusing on so that AI will work for everyone:

• Data privacy concerns and compliance challenges: With artificial intelligence relying heavily on vast amounts of data, insurers must navigate and comply with strict laws to protect customer information while using AI.
• Ethical risks of AI-driven decision-making: AI algorithms can unintentionally reinforce biases, potentially leading to unfair pricing or claim rejections for certain groups. It’s crucial for insurers to address and correct these biases.
• Equitable pricing: AI can lead to higher premiums for some people based on their individual risk factors. That said, there are rules in place to make sure pricing stays fair for everyone.
• Cybersecurity threats, including AI-driven fraud: While AI strengthens cybersecurity, it can also be used by cybercriminals to develop sophisticated fraud tactics. Insurers need to stay ahead of evolving AI-powered threats to protect their customer data.

The future of AI in insurance

Looking ahead, AI in the insurance industry is going to transform the way insurers operate and interact with customers. Here’s what to expect as AI progresses and improves:

• Shift towards prevention: The future of artificial intelligence in the insurance industry is in helping with preventative measures. With AI-driven data analysis, insurance companies will foresee and avoid potential issues before they result in claims.
• New AI-driven products and services: The future will bring more AI-powered products and services designed to meet individual customers’ needs. Innovative insurance products, including personalised and on-demand options, are coming thanks to AI.
• Smarter, more natural AI interactions: AI will revolutionise how we interact with insurers as AI learns how to converse with humans better. . Chatbots and virtual assistants will be able to offer customers smoother and more intuitive conversations over time.

*NobleOak Pulse Report 2025, conducted in January 2025 with 1,088 online survey participants.

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