2026 insurance outlook: Firms with a people-first AI strategy will outdo competitors
In 2026, the insurance industry will face a crossroads. To manage pressures like spiraling claim costs, a wave of soon-to-retire talent and a customer base that is quick to jump to competitors offering better rates, companies are increasingly looking to AI to become more agile and adaptable.
This is smart — if you go about it in the right way. Firms that actually succeed in implementing AI to work more effectively will be those that use it as a tool to complement, not replace, their people. Insurers who fail to strike that balance will risk not only losing ground but even going out of business.
Keep reading to learn more about the major insurance industry trends that will shape 2026 and how to better incorporate AI into your business to drive opportunities.
What are the major trends and challenges for the insurance industry in 2026?
Insurers in the property and casualty (P&C) or health spaces confront not just economic challenges but also a broader climate of uncertainty. Trends like increasing catastrophic weather events, spiking healthcare costs and high-dollar jury verdicts are causing claims payouts to rise, while operational issues like a major talent drain due to retirements and albatross-like legacy systems make it harder to adapt internally.
Below are the five big challenges the insurance industry faces in 2026:
- Catastrophic events: Climate and extreme weather events continue to increase in both frequency and the dollar value of damages. This is not only costing insurance companies tens of billions in claims but also forcing firms to raise premiums and deny coverage in certain areas, which leads to blowback from regulators and customers.
- Healthcare costs: Healthcare costs only ever seem to go up. But the pressure has increased in recent years as popular but expensive new treatments like Ozempic become covered under more health plans. Meanwhile, inflation, Medicaid cuts and other political pressures will likely lead to rising insurance premiums as well.
- Social inflation: Jury verdicts in civil lawsuits have continued to rise, with some cases crossing the billion-dollar mark (although these figures are often reduced on appeal). In many cases, a defendant’s insurance company may be on the hook for some or even all of the verdict amount, making this increase a genuine concern for insurers.
- Retiring talent: Insurance talent is aging, with the population of insurance professionals who are 55 and older growing by 74% over the last 10 years. In little more than a decade, roughly 50% of the current insurance workforce will have retired, creating a talent vacuum and more than 400,000 open positions.
- Uncertainty: Health insurers are also navigating an overall climate of political and regulatory uncertainty, including changes that will result from the One Big Beautiful Bill (OBBB) Act that passed over the summer. It is not yet fully clear how the bill, which reduced funding for Medicaid and rural healthcare facilities, will affect the market for private insurers, but there will likely be ripple effects.
How to overcome these challenges and move forward? Many insurers are turning to AI as a key part of the solution.
AI is transforming insurance, but are companies still missing possibilities?
Insurance providers want to move faster, operate more efficiently and keep their customers happy. And firms are increasingly using AI as a tool to support these aims.
On both the underwriting and claims fronts, AI is helping insurance firms improve how they do business by providing better data and analytics. During the underwriting process, for example, AI can assess satellite or drone photos of a home to assess roof and general property conditions and to help model flooding or fire risk more accurately.
This same analysis can also be performed for existing customers so that the insurer could suggest preventative action that could lower the risk of a future claim.
These and other AI use cases are exciting. But insurers who want to go beyond what their competitors are already doing should approach AI as a tool to solve some of the sector’s most pressing talent problems: making human work more engaging and preserving fast-vanishing institutional knowledge.
So what does a really effective AI strategy for insurance look like?
How should insurance companies implement AI in 2026?
Insurers should think about AI holistically as a tool to enhance operations throughout their whole organizations. Rather than getting caught up in AI as the next shiny thing, take the time to assess your existing processes and consider how AI and automation can help you do that work more effectively — and even more enjoyably.
Here are five steps to help you better implement AI within your insurance business:
1. Make human work more interesting
Many people are understandably concerned that AI could threaten their jobs. But what if it could really just make those jobs more interesting?
As your company competes to stand out in the hiring market or retain existing talent, consider how AI can automate the less appealing aspects of jobs. For example, your sales team members probably prefer interacting with customers over reading through dozens of pages of underwriting details. Can you use AI to summarize those details so your team can focus on interpreting and applying the knowledge gained rather than compiling and organizing data?
Ask questions here. What other routine rote tasks do your team members not like doing, and how can you leverage AI and automation to free up your people to exercise more imagination, creativity and humanity in their work?
2. Create a more appealing customer experience
Just as AI can take some of the boring elements out of the work your team does, it can make life simpler for your customers, too. Gone are the days of longstanding relationships between consumers and a single insurance company; with consumers quick to jump ship based on price, insurers who make it easy for new customers to onboard will have an advantage.
Consider how AI can contribute to a better customer experience. You could, for example, create an AI agent to summarize and compare different policy options for potential customers, making it simpler for them to understand what they’re signing up for.
3. Maintain institutional knowledge
As thousands of experienced insurance employees head for retirement over the next several years, your firm will lose valuable institutional knowledge that cannot easily be replaced, especially given that insurance is struggling to recruit younger replacement talent. But AI can help preserve that knowledge.
AI tools can learn from the wisdom of your current team, documenting and absorbing institutional knowledge that may not be getting passed down by other means. This knowledge can then be put into digital training libraries, built into your insurance risk modeling or included in analytics dashboards.
Making an effort to do this can help both your younger personnel and your systems become smarter over time, helping drive more effective business decisions.
4. Upgrade holistically
Many insurance companies are still using legacy systems that date back as far as the 1980s. And then those same companies are trying to add AI on top of that.
Taking that approach may save a little money upfront, but you’re ultimately digging yourself into a hole. Legacy systems are simply not as adaptable as is needed to realize the full value of AI and today’s technologies, so as you begin to incorporate more AI tools into your business, think about whether now is the right opportunity to move your whole tech base into a modern, cloud-based infrastructure.
Otherwise, you’re continuing to pour money into antiquated systems now in order to bolt AI on top — and will still have to replace those legacy systems in the future — and likely redesign or replace all the AI add-ons you’ve attached to it.
5. Bring in an advisor early on
Engage an outside advisor to help you design and implement your AI strategy. Ideally, you should do this early on in your process so that you can lean on their experience as you move forward.
An advisor can help you build the data foundation you need to benefit from AI, create an AI roadmap, and start using the AI and automation tools that fit your specific goals. Look for an advisory firm that combines deep industry knowledge, digital and organizational performance or talent management insights to help you best use AI to support your team and customers.
How Wipfli can help
We help insurance companies to thrive today and prepare for tomorrow. Let’s talk about the challenges you face and how we can provide services like digital strategy, performance consulting and risk advisory so that you can solve them. Start a conversation.
Let’s navigate 2026 together
