Agent productivity could improve by as much as 20% under wider technology adoption.
Artificial intelligence (AI) could reshape the insurance industry by lowering costs, changing how policies are sold and helping insurers cover risks that are currently difficult to price.
Global insurance premiums grew by about 4.9% a year between 2005 and 2025, reaching an estimated $8.3 trillion, according to a McKinsey & Company report.
Pre-tax profits rose more slowly, at about 4.3% a year, to around $580b.
McKinsey said insurance has also lagged behind other industries in revenue growth and cost efficiency.
Operating expenses as a share of revenue rose 10% globally between 2005 and 2025 and 22% in North America.
AI could help insurers reduce customer onboarding costs by 20% to 40% and improve agent productivity by 10% to 20%, the report said.
It could also improve underwriting, claims handling and pricing, allowing insurers to cover risks such as cyber threats, climate-related losses and AI liability more effectively.
The report said less than 1% of global cyber costs are insured, leaving a gap of about $900b. The protection gap for natural catastrophes reached $133b in 2025.
AI could also affect insurance distribution. Around 85% of US property and casualty premiums and 95% of life insurance premiums are currently distributed through agents, brokers and managing general agents.
McKinsey said AI assistants may increasingly compare policies, monitor renewals and recommend providers, particularly for simpler products.
However, the firm warned that AI-related and cyber risks may be highly connected, making losses harder to diversify and price.
McKinsey said insurers should decide whether to compete mainly through scale or specialist expertise, invest in data and technology, and change their operating models.
It added that firms treating AI as a gradual technology upgrade risk falling behind competitors that use it across their businesses.