Kathmandu. The biggest financial gains will be lost if insurance companies limit artificial intelligence (AI) to isolated pilot projects. That’s because distribution costs can cost up to $0.80 of each first-year life premium.
McKinsey & Co Inc issued the warning in July. Global total premiums have increased by 4.9 percent annually since 2005 to nearly $8.3 trillion in 2025. Profit before tax rose 4.3 percent year-on-year to nearly $580 billion.
This gap points to weak operating efficiency despite continued premium growth. According to McKinsey, premiums, as a part of global economic output, have also remained stable for a decade. However, the natural disaster protection gap reached $133 billion in 2025 and less than 1% of global cyber costs are insured.
It says commissions on property and casualty insurance range from $0.10 to $0.25 per premium. The cost of insurance ratio is 17 percent higher globally than in 2005.
Bruno Abril, global head for the insurance industry at NTT Data Group Corporation, said in a June report, “The real question for insurance companies is not whether to invest in AI; It’s about how to incorporate underwriting, claims, and growth in a controllable, scalable, and sustainable way. ’
According to NTT data, 85.8 percent of insurance companies that aligned AI strategies perfectly with their business strategy reported at least a 5 percent increase in profits from AI. –Agency
