Insurers to embrace AI as operating system in 2026, reshaping risk management and underwriting

As insurers move beyond pilot projects and point solutions, SAS experts say 2026 will mark a turning point in which artificial intelligence stops being an accessory and becomes the industry’s operating system, reshaping underwriting, claims and risk management. According to a SAS press release issued in December 2025, the firm’s industry advisers foresee insurers using AI copilots to interact with data directly, reducing reliance on legacy policy administration systems and speeding routine decisions.

“A Fortune 500 insurer will begin phasing out policy admin systems in favour of insurance copilots in 2026. Some large insurers have already signalled their intent to invest big in AI technologies. And SAS’ survey data shows that insurance executives have a high level of trust in generative AI – twice as high as for machine learning, in fact. Policy admin systems require substantial investment and upkeep. However, interactions with data through copilots can eliminate the need to utilise those admin systems to underwrite policies or settle claims,” ̴ Franklin Manchester, Principal Global Insurance Advisor.

SAS and other commentators stress the promise of faster, more accurate decisioning across the policy lifecycle. “Many straightforward insurance claims will be settled in minutes by agentic AI. In order to safeguard customers’ trust, though, insurers will need strong AI governance. That means ensuring that their AI platform has the security controls and governance to minimise risks, from accidental bias in claims decisions to exposure to cyberattacks. The companies that install robust AI governance will earn and protect that trust. Building systems that act fast – and act right – will define the leaders of the next decade,” ̴ Alena Tsishchanka, Global Customer Advisory Director.

Market data underlines why incumbents are moving quickly. Industry estimates vary but point to rapid growth: AllAboutAI projects the AI-in-insurance market at roughly $10.24 billion in 2025, with a potential rise to $88.07 billion by 2030, while Fortune Business Insights forecasts expansion from about $10.36 billion in 2025 to $154.39 billion by 2034, reflecting a multi-year shift toward automation of claims processing, more granular actuarial modelling and improved customer experience.

That momentum is already shaping product and buy-versus-build strategies. SAS experts predict insurers will favour best-of-breed tools for fraud detection and investigations rather than single end-to-end platforms, as bad actors harness AI to create realistic synthetic identities and documents. “Insurers will seek out the best individual AI tools rather than one end-to-end solution… 2026 will also bring an increased focus to improving investigations, with insurers looking to augment their current detection efforts with solutions that include the use of copilots and AI agents to help automate processes and drive efficiencies, allowing investigators to do more with less,” ̴ Nick Feast, Principal Business Solutions Manager for Risk, Fraud & Compliance.

Climate change, cyber risk and regulatory fragmentation are set to complicate the transition. GlobalData identifies AI, cyber and climate as the central themes for 2026, noting rising M&A in generative AI and growing catastrophe exposure from climate-driven events. SAS warns that accelerating climate damage will force insurers to reassess risk appetite, optimise reinsurance and potentially withdraw from unviable lines, a shift that could widen the global protection gap. “Insurers must increasingly evaluate their business outcomes and adjust their risk exposure accordingly… Consequently, the global insurance protection gap is likely to widen further,” ̴ Thorsten Hein, Global Advisor for Insurance Product Innovation.

Cyber insurance is a particular growth area. SAS cites the market’s expansion and expects a move from generic actuarial approaches to technical, client-specific underwriting that rewards robust security practices. Industry reporting concurs: cyber premiums and product complexity are rising, and some carriers are already adding exclusionary language or tightening cover for AI-related and cyber-driven losses, reflecting Amwins’ analysis of evolving market conditions.

Regulation will add another layer of complexity. SAS predicts US states will take the lead in regulating AI, making compliance more intricate at a subnational level. The firm recommends insurers embed oversight and compliance features into their AI and modelling programmes to navigate a patchwork of rules. Observers emphasise that embedding explainability and ethical transparency into models will be critical if underwriting is to shift from rule-based to relationship-based AI that learns from longitudinal customer data while maintaining consumer trust.

Taken together, the assessments suggest 2026 will be a year of integration and reckoning: insurers that combine rapid AI adoption with rigorous governance, targeted underwriting approaches and climate-aware risk strategies may capture efficiency gains and competitive advantage, while those that neglect governance, security or regulatory alignment risk reputational, financial and operational setbacks.