Can AI Replace Insurance Agents? Not if They Know How to Prepare

By Sanket Das

Artificial intelligence (AI) is transforming the insurance sector by automating routine tasks like policy servicing, customer queries, endorsements, and policy updates, allowing agents to focus on more complex and strategic roles. With AI potentially handling simpler and more traditional products, it’s vital for agents to evolve into financial advisors who provide personalized counseling and manage complex, holistic fiduciary needs that require human judgment. This shift will likely change agent compensation models, with decreased commissions for selling and servicing basic traditional products and increased incentives for advisory roles, customer retention, cross-selling, and brand building. 

AI’s use in the insurance industry

Carriers strive to provide agents with better tools to engage with customers; agents seek to partner with carriers who make this investment in their success. AI is an essential tool that is “steering the insurance industry away from the age-old ‘detect and repair’ approach toward an adaptive ‘predict and prevent’ strategy,” according to digital transformation experts Maruti Techlabs. Its advanced capabilities can be leveraged to automate claims processing, create dynamic quoting, personalize product recommendations, service policies, and offer 24/7 support for more complex issues generally not available through traditional means. AI also facilitates the strategic decision-making that is essential to long-term agency growth.

According to Bain & Company, early AI operational adoption by insurance companies will transform distribution in four ways: agent productivity, customer self-service and sales support, hyper-personalization at scale, and business insight and decisions. It notes that for an individual insurer, the technology could increase revenues by 15 to 20 percent and reduce costs by 5 to 15 percent. AI will potentially reduce premium costs through better underwriting and reduced servicing costs. When insurance and risk mitigation services are more affordable, especially for those who really need it, it improves the living standards of policyholders, uplifting the industry and the economy.

What’s driving the increased use of AI in the industry

While AI has been in development for some time, the pace of its acceleration grew during the COVID-19 pandemic. According to McKinsey & Company, “The disruption from COVID-19 changed the timelines for the adoption of AI by significantly accelerating digitization for insurers. Virtually overnight, organizations had to adjust to accommodate remote workforces, expand their digital capabilities to support distribution, and upgrade their online channels.” Those companies that embrace digital transformation are better positioned to incorporate AI into their operations, especially in an industry that is on the verge of a “seismic, tech-driven shift.”

Many millennial and Gen Z customers are accustomed to having integrated and customized 360-degree digital experiences. Customers expect personalized, seamless, round-the-clock experiences as technology becomes more ubiquitous across every sector. There is also the business case: The bottom line will improve if tasks are performed more efficiently and effectively.

Benefits of increased use of AI in the industry

Using AI to automate routine tasks once performed by agents means they can now provide more specialized and personalized services to increasingly discerning and involved consumers. This will lead to the potential for increased market share. According to Precedence Research, “The global generative AI in insurance market size was USD 615.11 million in 2023, calculated at USD 818.78 million in 2024 and is projected to surpass around USD 14,297.94 million by 2034, expanding at a CAGR [compound annual growth rate] of 33.1% from 2024 to 2034.”

AI also allows insurers to track consumer trends and capture essential data to help make product and pricing adjustments. AI will help consumers become more involved and informed about their purchases. For example, “AI allows insurers to deeply understand their customers, personalize their offerings, and provide proactive support, according to insurance operations experts Perr + Knight. “Consider virtual assistants that answer questions and guide policyholders through processes and sentiment analysis tools that proactively identify and address potential customer dissatisfaction. This results in loyal, happy customers—essential for retention and growth.”

AI’s impact on agents and agent compensation

These changes might call to mind the fear employees had when computers were introduced. Would they replace workers? Today, many wonder if AI will replace insurance agents. It’s not likely, but agents’ roles will undoubtedly change. As agents take on more of a financial advisory role, consumer perceptions will shift away from the conventional view of agents as merely salespeople. Because of these new strategic capabilities, their compensation will likely change, too. Rather than compensation based primarily on commission, agents may receive a flat advisory fee, which may be included in the insurance cost. They may also receive small commissions, customer interaction-based fees, and bonuses based on marketing and social media impact. This will be possible as AI matures to capture customer interactions that provide necessary metrics. For instance, AI may create scores to rate agents’ interactions with clients, which could drive compensation.

This means agents will become specialists and work with consumers on tailored solutions to fit their needs. Relationship-building will be the foundation of these new agent-consumer interactions. Many agents will work to become or team with ‘finfluencers,’ educating potential consumers, developing a social media following, and gaining consumers’ trust to handle their personal matters.

Much as physicians know their patients’ personal health history, the agents of the future will serve as financial doctors. They will have a general sense of policyholders’ financial health, enabling them to detect issues and address them with appropriate recommendations and products to enhance long-term fiscal stability.

The future of the AI in the insurance industry

Many insurance companies are determining how to equip themselves to use AI successfully. They may look to other industries further along in AI’s operational integration for guidance. Agents are or will soon be using AI to streamline some operations. For example, Bain & Company says the technology “will reduce low-value interactions, and provide coaching for more effective interactions with customers.”

Previously, many agents entering the field targeted family and friends as potential clients and purchased leads from a third party to increase the opportunities to sell policies. Yet, they often lacked the training and resources needed to grow their business successfully. Data and AI are changing this by democratizing training and insight creation. AI models rely on relevant data, such as customer interactions, that help provide agents with valuable insights. This may lead to increased mergers and acquisitions of agencies to build better data-gathering operations. 

While AI in the insurance industry is nascent, agents are beginning to operationalize it to streamline “business as usual” activities and respond to clients’ requests for information. As AI matures over the next several years, carriers will increasingly move some servicing functions like policy updates, endorsements, coverage changes, and claim adjudication to AI-driven tools. This means agents will have more time for value-added activities and building a loyal client base. Moving forward, it will be vital for agents to better understand their customers and product offerings. In addition to better serving the policyholder, it will allow agents to elevate their value proposition, benefiting the entire insurance ecosystem.

AI will also play an important role in embedded insurance and its adoption. According to EY, in the next five years, 30 percent of all interactions will occur within embedded channels, with AI serving as the catalyst to make this possible. For example, as customers provide their details for purchase, such as payment authentication details, the AI model should be able to process this information and generate a quote tailored to the customer’s profile.

Agents who effectively use AI to enhance efficiency will have more time for business development, customer relationship management, and expansion efforts. By leveraging AI to perform routine tasks, identify potential clients, analyze data for insights, and automate follow-ups, agents can focus on providing value-added services that AI cannot deliver alone. Agents of the future will be crucial in educating clients on AI-driven tools, ensuring technology complements human expertise. As AI redefines the industry, agents who adapt will thrive in a more efficient, customer-centric environment, with compensation reflecting their expertise and ability to harness AI for growth.

About the Author:

Sanket Das heads the distribution management practice at a Big 4 consulting firm. He is an industry thought leader in the space and often speaks on topics related to insurance and sales performance management (SPM). With nearly 15 years of experience in the insurance space, Sanket tackles complex issues around distribution and producer management, AI, data, actuarial valuation, and agent compensation. He holds a master’s degree in actuarial science from NMIMS. Connect with Sanket on LinkedIn.