Insurance Industry Shifts to Granular Underwriting Using AI and Machine Learning
What happened
Arthur J. Gallagher & Co. noted that U.S. property and casualty insurers recorded a net profit of $60.9 billion in 2025, marking a best year in decades. Despite this success, insurers face pressure to improve profitability due to unpredictable costs driven by inflation, geopolitical shocks, and climate volatility. This environment is pushing the industry toward granular underwriting approaches, utilizing AI and machine learning models to evaluate individual policies rather than relying solely on segment averages.
From ibtimes.com
Why it matters
The shift involves using advanced technology to evaluate policies on a broad set of variables. McKinsey has estimated that this level of policy-level precision could deliver a 30% to 50% boost in underwriting results. Companies like Lemonade are already building solutions around this industry trend.
From ibtimes.com
Who's involved
- Arthur J. Gallagher & Co.Prominent insurance brokerage providing insights into industry trends
- McKinseyConsulting firm that provided estimates on the potential payoff of precision underwriting
- LemonadeInsurtech company cited as an example of the industry adapting to granular underwriting
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- Arthur J. Gallagher & Co.Speculative
The insurance brokerage could see increased demand for advanced risk consulting services due to the industry-wide shift toward AI underwriting.
Keep exploring
The entities involved
-
Arthur J. Gallagher & Co.
insurance brokerage and risk management services company
-
McKinsey
family name