The insurance industry stands at a pivotal moment in its digital transformation journey. With deep data reserves, a tradition of analytic decision-making, and a workforce skilled in actuarial and underwriting practices, insurers are uniquely positioned to benefit from the ongoing advances in AI.

However, despite early enthusiasm and pilot projects, only 7% of insurers have successfully scaled AI initiatives across their organizations.¹ The adoption of increasingly powerful AI agents—systems that can support autonomous tasks, help make decisions, and take action under human oversight—offers a promising path forward. By embedding intelligent agents into workflows, insurers can tackle legacy constraints, talent shortages, and operational inefficiencies to unlock transformative value.

Challenges in adopting agentic AI

The broad adoption of agentic AI in insurance is hindered by several entrenched challenges.

First, a persistent talent shortage affects specialized roles such as actuarial analysis and underwriting, which limits the industry’s ability to leverage data effectively. Adding to the challenge is legacy infrastructure, including outdated systems and fragmented data architectures, which can impede integration and scalability.

Financial strain across the insurance sector is another major factor, with catastrophe losses exceeding $100 billion annually for six consecutive years, making high-frequency property losses a structural issue.²

Organizational resistance also plays a significant role; siloed teams, unclear priorities, and a conservative corporate culture slow the pace of AI adoption.

Opportunities with agentic AI

Despite these hurdles, agentic AI presents transformative opportunities. Workforce augmentation is one of the most promising areas. For instance, Sedgwick’s Sidekick Agent, developed in collaboration with Microsoft, enhances claims processing efficiency by more than 30% through real-time guidance and decision support.³

AI also enables personalized customer experiences at scale, using embedded systems to tailor communications and support. Operational efficiency can be improved significantly in some implementations, with end-to-end redesigns yielding 30–40% gains in net efficiency.¹

Furthermore, agentic AI, under human guidance, can enhance quality assurance by improving consistency and helping insurers adhere to compliance processes, which is especially important as seasoned professionals retire and institutional knowledge can be lost.

With agentic AI, chatbots can also be improved to more effectively enhance customer experience. Instead of answering a question and handing a customer off to a queue, an agentic solution can help orchestrate a more end-to-end experience. Potentially, this can include everything from capturing first notice of loss, to requesting missing documentation, updating policy and billing systems, scheduling appraisals, and proactively notifying customers of next steps (all subject to insurer workflows and regulatory review, of course).

This “resolve, not route” approach is already showing measurable impact in claims operations: For example, according to McKinsey, one major insurer rolled out more than 80 AI models in its claims domain, cutting complex-case liability assessment time by 23 days, improving routing accuracy by 30%, and reducing customer complaints by 65%.⁴

For carriers, such outcomes translate into faster cycle times, higher customer satisfaction, and better loss-adjustment expense control—all while preserving necessary human oversight where judgment, empathy, and regulatory accountability are required.

Strategies for success with agentic AI

To successfully adopt agentic AI, insurers must align technology initiatives with customer needs and business goals.

Establishing an AI Center of Excellence (CoE) is a foundational step. A CoE provides governance, strategic direction, and technical expertise, helping organizations avoid fragmented AI adoption and scale responsibly.

Iterative testing is also essential, beginning with high-volume, repeatable tasks that help insurers refine models through feedback loops and production pilots.

Targeting scarce talent areas, such as fraud detection and underwriting, can maximize impact by augmenting roles that are difficult to fill.

Industry accelerators like Cognizant’s Agent Foundry offer prebuilt tools and frameworks that can help reduce implementation time and support compliance efforts. This platform-agnostic solution supports the full lifecycle of agent deployment, from discovery to scale, and integrates seamlessly with existing enterprise systems.

Finally, cultural transformation is critical. Since 70% of scaling challenges are organizational, insurers must foster a culture of change, accountability, and long-term thinking to fully realize AI’s potential.¹

Move to agentic AI with confidence

Agentic AI is not just a technological upgrade, it is a strategic imperative for insurers seeking to thrive in a rapidly evolving landscape. By addressing structural challenges and embracing AI as a catalyst for transformation, insurers can unlock new levels of efficiency, personalization, and resilience.

The path forward requires bold leadership, cross-functional collaboration, and a commitment to continuous learning. Those who invest in scalable frameworks, such as AI Centers of Excellence and industry accelerators, will be best positioned to lead the next era of insurance innovation.

Explore solutions for agentic AI in insurance

• Explore insurance solutions and resources on Microsoft for Insurance.
• To learn about how Cognizant and Microsoft are partnering to help insurance companies advance their cloud modernization journeys, see the Cognizant and Microsoft Partner Page.

¹ Insurance leads AI adoption. It’s time to scale

² 2025 marks sixth year insured natural catastrophe losses exceed USD 100 billion, finds Swiss Re Institute

³ Sedgwick optimizes claim workflows with AI application Sidekick and Microsoft integration

⁴ The future of AI in the insurance industry

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When it comes to AI, insurers no longer need much convincing about the potential value of the technology to their business. What they need is help, partnership, and a path to adoption that recognizes the unique demands of the insurance industry.  

Some of the world’s largest insurance companies are busy innovating on early use cases to help them evaluate the potential impact of generative AI on their operations and businesses. Most other insurers are not far behind.                         

With the recent availability of Microsoft Copilot for Microsoft 365, which integrates the magic of the technology into everyday applications like Microsoft Teams and Excel, insurers understand that their employees and customers alike will welcome generative AI into their operations (if not demand it). Most insurers want to innovate quickly but carefully, deriving maximum value from even the earliest steps while incurring minimal risk to the business. 

Helping insurers unlock business value and deepen customer relationships through technology is what Microsoft Cloud for Financial Services is all about. In our work with early AI adopters, we have identified a set of progressive milestones that can help insurance companies explore generative AI so that its value can be assessed and scaled as quickly and productively as possible.  

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4 stages of AI maturity in insurance 

Today, most of the insurance companies we work with are evaluating projects at what we call the “exploring” phase—the early horizon where the technology is deployed on a limited basis. While these use cases tend to focus on internal business scenarios, they are executed with an eye to the far horizon of opportunity, beyond improving operations to being central to new product development and reimagined processes.  

To help insurance manage this long-term approach, we recommend following a four-level maturity model that describes the AI adoption journey from early consideration to innovation at scale. 

1. Exploring: Conducting research and developing plans and demos to learn what AI can and cannot do.  
2. Experimenting: Building a set of limited use cases to determine value and inform next-step planning.  
3. Scaling: Generating an innovation flywheel of more advanced use cases impacting the business at multiple levels. The most innovative insurers are generally here. 
4. Innovating: Integrating AI into core business processes and new offerings, with governance and training to create a new business-as-usual.  

From exploring to experimenting 

In a remarkable way, generative AI can feel almost too appealing. Brainstorming ideas for use cases can produce lists that are quite lengthy. So, it is important to prioritize.  

The north star in this phase is speed to value, which can be achieved by building use cases that are relatively simple to design and easy to deploy. Use design thinking techniques to ideate use cases and map them in a two-by-two “value versus implementation” matrix to find the ones that will deliver higher business value.  

Early use case scenarios are often designed to help employees do their jobs more efficiently. For example, in underwriting, it can take the form of an internal chatbot to answer agent questions or help triage submissions. Claims managers can realize immediate benefits using generative AI to transcribe first notice of loss conversations. In marketing, it can speed the process of developing presentations or drafting new content. 

We work together with insurers by first conducting envisioning workshops, choosing the most strategic options, then building and deploying rapid prototypes. This is where leveraging your technology partner or service provider can reap great benefits.  

 Keys to success in this phase: 

• Begin with three to five use cases.
• Focus on inward-facing scenarios with defined business value.
• Define timelines and success metrics that can be validated.

From experimenting to scaling generative AI 

With the learnings from early efforts in hand, insurers can gain the confidence to move up to more substantive use cases. Business value is the key criterion, and so every candidate should be evaluated on scalability (for example, if it won’t scale, don’t do it). Use cases can also include more than just text-based, with visuals or audio incorporated for richer experiences. Already, we are seeing insurers building on early success to generate an innovation flywheel that generates speed, scale, and learning through experience.  

To move to this next level, the IT landscape needs to be made AI-ready. The most important step is to prepare your data estate by migrating to a modern platform such as Microsoft Fabric, which unifies data and analytics, and has generative AI built in. This positions the company to build custom copilots, chatbots, and other AI enhancements using Microsoft Azure OpenAI Service and other cutting-edge solutions. It also ensures that critical concerns such as privacy, security, and compliance are fully addressed.  

This is also the point to consider the organizational implications of AI, not only identifying how roles will be impacted but also ensuring that frameworks and training are in place to ensure responsible AI over the long term.  

Keys to success in this phase: 

• Don’t stay small—apply learnings to larger efforts tailored to the business’s unique needs.
• Get your data estate ready for AI.
• Set up steering committees to ensure responsible AI and quality assurance frameworks. 

From scaling to long-term innovation  

Early adopters of AI in insurance are already building solutions designed to directly impact their operational efficiencies and, increasingly, the products and services they deliver. It won’t be long before deeper innovation with AI will create significant differentiation among competitors, and that has implications for every organization.  

To enable the greatest competitive advantages with AI, insurers will require a comprehensive cloud foundation that identifies and manages data from many sources, and ensures that AI tools integrate smoothly with existing systems. This is key to enabling AI development to scale as quickly as business requirements demand. You want to be sure that cloud and AI are being provided responsibly, and that it meets the industry’s stringent requirements for data privacy and protection.  

Organizationally, business processes will change to ensure safety and responsibility. We advocate creating committees or offices to define company values for using AI, ensuring guardrails in operations, and managing pipelines of use cases and measurement across the company.  

Finally, you want to ensure that your people are ready. Roles will change over time, and the workforce will accommodate this evolution best with training to build on their skill sets. A great step you can take today is to put AI in their hands now with Microsoft Copilot for Microsoft 365, which integrates powerful capabilities into the productivity tools they use every day.  

Keys to success in this phase: 

• Build a comprehensive AI technology foundation.
• Evolve business processes and deploy AI governance frameworks.
• Engage with and upskill employees to foster adoption and unlock creativity.

Continue on your generative AI journey 

As your organization considers how best to embrace generative AI, we invite you to reach out to your Microsoft representative or technology partner for insights and ideas to move forward with confidence.  

You can learn more about how Microsoft Cloud for Financial Services is helping our customers realize the future of insurance in the era of AI, unlocking business value, and deepening customer relationships.  

The post From exploration to innovation: 4 key stages of AI adoption for insurers appeared first on The Microsoft Cloud Blog.

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The ubiquitous nature of cybercrime 

Cyber risk is the risk that businesses face from bad actors—be they rogue operators, criminal enterprises, or even nation-states—who try to break into information systems to steal money, misuse data, take systems hostage for ransom, or otherwise wreak havoc. Unlike the threat of a physical break-in, there is no “move to a safer neighborhood” option with cybersecurity. The very fact that a company is always online means that attackers have virtually endless access and opportunity.  

Making things worse, automation and AI are being used to increase the volume and sophistication of cyberattacks, with ever-growing impact. Ransomware and fraudulent funds transfer attacks on small businesses have increased yearly. According to Microsoft Threat Intelligence, Ransomware as a Service (RaaS) has led to the evolution of a gig economy that lets small cyber criminals increase their reach and scale. Simply put, technology has allowed bad actors to automate and scale their cyberattacks, making cyber criminality a large global business.

Cyber protection essentials for small businesses 

The escalating threat landscape requires proactive measures to safeguard small businesses from cyberattacks. Fortunately, while the risks may be growing, the protections against them are keeping pace with improvements in quality and usability. And that means every business has the option of dramatically improving its security posture.  

You don’t need the security of a giant enterprise to mitigate the risk of your small business getting hacked. You just need to master a few basics. In the Microsoft Digital Defense Report 2022, researchers found that “Over 80 percent of security incidents can be traced to a few missing elements that could be addressed through modern security approaches.”¹ I’d recommend that every business owner review this report, and also learn how Microsoft is innovating on security, specifically for small businesses.  

In the meantime, here is a summary of four of the most important steps every small business leader can take to sleep a little better at night:

1. Keep up to date

To start, you should learn to love those software updates you’re constantly being notified to install from Microsoft and other trusted vendors. One area of increasing cyber threats is through exploited software. Even long-trusted software may have vulnerabilities. Fortunately, software security providers and ethical hackers work directly to identify these vulnerabilities as fast or faster than bad actors so the software provider can craft fixes proactively. Those updates are useless if the technology domain owner doesn’t implement them. Implementing a rapid patching plan is an easy best practice for any small business. Indeed, some cyber insurers have begun to deny coverage for cyberattacks if relevant software is not up to date, while others have put incentives like increasing deductibles in place to encourage timely patching. 

2. Keep score on your security posture

Beyond tracking updates, it can be hard to understand precisely how vulnerable your business is. So one essential tool is a measurement service like Microsoft Secure Score, which evaluates your business’s security posture based on your security configurations and provides insights and recommendations regarding security controls. Many businesses now make it a best practice to share their Secure Score with their IT security partner and their insurer, yielding good advice that’s tailored to their particular business.  

3. Implement essential controls

You don’t need to be a cybersecurity expert to secure your online presence. You just need to focus on leveraging a set of key controls. Most cyberattacks on small businesses still come from the least sophisticated sources like social (for example phishing), malware (such as viruses and ransomware), and device and network hacking (like endpoints). Fortunately, there are some basic, proven ways to protect against these kinds of attacks. While no one security measure will stop every attack, there are a set of relatively simple-to-use controls that every small business should put in place. Five security controls really stand out as high impact:

• multifactor authentication (MFA)
• email and web filtering
• data security and backups
• privileged access management (PAM)
• endpoint detection and response (EDR)

These critical cyber-hygiene controls create multiple layers of defense, making it harder for cybercriminals to exploit common attack vectors. And they can be implemented without a lot of friction or cost—especially when measured against the pain and disruption that can happen when a business fails to put them in place.  

Implementing these controls isn’t as hard as it sounds—most modern cloud-based software has multiple players of built-in protection. For example, implementing MFA in Microsoft Office 365 is a three-click procedure. Similarly, Microsoft OneDrive has built-in ransomware protection tools that automatically detect and guide recovery from ransomware attacks.   

4. Partner with your cyber insurer and your IT provider

Just as a burglary can happen even when you have all the best door locks, a cyberattack can succeed even when you’ve got the best cybersecurity measures in place. Consequently, preparation and planning are essential. You need to work with your insurer to determine the best security coverage for your specific needs. Cyber insurance offers financial support, incident response coaching, and access to specialized teams that can assist in limiting the damage caused by cyberattacks. You should also work with an IT provider who can build an incident plan that leverages your insurer in case things go wrong. Working together, these partners will make it easier to get you back up and running if an attack should ever succeed.  

Keeping cyber-safe as you grow 

Like property protection and professional liability, cyber insurance is now a necessary cost of doing business. By simplifying the essential steps to mitigate cyber threats, every small business can enhance its cybersecurity posture, reduce the likelihood and impact of attacks, and keep insurance costs down. Done well, effective cybersecurity can even build confidence in making new investments and driving new innovations. 

Staying informed and up to date, implementing basic security controls, and forging partnerships with cyber insurers and IT providers will empower a small business to protect its online presence and digital assets effectively. Remember, cybersecurity is a team sport. By working together, we can create a safer digital environment in which any small business can thrive. 

Learn More 

Find out more about Microsoft and partner solutions for insurers.

¹ Microsoft, Microsoft Digital Defense Report 2022.

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