When State Farm Insurance agents rose up earlier this year in a cry against changes to the contracts State Farm offers them as independent contractors, part of the pushback centered on blaming company plans for AI implementation and a deep suspicion among some agents that State Farm has designs on significantly reducing the number of agents and will use AI to compensate for that supposed reduction in people power.
It’s not that simple.
Most insurance companies, including State Farm and Country Financial, are implementing AI across their businesses. Yes, State Farm has licensed AI products for all agent offices. Yes, some of the things AI is good at — automating routine tasks and providing faster pattern analysis — may, over time, shift the workforce.
But the implementation of AI in the larger insurance sector is at once less abrupt and more incremental than the specific fear voiced by agents, yet more far reaching in other ways.
It’s happening not just among agents, but through the entire business operation.
They're already using it
There’s a lot of discussion about AI lately, but it has really been moving into insurance workplaces for 4-5 years, according to Gunratan Lonare, a professor at the Katie School of Insurance and Risk Management at Illinois State University.
“Looks like a majority of insurance companies are already using AI or they are gonna use AI in a broader way in the future,” said Lonare.
He cited a survey of 16 states done by the National Association of Insurance Commissioners [NAIC], an association of regulators.
Eighty-four percent of health insurers reported they currently use AI or machine learning, plan to, or are exploring it. That’s 88% for auto companies, 70% for homeowner insurers and 58% for life policy carriers.
“It's really helping the industry shift from kind of a detect-and-repair sort of approach to a predict-and-prevent approach. There's enough data and there's enough compute power, frankly, and there's enough technology now that you can start to spot patterns in events. And then you can detect or you can predict when something bad's going to happen and prevent it,” said Pete Miller, CEO of the Institutes Risk and Insurance Knowledge Group, a nonprofit which educates and connects people in the industry.
AI adoption is already having an impact on productivity, though the effect is not mature, according to Julia Lamm, workforce transformation partner at PwC [PricewaterhouseCoopers International]. She specializes in the insurance sector. Lamm said her clients are seeing 4-5% boosts to productivity through the adoption of large language models, the kind of thing that all workers use to streamline report writing, retrieve information and put it into context.
Less advanced is the uptake of AI software agents that show promise to truly change a business process. She said a lot of insurers have looked at a broad list of things they want AI to do but have yet to fully rewire the way things happen.
"I've seen resistance where we've worked with clients to adopt this, where they're saying, ‘Is it really easier for me to use that for the work rather than just do it myself?'"Julia Lamm, Workforce Transformation Partner at PwC
“I'd say most of our clients are now going ‘OK, wait, I turned on this agent, but I'm not getting the full power of what I thought it would uplift' because I didn't actually reimagine the work, rethink roles and do all the org design around that,” said Lamm.
She said the software development life cycle has some low-hanging efficiency fruit insurance companies are starting to pick. Some of her clients have begun using the tools to create new software rather than write code from scratch. Fully embracing the tool has moved slower.
“I've seen resistance where we've worked with clients to adopt this, where they're saying, ‘Is it really easier for me to use that for the work rather than just do it myself?’ Because if they do it themselves, they're confident in the output,” said Lamm.
Hesitancy will not last
“I started out my work life as a coder, and in this world I can create apps so quickly that it's … very difficult to me to have a competitive advantage long run,” said Pete Miller of the Institutes.
Lamm said when software agent adoption does mature it will unlock capacity gains of 25-50%, though company cultures will determine some of that.
“Many of our clients … they're not going all the way to, ‘This is everything that could be done with an AI agent,’ because they're very much thinking about the customer experience, the human experience, in the claims example, where a human should still be in the loop from an empathy perspective,” said Lamm.
That’s the approach Bloomington-Normal insurance companies State Farm and Country Financial have signaled they are taking.
“Our standard is consistent: thoughtful application with human oversight and clear accountability. Across my career, one principle has held true. Technology earns its place when it makes the experience better for the people on the receiving end,” State Farm Chief Digital and Information Officer Joe Park said in May.
State Farm has branded these efforts “Next Gen Good Neighbor” and “Human + Digital.”
“As we modernize, we’re doing it with the clear principle that technology should strengthen human connection, not substitute for it,” said CEO Jon Farney in a May blog post. “And in a moment of need, that means digital tools that reduce paperwork and speed up updates, paired with a person who can explain options, exercise judgment and help a family take the next step.”
Country Financial said insurance will remain a people business.
“Human judgment, empathy and trust remain critically important in insurance. Country remains committed to personalized service, ensuring clients continue to benefit from both human expertise and technology-enabled capabilities," according to a statement.
Country said like previous technology transformations, AI is enabling employees to focus more on high-value activities in a quest for efficiency.
"AI can improve speed, accuracy and access to information, strengthening our ability to serve clients. For example, AI Assist is designed to help financial representatives and employees quickly access relevant information, creating more time for client-focused activities,” said Country.
PricewaterhouseCoopers said insurance agents are embracing some AI tools.
“AI does unlock a lot of efficiency where the process was extremely manual before. If you're trying to look up a customer, it's plugging into public databases to get the rest of their personal data, where before they would manually ask the customer for that information,” said Lamm.
Currently, there are limits to a willingness to adopt.
“Agents may be more cautious about tools that operate like an autopilot, lack transparency or diminish the human judgment and communication skills that underpin trust and customer choice. Adoption is strongest when AI is positioned as a collaborative tool that enhances, rather than replaces, the agent’s expertise and role as a trusted advisor,” said Marie Carr, PwC global growth strategy leader.
For companies that do not rely as heavily on human agents, PwC’s Julia Lamm said the primary driver may be cost. And those companies will likely go further with automation.
Workforce may shift, more than shrink
All sources consulted for this story asserted AI is not simply eliminating insurance jobs but changing the nature of the workforce. The scope of the change in the existing workforce structure will someday be noticeable, but perhaps not yet. The experts suggested this is happening slowly enough to avoid disruption to most workers.
Bureau of Labor Statistics projections supported those thoughts. BLS projected two years ago that employment of claims adjusters, appraisers, examiners, and investigators will decline 5% by 2034. Insurance underwriters will drop 3% over the same period. At the same time, related analytical and technology roles could grow much faster. Actuaries are projected to grow 22%, data scientists 34%, and computer and IT occupations faster than average.
“That might not translate into immediate headcount savings. More often than not, we're hearing clients say we want to put that on our tech debt, or we want to redeploy that…to help us grow and enter new markets and things like that. So, certainly not just a cost savings play,” said Lamm.
A Country Financial statement acknowledged AI also imposes a “workforce and talent strategy imperative.”
"Our intention is to continue thoughtfully managing workforce needs by factoring in retirements, attrition, workforce reskilling and the pursuit of new business growth,” said Country.
There may eventually be some disproportionate demographic effects on the insurance workforce. For instance, Lamm said some sectors that will shrink, such as claims, have more women working in them.
Lamm said most of her clients are not targeting reductions in headcount in the claims area as AI realizes efficiencies. As with Country, she said companies may allow that to happen through attrition. She said the claims area historically has high turnover anyway.
“Insurance companies just generally are a little more cautious, so they're moving slowly,” said Lamm.
