Insurance Leaders Accelerate AI Investment Amid Rising Cyber Risks and Skills Shortages

Chief executives across the global insurance sector are significantly increasing their commitment to artificial intelligence (AI), with a growing majority expecting tangible returns within a relatively short timeframe. Despite a backdrop of economic volatility, climate-related challenges, and rapid technological disruption, industry leaders remain broadly confident about both company performance and sector-wide prospects.

According to the latest outlook report by KPMG International, 82% of insurance CEOs express confidence in their organisations’ growth over the next three years—an improvement from 74% recorded in 2024. Confidence in the broader insurance industry is also robust, with 78% of respondents indicating optimism about sector resilience and expansion.

AI Investment Takes Centre Stage

Artificial intelligence has firmly established itself as a cornerstone of strategic investment. Approximately 73% of CEOs rank machine intelligence among their top spending priorities, reflecting a decisive shift from experimentation to scaled implementation. Notably, 67% of respondents plan to allocate between 10% and 20% of their budgets to AI-related technologies, including analytics, automation, and generative AI.

Even more striking is the acceleration in expected returns. Around 67% of CEOs anticipate seeing returns on AI investments within one to three years—more than triple the 21% who held this expectation in 2024. This signals increasing confidence in AI’s capacity to deliver measurable business value in the near term.

Key Findings at a Glance

Persistent Challenges to AI Adoption

Despite the enthusiasm surrounding AI, several structural and operational challenges remain. A significant 83% of CEOs cite workforce readiness and skills shortages as major impediments to effective AI adoption. This highlights the urgent need for reskilling initiatives and talent development strategies across the sector.

Ethical considerations also feature prominently, with 56% of respondents expressing concern about responsible AI deployment. Meanwhile, 51% identify data readiness as a critical issue, underscoring the importance of high-quality, well-governed datasets for successful implementation. Regulatory complexity is another major hurdle, with 77% warning that evolving compliance requirements could slow progress.

Cybersecurity Emerges as the Leading Risk

Cybercrime has emerged as the most pressing threat to growth, identified by 83% of surveyed CEOs. As insurers become increasingly digitised, the sector faces heightened exposure to cyberattacks, data breaches, and operational disruptions. This has prompted a parallel rise in investment in cybersecurity frameworks and risk mitigation strategies.

M&A Activity and Strategic Expansion

Mergers and acquisitions are expected to remain an important avenue for growth and consolidation. Half of the CEOs anticipate high-impact deals over the next three years, whilst a further 41% foresee moderate levels of activity. These transactions are likely to focus on acquiring technological capabilities, expanding market reach, and enhancing product portfolios.

Sustainability Moves to the Core

Sustainability is no longer a peripheral concern but a central component of corporate strategy. Around 72% of insurers report that sustainability principles are now embedded in their operations. In addition, 81% are enhancing their environmental, social, and governance (ESG) reporting practices, and 77% are strengthening climate risk modelling capabilities to better assess long-term exposures.

India Reflects Global Trends

In India, these global dynamics are mirrored by strong premium growth, rising demand for protection and retirement products, and rapid digital transformation. Insurers in the country are placing increasing emphasis on governance, regulatory compliance, and workforce reskilling as they expand their use of AI and digital tools.

Crucially, the industry is moving beyond pilot programmes towards full-scale AI deployment. Applications now span risk assessment, claims processing, fraud detection, and customer service—areas where efficiency gains and improved accuracy can deliver significant competitive advantages.

Outlook

The findings suggest that whilst optimism remains high, the path forward will require careful navigation of technological, regulatory, and human capital challenges. Investment in innovation, talent, and strategic partnerships will be essential for insurers seeking to remain competitive in an increasingly complex and digitised landscape.