An arms race is brewing in claims handling

The insurance industry is no longer discussing whether digital and artificial intelligence (AI) transformations in claims handling are a business necessity – it is in near total unanimity that they are.

However, adoption and investment levels vary across firms, as do the tech-stacks and problem-sets that firms are focusing on. What is clear though, is that early movers are seeing reliable efficiency improvements – and the starting gun has been fired on a new claims handling arms race.

The data behind these conclusions comes from Insurance Times’ AI Claims Report 2025/26 – available online now – released in partnership with insurance software provider RDT.

To underpin the report, Insurance Times conducted a major survey of senior insurance professionals. Insurance Times’ head of research, Savan Shah, explained how high quality responses were vital for generating informative and actionable conclusions.

He said: “This sample offers a balanced view of current market dynamics. It spans personal and commercial lines, ensuring both major segments are represented. Respondents are highly experienced – 39% have over 20 years in claims, bringing seasoned judgment.

“Crucially, we capture the full AI adoption spectrum – 38% already using tools and 38% are piloting tools, alongside planners and sceptics – so our insights reflect both leaders and late adopters. This composition provides a credible snapshot of the UK claims landscape.”

Indeed, the report crystallised a series of high level trends in the market. An overwhelming 57% of respondents rated digital transformations as extremely important to their business remaining competitive, while 34% rated it as very important – just 9% held opposing views.

AI adoption, however, while prevalent, was lower. Some 38% of surveyees reported they were currently using AI within their claims processes, a further 38% said they were in a piloting or testing phase, while 24% reported not yet using the technology.

Lower still were the investment levels in AI claims tooling. Just 14% of respondents reported that their firm had made extensive investment, while 55% reported some investment. Some 31% of people reported little or no investment, highlighting the gap between perceived importance and implementation of tooling.

Speaking on the findings, Mark Bates, chief executive at RDT, said: “Digital transformation is no longer optional – it’s fundamental to staying competitive.

“The real shift is around data and AI – insurers that can harness these tools to automate processes, improve decision-making and deliver personalised customer experiences will move ahead. Those that rely on outdated, manual processes will inevitably be left behind.”

Pain points

For the 76% of professionals that are piloting or actively using AI in claims processes at their companies, the focus of the implementation is clear.

Asked to name the top three challenges in their roles, 68% of claims handlers reported high workload as an issue. Driving this was the prevalence of inefficient systems (63%) and the pressure to process claims quickly (57%).

Beyond these operational and structural pain points, the instances of any given issue fell dramatically. Just 19% of surveyed professionals highlighted a lack of career progression, 18% a lack of training and 13% a lack of leadership communication.

The appearance of workload and systems-related pressures among the commonly cited challenges will please insurers that are keen to expand the use of the AI in their claims processes, given the widely touted ability for AI to drive efficiencies in these areas.

The survey also revealed that early adopters are indeed using AI predominantly in areas that reduce the manual workload of their staff.

Document processing was the most commonly reported use case, being utilised by 43% of respondents, while data collection (42%) and triage and routing (36%) were also common occurrences.

Customer communications (36%), fraud detection (33%) and settlement and payment (22%) were also targets for process optimisation, though at slightly lower levels due to their traditionally more tailored approach.

Is it all worth it?

As the data shows, AI initiatives in claims are now common, broad and growing. Indeed, a separate RDT survey showed that claims handling is the number one target for AI augmentation.

The natural question then, is whether the implementation is leading to tangible benefits. According to the research, it is, with 43% of respondents reporting some improvement to their claims handing efficiency and 26% reporting greatly improved efficiency.

Just 11% said that new ways of working had had no impact on their business and only 1% said that their claims efficiency had worsened as a result of AI.

With the immediate benefits increasingly apparent, and the potential for the technology to develop yet further, it is likely the role of AI in claims handling will continue to grow. But the growth of the new technology comes with a caveat – over-rely on the technology at your peril.

Many, such as chief executive at claims handler Hibrid, Justin Murphy, felt the “real opportunity lies in collaboration between technology and people”.

He concluded: “AI can deliver speed, consistency and deeper insight, but trust is built when customers understand these systems don’t replace human judgment, they enhance it.

“By being transparent about how AI informs decisions, and by making clear where our claims experts apply oversight and empathy, we can show that technology supports fairness, consistency and accountability.

“That balance is what ultimately builds confidence and trust.”