The insurance industry, a sector famously built on the foundation of trust, is currently grappling with a paradox: while AI adoption is accelerating, a lack of robust data infrastructure and governance is keeping many firms from realizing the technology’s full potential.
A new report by IDC, commissioned by SAS, reveals that insurers are taking a measured, and at times overly cautious, approach to AI compared to other sectors. Despite the buzz surrounding generative AI, the research indicates that many organizations are still struggling with “siloed” data and a shortage of specialized talent.
The industry is often seen as a prime candidate for AI disruption, but the Data and AI Impact Report highlights significant roadblocks. Insurance currently presents the most modest profile in terms of AI and data infrastructure maturity among the analyzed industries of banking, government, and life sciences. Only 7% of insurers consider themselves “transformative,” which is the lowest percentage across all surveyed sectors. Additionally, 14% of firms remain stuck in siloed data architectures that prevent the enterprise-wide innovation necessary for a competitive edge. More than half of respondents, or 51%, admitted their organizations lack effective data governance or centralized data foundations.
“Our research shows the insurance industry in line with other sectors—if not slightly ahead of them—in terms of delivering trustworthy AI. However, when it comes to the level of maturity of AI and data infrastructures, insurers lag,” said Kathy Lange, Research Director at IDC.
Trust remains the industry’s biggest hurdle. Interestingly, the report found that users often place more faith in generative AI than traditional analytical AI, yet they don’t always invest in the governance to back up that trust.
The study identified a significant “trust gap,” with over 40% of insurers falling into one of two dangerous categories: underutilization (failing to trust reliable systems) or overreliance (placing too much trust in unproven systems). Only 9% of insurers currently balance high trust with strong, verified AI capabilities.
“AI is an imperative for businesses, but it’s not a magic pill,” says Franklin Manchester, Global Insurance Strategic Advisor at SAS. “The insurers who can infuse AI into their existing operations—and who establish the governance necessary to deliver safe and responsible AI—will have a competitive advantage.”
As the industry moves deeper into 2026, the strategy is shifting. While early AI efforts focused on efficiency, the report notes that cost-reduction measures produce the lowest return.
The real value, according to experts, lies in improving the customer experience, expanding market share and strengthening operational resilience against climate change and geopolitical volatility.