Wipro says US insurers set to double AI investment in 3-5 years; stock ends flat

Shares of Wipro Ltd edged higher on Thusrday after the consulting firm said US insurers are likely to more than double AI investment in the next 3-5 years. In a report titled "The AI Advantage: Building Tomorrow’s Insurance Enterprise", Wipro said inputs from 100 business leaders in the US insurance sector highlight a growing commitment to leveraging Artificial Intelligence (AI) to transform core processes.

The report suggested that 81 per cent of insurance companies plan to increase AI spending within the next year. They anticipate AI budgets will more than double over the next 3-5 years, increasing from 8 per cent to 20 per cent of total IT spending. This reflects a strategic shift as firms seek competitive advantages through enhanced customer experience and personalisation.

Wipro shares rose 0.19 per cent to settle at Rs 259.45 on BSE.

According to the report, a notable 92 per cent of respondents view AI as essential for maintaining competitive edges. Larger firms are leading the charge in AI adoption, benefiting from extensive data resources and strong governance. In contrast, mid-sized and smaller firms face challenges, including legacy systems and limited AI expertise.

Underwriting is a key area where AI is expected to drive value. The technology's ability to process vast amounts of data efficiently is seen as crucial for improving underwriting accuracy and efficiency. Despite this, less than half of the surveyed firms have extensively integrated AI into their underwriting processes.

Looking forward, 68 per cent of insurers expect AI to significantly improve risk assessment accuracy and cost savings. Additionally, 65 per cent foresee better compliance with regulatory requirements, while 62 per cent anticipate improved customer satisfaction and retention.

Challenges in AI adoption persist, notably the risks associated with bias and reputational damage. The report warns that 21 per cent of insurers, including 44 per cent of smaller firms, lack formal AI usage policies, potentially exposing them to compliance risks as regulations evolve. Furthermore, the growing complexity of AI technologies necessitates robust frameworks to manage these risks effectively.

Integration with existing systems remains a significant hurdle, with 71 per cent of insurers citing difficulties merging AI with legacy infrastructure. Most companies are adopting a phased implementation approach to address these integration challenges and mitigate risks. This strategy helps ensure smoother transitions and minimizes disruptions to ongoing operations, Wipro said.

Inter-departmental collaboration is emerging as a top priority as firms look to reap the maximum benefits from AI implementation. Forty-one percent of firms are reinforcing cross-functional collaboration between AI experts and underwriters. Meanwhile, almost half of the respondents are investing in upskilling their workforce and hiring AI talent to ensure they have the right skillset for an AI-first era.

"AI adoption is no longer optional, it is essential to future success," said Ritesh Talapatra, Vice President and Sector Head for Capital Markets and Insurance at Wipro Limited. As firms increasingly align AI initiatives with business objectives, those slow to adapt may fall behind. Investing in robust data, governance, and technical foundations is deemed critical for success.

Ultimately, Wipro said, the industry will need to recognise that AI is not just an innovation; it is the new foundation of success in insurance. Firms that prioritise quick wins and invest in building the foundation necessary for scale will be best positioned to thrive, it said.