New Delhi, Oct. 3 -- Two decades of investment in automation and digital technology have failed to bring down the insurance industry's overall cost burden, but artificial intelligence could finally change the equation by sharply reducing the cost of underwriting, claims and customer servicing, according to a McKinsey report.

The July 2026 report, How AI will reshape the economics of insurance: A CEO's guide to strategy, said insurance cost ratios globally are around 10 per cent higher than in 2005, despite substantial investment in technology.

"In contrast to most industries, insurance has failed to improve its cost efficiency in the past two decades," McKinsey said.

While earlier technology investments did improve labour productivity,...