AI in Insurance
AI risk and the need for embedded governance
Editor's Note: This is the part two of a two-part column. Follow this link to read part one.
In part one of this column, I set the stage for how analytics used to be insured within existing coverages and what makes AI risk different. This installment goes deeper into how to evaluate that risk.
For insureds using AI agents, the "human in the loop" becomes part of the risk conversation. Human oversight remains essential. Judgment and context matter across industries, as experienced people see nuance a model may miss.
Human review works when the system is designed to know when to ask for it. A process that relies on a person to catch every possible AI error after the fact will not hold up when an agent can move faster than the reviewer, take multiple steps in sequence, or interact with systems before anyone realizes the action created risk.
A smart loop limits authority by use case, role, data sensitivity, and risk level. Micro AI agents make it easier for an organization to identify, diagnose and correct issues than agents with a broad remit. In some scenarios, the agent drafts, recommends, or prepares an action that requires approval. In other cases, an agent acts from beginning to end. Both are valid as long as insureds have visibility and an auditable trail into why a decision was made.
That requires embedded governance.
Underwriting’s Next Job: Governance Steward
A decade ago, when an underwriter entered an incorrect number or misread a file, the damage was contained to one policy. One person, one mistake, one fix.
Executive Summary
Human underwriters are still needed as insurers introduce more AI agents to their underwriting processes, but part of the human role will include acting as a governance steward. Here, Tony Haverty and Nick Lamparelli explain what the new role entails, outlining the responsibilities that humans are taking on. They also describe the valuable role underwriters play in staying on top of changing exposures not captured in historical data that models will miss.
Today, a single flaw in a model’s logic or a bad software update can repeat the same mistake across thousands of policies before anyone notices. The error moved from the person to the architecture. And when the failure lives in the architecture, it happens everywhere at once.
News
Insurers Plan Modest Hiring Growth As Actual Job Gains Fall Short Of Forecasts
Nearly half of insurance companies plan to add staff over the next year, even though actual headcount growth over the past year fell well short of projections, according to a Q3 2026 study by The Jacobson Group and Aon, as reported by Risk & Insurance.
The big picture: Insurers remain broadly optimistic about both staffing and revenue growth, though that optimism has softened slightly compared with a year earlier. Companies point to rising business volume and expansion into new markets as the main forces behind hiring plans, while automation and overstaffing are cited as reasons for cuts.
By the numbers:
- 49% of companies plan to increase staff over the next 12 months, led by Life/Health insurers at 53%.
- 0.21% was actual headcount growth from July 2025 to July 2026, versus 1.03% projected.
- 78% of companies expect revenue growth, down 3 points from July 2025.
- 7.6% was 12-month voluntary turnover, down 1.6 points year over year.
- 86% of companies offer flexible hours, and 74% expect hybrid schedules to persist.
Climate/Resilience/Sustainability
Are Quieter Hurricane Seasons an Anomaly or a Trend?
To date, no major hurricanes have made landfall in the U.S. during the 2026 Atlantic hurricane season. Does a quiet year signal that hurricane risk is easing? The evidence suggests no.
For the first time in a decade, the 2025 Atlantic hurricane season ended without a single hurricane making landfall on the continental U.S. Yet, the same season produced three Category 5 hurricanes, which was tied for the second-most ever recorded, according to the National Oceanic and Atmospheric Administration (NOAA). None of those hurricanes made landfall.
The threat that defines hurricane season for the U.S. is not the count of storms a forecaster predicts, but whether one of those storms strikes a populated area, according to “A Decade of Storms: Why 2025’s Calm Season Isn’t a Trend” by Neptune Flood, which explains what hurricane season is, what the past decade has actually cost, and why one quiet year should not be mistaken for a change in direction.
Commentary/Opinion
The Private Equity Revolution in Insurance
Insurance enjoys the protection of a regulatory moat. Capital requirements, reserve rules, licensing, and market oversight protect policyholders—and, by extension, legacy carriers' market positions.
But the moat is built around the balance sheet, not the operating model. It was never designed to protect expense ratios, organizational layers, underwriting workflows, claims operations, or administrative overhead.
Private equity is finding the seams—the fee-generating, capital-light nodes adjacent to the regulated core—and systematically buying them, then using AI to compress cost inside while the actual risk gets parked elsewhere. Here's where the action is happening.
CLAIMS, FRAUD, AND SUBROGATION
Loss costs and loss adjustment expense consume roughly 60–70 cents of every premium dollar. That's the single largest pool of spending in the industry, and it's almost entirely a process problem—not a regulatory one. A state insurance commissioner has opinions about your rate filing, not about whether your computer vision model estimates hail damage better than an adjuster with a clipboard, or whether an natural language processing (NLP) model flags subrogation opportunities your staff missed while chasing cycle-time bonuses.
Riv Arthur is a business leader and technologist working in insurance, healthcare, and private equity
State News
‘Compromise’ state wildfire bill pleases victims but falls short of full structural reform
“We reached a compromise that blocks hedge funds from profiteering off wildfire survivors, bars utility executives from taking bonuses when their company ignites a fire, and gets money into survivors’ hands faster,” according to a Saturday statement from Newsom announcing the deal hashed out among lawmakers, the governor’s office and stakeholders. “It also establishes a Statewide Community Wildfire Strategy to better coordinate prevention and preparedness efforts across the state.”
As it is, the bill tightens statewide wildfire risk management provisions, enacts a so-called Fast Pay Programfor wildfire survivors who file claims, curbs bonuses for executives from utilities that cause major wildfires and bolsters bond provisions for the state’s Wildfire Fund, a multi-billion dollar account to keep investor-owned power companies from going bankrupt if they start a wildfire. It is funded by utility shareholders and ratepayers.
Under the new California Wildfire Relief Fast Pay provision, for instance, an administrator would establish and approve procedures “for the review, approval, and timely payment of claims by individual claimants for damages as a result of an activating wildfire.”
Research
Safer Cars, Smarter Repairs: Farmers Insurance® Explains How New Car Technology May Impact Repair and Insurance Costs
Today's cars can do more to help keep drivers safe than ever before.
Cameras, sensors and alerts can warn drivers about potential collisions, help them stay in their lanes and make it easier to see what's around them. But many of those same safety features rely on advanced technology built into windshields, bumpers, mirrors and other common repair areas. That means when damage happens, repairs can be more complex and costly. Farmers Insurance® is sharing how new safety technology in cars may impact repair and insurance costs.
These features are part of what's known as Advanced Driver Assistance Systems, or ADAS. When a car with ADAS is damaged, repairs may require special parts, computer checks and careful adjustments to keep safety features working properly.
"Many drivers use these safety features every day, but they may not connect them to the cost of repairing a car after an accident," said Michaela Rush, Head of National Auto Physical Damage at Farmers®. "Features designed to help prevent collisions can also make repairs more complicated and costly. Understanding that connection can help consumers make informed decisions about their car insurance coverage."
InsurTech/M&A/Finance💰/Collaboration
Aon to acquire USI to establish the premier U.S. middle-market platform
- Builds on the successful acquisition of NFP to advance leading platform in the large and growing U.S. middle market
- Extends Aon's differentiated capabilities to provide better choice, superior solutions and greater value for clients
- Expands Aon's access to the Excess & Surplus (E&S) segment, among the fastest-growing areas in U.S. commercial insurance
- Enhances Aon's industry-leading data platform, deepening its context advantage
- Following the close of the transaction, USI Chairman and CEO Mike Sicard will serve as President of Aon plc and global CEO of Middle Market for the firm
- Purchase price of $17.0 billion; transaction expected to deliver $395 million in annual run-rate net adjusted EBITDA impact from revenue and cost synergies across the combined middle-market platform and to be accretive to adjusted EPS in 2028
- Aon to host conference call to discuss transaction on August 31, 2026, at 8:00 AM ET
Bamboo Insurance files for IPO - what it means for brokers relying on its wildfire capacity
Bamboo Insurance, one of the few admitted carriers still actively writing new homeowners policies in California's most wildfire-exposed areas, has filed to go public on the New York Stock Exchange under the ticker "BMB", a listing that will put new financial scrutiny on the capacity model brokers in constrained markets have come to rely on.
J.P. Morgan and Morgan Stanley are acting as joint lead bookrunners on the offering, with Deutsche Bank Securities, Evercore ISI and Wells Fargo Securities as active bookrunners. The number of shares and price range have not yet been set.
The Utah-based, technology-enabled MGU is majority owned by White Mountains Insurance Group, which has invested roughly $285 million in the business since backing founder John Chu in 2018. Bamboo does not carry underwriting risk itself; instead it prices and selects risk in-house while a group of fronting carriers hold the capital behind the policies, a structure the company describes as "capital-light."
Legal System Abuse/Social Inflation
Nuclear Verdicts Go Boom, Increase 40.7% in 2025
So-called “nuclear” verdicts did not subside in 2025. In fact, it was quite the opposite.
According to a new report from strategic communications and research firm Marathon Strategies, there were nearly 200 verdicts resulting in an award of at least $10 million in 2025. Verdicts like this against corporate defendants have come to be known as nuclear verdicts, and the total from 2025—a 40.7% increase over 2024—is the highest Marathon has seen since 2009.
The total sum of the identified nuclear verdicts was about $25.6 billion, Marathon said, with 40 cases reaching what the firm described as “thermonuclear” level, or verdicts of $100 million or more. Four verdicts eclipsed $1 billion.