How AI is Reshaping the Future of Life Insurance in 2025
Artificial intelligence is poised to significantly impact the life insurance sector, signaling one of the most significant tech-driven changes coming to the industry. However, with insurance being a highly regulated industry, companies are still determining how, and when, to implement AI-powered tools.
According to a January 2025 research study by Digital Insurance, which surveyed 120 experts from insurance carriers, agencies, and tech firms, the majority anticipate increased spending in the technology sector. Approximately 78% of respondents expect to increase tech spending this year, while 18% plan to maintain the same level of investment, and 4% anticipate cuts.
One of the leading trends for insurers over the next one to three years is new technologies like AI, machine learning, and blockchain, as identified by 55% of respondents.
Ryan Baillargeon, insurance industry lead at Glia, noted that companies that implement AI tools can “create a competitive advantage when it comes to attracting and retaining talent, especially from younger generations.” He added, “The conversation around AI will shift from initial research and proof-of-concept phases to widespread implementation and value realization. The real winners will be those who harness AI to optimize processes and reduce operational costs.”
Popular AI applications include claims processes (36%), customer service (23%), and even underwriting (16%), based on the report’s findings.
However, the use of AI and GenAI poses risks. A major concern for insurance experts is “hallucinations,” with 51% of respondents expressing agreement. Additionally, 46% cited regulatory challenges stemming from a lack of model explainability, with 43% expressing concern over increased risk of data leaks.
Manulife’s AI Innovation
Manulife, a Canadian insurance firm operating in the U.S. as John Hancock, has been a leader in AI adoption for over a decade. Since launching AI practices in 2016, John Hancock and Manulife have identified over 200 GenAI use cases within the organization.
Jodie Wallis, the global chief analytics officer at Manulife, told Digital Insurance that the combination of classical AI with GenAI has been the most successful in improving “straight through processing rates” and other business functions. “GenAI is definitely a key lever in digital transformation, not the only lever, but it’s a key lever,” Wallis said. “I think the language that is used to discuss insurance, the story gets easier to tell with GenAI.”
Empathy: Bringing Innovation to Life Insurance
In 2020, Ron Gura and Yonathan Bergman co-founded Empathy, a life insurance technology firm. Their mission was to collaborate with life insurers by providing estate settlement and support services for bereaved beneficiaries.
Empathy offers tools for creating and maintaining care plans with dedicated care managers, as well as assistance with drafting obituaries, handling estate settlements, and other complex processes.
“We proved that if you shift from a transaction to a relationship, people will never forget what you did for them,” Gura said. “We’re seeing how this connects to everything else that is happening in the industry, a relatively antiquated industry that is looking for innovation, looking for customer experience [and] looking for more engagement during what we all know is the greatest wealth transfer in history.”
The Impact of Economic Factors on Retirement Savings:
New data from the Nationwide Retirement Institute suggests that a shaky economic outlook and familial responsibilities are major factors hindering women’s retirement savings. A study of over 2,500 investors and 610 advisors showed that 67% of women investors who support loved ones had career impacts due to caregiving duties. Approximately 18% reported that caregiving prevented them from saving for retirement.
Suzanne Ricklin, vice president of retirement solutions sales for Nationwide, said that it is understandable that women investors, who are often primary caretakers, are challenged by the current economic environment and the pressures of taking care of their loved ones.
AI’s Role in Underwriting
Brett Laker, head of North America for Underwrite Me, stated in a recent podcast for DI that AI will have a significant impact on underwriting, claims, and product development or mortality assumptions in the coming years.
“So there’s this fear of being left behind by peers and competitors, particularly if you’re looking at the C-suite and they’re getting recommendations from the subject matter experts, that can be really great because it can foster a faster adoption of new innovations,” Laker said. “However, it can also be a problem because if you cut corners on assessing the impacts and the implications, then you might trip up over yourself.”
He emphasized that AI can take over the “mundane and laborious” tasks for insurance agents, while also acknowledging the regulatory hurdles the insurance industry needs to address.
Financial Strategy and Tax Implications
The benefits of life insurance policies are available to affluent households, providing tax-free liquidity when needed, serving as loan collateral, and aiding in estate planning, although with certain costs.
High premiums associated with whole life or permanent policies represent an upfront challenge for those seeking to build a life insurance strategy. Additionally, evolving regulations regarding trusts and estates cause further complications.
“The tax attributes alone make it a very successful product in someone’s financial plan from a tax perspective,” Peter Harjes, a certified financial planner and chief financial strategist with ARI Financial, told Financial Planning.
