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AI-first CFO Strategies to Cut Costs and Drive Insurance Excellence

Read | Jul 25, 2025

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AUTHOR(s)

Nagendra Babu

Corporate Vice President – F&A Practice

Key Points

With margins under pressure and volatility becoming the norm, insurance CFOs are under increasing pressure to contain costs while still funding innovation and navigating complex risk landscapes.
This article unveils how an AI‑first approach – leveraging technologies such as Generative AI, hyperautomation and cloud – can transform underwriting, claims and finance workflows into lean, resilient engines.
Discover how leading insurers are building future-ready finance functions by aligning talent, technology and transformation priorities for sustained performance.

The insurance industry is facing a perfect storm – rising operating costs, surging claims, mounting regulatory demands and disruption from agile InsurTechs. Meanwhile, customers expect greater speed, transparency and value. For CFOs, this means traditional cost containment is no longer enough. To stay competitive, insurers must adopt strategic cost transformation powered by Artificial Intelligence (AI)-fi

Figure 1: Impact of skyrocketing costs across business lines

From Cost Pressures to Competitive Advantage

Short-term fixes, such as tweaking policy terms or limiting coverage, are not enough to counter today’s multifaceted cost challenges. Instead, insurers must leverage intelligent technologies to build scalable, efficient operations that reduce costs while driving long-term value.

Here is how an AI-first strategy can help insurers future-proof their cost structures.

Invest in AI, Generative AI and ML

Advanced AI tools automate repetitive tasks, exponentially boosting efficiency, reducing costs and improving resilience. Harness Generative AI (Gen AI) and Machine Learning (ML) driven solutions to power Straight-Through Processing (STP), real-time data ingestion, risk assessments and benchmarking.

AI-powered technologies help insurers assess damage, verify coverage, detect fraud and issue payments within minutes – cutting operational and claims-related costs by ~30 percent.

Build a Hyperautomation Foundation

Intelligent hyperautomation re-imagines workflow orchestration across underwriting, claims, finance and customer service, minimizing errors and accelerating turnaround times. From policy intake and loss runs to certificates of insurance and claims, these solutions significantly lower manual effort and costs.

An insurance broker cut Days Sales Outstanding (DSO) by 57 percent by re-engineering Order-to-Cash with automation and risk controls.

Lean into Blockchain for Trust and Transparency

Blockchain automates reconciliation and supports real-time updates, enhancing transparency and lowering administrative overhead. In addition, smart contracts automate claims validation and payouts, reducing fraud and accelerating settlements.

Using Blockchain, insurers can process claims 3x faster and 5x more cost-effectively⁶ while significantly reducing risk of fraud.

Modernize Infrastructure with Cloud and Cybersecurity

Secure cloud platforms offer scalability, reduce infrastructure spend and boost cyber resilience. Flexible architectures manage fluctuating workloads, scaling during peak periods without the need for investing in year-round capacity.

McKinsey estimates, cloud will deliver USD 70-110 Bn in value to the insurance sector⁷ by 2030. An early adopter has cut computing costs by 30 percent, underscoring the potential impact.

Amplify Value with Data and Analytics

Data-driven insights power faster, smarter decisions. From precise pricing and risk modeling to fraud detection and claims forecasting. This enables insurers to reduce leakage, optimize portfolios and improve outcomes across the value chain. Furthermore, analytics enhances operational visibility and distribution targeting.

A top insurer leveraged analytics to shape a future-ready Accounts Payable (AP) ecosystem, unlocking efficiency, vendor satisfaction and strategic control over USD 6.7 Bn in global spend.

5 Focus Areas for Meaningful Transformation

While implementing AI-led strategies may require upfront investment, the long-term gains can significantly outweigh the costs, especially when guided by a strategic, value-driven approach.

1. Claims Management

Smart STP platforms automate the end-to-end claims journey, cutting cycle times by 40 percent and manual intervention by 40-60 percent. IoT tools (like leak sensors) can reduce claim severity and frequency by ~51 percent and ~39 percent, respectively, while boosting customer satisfaction through proactive risk mitigation. In a notable case, advanced analytics delivered USD 90 Mn in fraud recoveries for a global insurer.

2. Underwriting & Distribution

Predictive models not only improve underwriting consistency, speed and pricing accuracy, they flag emerging risk trends early, enabling proactive risk mitigation and cost reduction. In distribution, shifting to direct digital channels allows insurers to bypass costly intermediaries and lower acquisition spend by aligning closely with customer expectations. One global insurer realized USD 45 Mn in combined value through such underwriting excellence and distribution optimization.

3. Finance & Accounting

Analytics and Gen AI support accurate forecasting, scenario modeling and capital allocation, easing the transition to proactive financial anagement. Agile finance functions, powered by AI-driven expense controls, also enable faster responses to market shifts. A global insurance leveraged AI-driven finance transformation and risk management to gain meaningful automation of its AP and Record-to-Report tasks, accelerating month-end and AP close cycle.

4. Risk and Portfolio Management

AI and Gen AI support dynamic portfolio optimization and early identification of emerging risks, enabling smarter underwriting and improved capital deployment. This ensures insurers stay profitable even amid rapidly evolving risk environments.

5. Regulatory Compliance

Predictive compliance and AI-enabled tax planning minimize risk exposure, creating audit readiness and scalable governance frameworks as regulatory scrutiny intensifies globally. Automating regulatory workflows, with centralized documentation and smart tracking tools, can yield savings of up to 50 percent.

Moving from Cost-cutting to Future-proofing

Strategic cost management in today’s insurance is all about building leaner, smarter and more resilient organizations. By using advanced technologies to design cost structures that are both efficient and sustainable, CFOs can develop agile, future-ready operations amid ongoing volatility.

To ensure lasting success, insurers must embed governance frameworks with clear metrics, including Operational Efficiency Ratios (OER), capital efficiency, risk-adjusted returns and digital adoption rates. These enable timely, data-driven decisions that align operational execution with long-term strategy.

Ready to go beyond cost containment? Connect with our experts to drive intelligent cost transformation that fuels performance, innovation and resilience.

References

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