Transformative Role of Technology in the Insurance Sector

Technology spending is rising across insurance, and 2026 is shaping up to be a defining year for how carriers and distribution modernize.

Digital Insurance’s latest study found that 78% of insurance companies and 60% of brokers plan to increase their technology budgets in 2026. The research, conducted from October through December 2025, reflects a broad mix of agents, carriers, reinsurers, and adjusters across organizations ranging from under $1 billion in premium to more than $20 billion.

That’s the industry view from inside the house. From the outside looking in, analysts are calling out the same direction of travel. Forrester recently projected U.S. technology spending growth for 2026 across industries, highlighting that insurers are shifting from modernization toward “intelligence,” with tech investment increasingly tied to measurable operational outcomes.

Where the Money Is Going and Why It Matters

One of the most practical takeaways from the Digital Insurance study is how spending priorities differ by segment. Carriers are allocating a large share of budgets to technology development and the capabilities that support it, including data platforms, automation, and analytics. Brokers and agencies are putting more weight on human capital while still reserving meaningful funding for technology enhancements that improve speed, service, and producer productivity.

This split makes sense in the real world. A carrier can modernize core systems and centralize data to improve underwriting discipline and claims handling. An agency, on the other hand, feels the pain of onboarding, retention, service work, and producer enablement every day, so investments often land in workflow, CRM, comparative raters, and client experience tools that remove friction.

Risk Pressure Is Driving Tech Priority Lists

The survey respondents pointed to a set of pressures that will feel familiar to almost anyone operating in insurance right now. The lack of affordable disaster insurance was cited by 72% as a decisive issue. Social inflation and litigation impacts were close behind. AI-enabled fraud also ranked high, reflecting a growing concern that synthetic identities, manipulated documentation, and more convincing social engineering could increase loss costs and claims leakage.

Outside the survey, the litigation trend is getting sharper around climate volatility and property losses. In a Financial Times report on the rise in climate-related disputes, Lex Machina’s Adam Masarek connected business interruption litigation directly to changing weather patterns and the scale of disruption companies face.

For insurance leaders, the message is clear. Tech spending is not only about efficiency. It is also about managing volatility. Better data, faster decisioning, and tighter controls show up as underwriting precision, claims cycle time improvements, and fraud prevention wins. When severity is rising, those wins compound quickly.

AI Moves From Experiments to Enterprise

AI is no longer a “future roadmap” topic. It is already shaping how work gets done across underwriting, claims, service, and sales. In the Digital Insurance study, participants highlighted AI, cybersecurity, and fraud prevention tools as key disruptors. That aligns with broader industry research. McKinsey has emphasized that insurers who capture outsize value from AI tend to treat it as an enterprise transformation, not a series of isolated pilots.

There’s also a quieter shift happening in how insurers think about risk transfer tied to AI. As organizations adopt generative tools across customer service, marketing, coding, and decision support, insurance markets are actively debating what “AI-related loss” means and how exclusions, definitions, and underwriting standards should evolve.

Within organizations, the most effective approach tends to be practical and grounded. Use AI where it removes repetitive work, improves decision quality, and strengthens controls. Pair that with governance that keeps models explainable, compliant, and aligned to business outcomes.

Greg Chandler, a senior executive at The Standard, framed it simply in the survey context: companies need to innovate strategically with AI to solve real organizational problems, not adopt it for novelty.

Parametric Insurance and New Product Paths

While much of the conversation focuses on operations, technology is also widening the product playbook. Parametric insurance, which pays out when a defined trigger is met, is gaining attention as catastrophe frequency and severity strain traditional structures. In the Digital Insurance findings, only 8% of companies reported using parametric insurance today, while 14% plan to adopt it in 2026.

That adoption curve fits the broader market trajectory. Several market forecasts project continued double-digit growth for parametric solutions, driven by improved data sources, better event measurement, and demand for faster, clearer payouts for large-scale events.

It’s also easy to see why parametric products can be appealing from a distribution standpoint. They can complement traditional coverage, address specific gaps, and offer more predictable payment mechanics when claims adjusting is complex or contested. The key is clarity in triggers, transparent basis risk discussions, and strong client education so expectations match policy design.

What Leaders Are Funding First

Across carriers, agencies, and brokers, the priorities tend to cluster around a few themes that directly impact profitability, retention, and service capacity.

• Data modernization for better underwriting, pricing discipline, and portfolio insight
• Claims automation and triage tools to reduce cycle time and improve severity control
• Fraud detection enhancements, especially for identity and document verification
• Cybersecurity hardening to protect sensitive policyholder and claims data
• Distribution workflow improvements that cut service time and support producer growth

What This Means for 2026 Planning

Insurance leaders do not need another reminder that “tech is important.” The more useful question is how to turn spending into outcomes.

For carriers, the winners in 2026 will likely be the organizations that connect data quality to underwriting action, connect claims efficiency to severity control, and connect AI adoption to governance that keeps decisions reliable. For agencies and brokers, the advantage will come from reducing friction, improving client experience, and giving producers better tools to advise and place coverage in a harder, more complex market.

Technology budgets are increasing because the risk environment is changing faster than traditional operating models can absorb. The organizations that treat 2026 as the year to operationalize intelligence, not just buy more software, will be the ones best positioned to grow through volatility.