Artificial intelligence is becoming a key technology priority for property and casualty (P&C) insurers as carriers look to improve underwriting, portfolio management and operational efficiency. However, new research suggests that increasing AI investment alone is not solving one of the sector’s biggest challenges, maintaining visibility and control across increasingly complex insurance operations.
Research from Federato, an AI-native insurance operations platform, indicates that the effectiveness of AI depends less on adoption rates and more on how deeply the technology is integrated into underwriting workflows. The findings come from the company’s 2026 State of P&C Insurance Technology report, which surveyed 750 professionals across insurers, managing general agents (MGAs) and MGA aggregators.
The report identified a significant disconnect between insurance leaders and underwriting teams when it comes to portfolio visibility. While 91% of executives said they have real-time control over their portfolios, only 27% of underwriters agreed, creating a 64 percentage point gap between leadership expectations and operational reality.
Federato’s research found that insurers that have fully integrated AI into their underwriting processes are 3.6 times more likely to achieve genuine portfolio control than organisations that have introduced AI tools on top of fragmented legacy technology environments. The findings suggest that the value of AI depends not only on the technology itself, but on whether it is connected to the systems and workflows where decisions are made.
The research highlights a wider challenge across the P&C insurance market. While many insurers have accelerated AI adoption, fewer have addressed the underlying operational fragmentation that limits its impact. Disconnected systems, inconsistent data and manual processes can prevent AI tools from delivering the level of insight and automation insurers expect.
This challenge is particularly visible in underwriting consistency. Federato found that while 93% of insurance leaders believe underwriting guidelines are applied consistently, 88% of employees said deviations occur because of missing information, disconnected platforms and workflow limitations. As insurers expand products and distribution channels, maintaining consistent underwriting decisions becomes more difficult when critical portfolio data is spread across multiple environments.
Operational inefficiencies are also creating additional pressure. According to the report, the average P&C employee spends approximately five hours each week manually coordinating information across disconnected systems, representing an estimated annual productivity cost of $10,145 per employee. Meanwhile, severe appetite drift nearly doubled year over year, increasing from 18% to 39% despite broader AI adoption.
The research also points to growing governance concerns as insurers introduce more AI tools into daily operations. Federato found that 89% of employees admitted using unsanctioned shadow AI applications, suggesting that workers are turning to external tools when enterprise technology does not support their workflows. This creates additional challenges around security, compliance and oversight.
Read the full Federato report here.
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