AI is reshaping the industry. Why credit unions should pay attention
For decades, insurance was known for its cautious pace. Change came slowly, often measured in decades rather than years. But that era is over. “Artificial Intelligence (AI) is not just speeding up the industry — it is rewriting the playbook altogether,” notes PwC.1 From underwriting and claims to customer experience and fraud detection, AI is pushing insurers onto a brand-new track. And for credit unions, the ripple effects are impossible to ignore.
From experimentation to transformation
AI has moved from pilot projects into the heart of insurance strategy. KPMG projects the AI insurance market will swell to nearly $79 billion by 2032,2 while Roots’ State of AI Adoption in Insurance 2025 reveals that more than 80% of insurance executives view AI as a strategic imperative.3 Yet only a fraction — about 22% — have scaled solutions into full production.3 This gap between ambition and execution is one of the defining dynamics of the industry today.
Consulting firms like McKinsey warn that insurers that treat AI as an add-on risk falling behind.4 The real gains, they argue, come when AI is treated as a foundation — rewiring underwriting, claims, and operations end to end. Instead of layering automation on outdated processes, the leaders are redesigning workflows entirely with AI at the core.
The value of AI is unlocking data
AI is already making a measurable impact. In underwriting, insurers are using advanced models to analyze structured and unstructured data, shrinking quote turnaround times and improving pricing accuracy. In claims, automation speeds up processing, using everything from document scanning to image-based assessments. Fraud detection has been sharpened through machine-learning models that identify patterns traditional systems often miss. Even IT and back-office operations are benefiting, with agentic AI handling repetitive workflows and freeing up human capacity for higher-value work.
The results are clear: Faster service, lower costs and higher member satisfaction. For credit unions, whose brand promise centers on trust and personal connection, partnering with insurers that deliver these outcomes can translate into a tangible, competitive advantage.
Challenges along the way
Still, insurers face real hurdles. Data remains a stubborn barrier, with only a small share of companies achieving real-time integration across their systems. Skill gaps persist, with many insurers citing a shortage of AI-ready talent.
Trust is another obstacle. KPMG’s U.S. insurance survey found that fewer than one in four insurers fully trust their AI systems, citing explainability and compliance risks.5 Legal experts, like those at Saul Ewing, are also raising questions about liability, data use and fairness that regulators are only beginning to address.5
The sustainability challenge is also growing louder. AI’s energy intensity is forcing insurers to balance technological ambition with environment social and governance (ESG) commitments. For an industry already under scrutiny from both regulators and the public, mismanaging these trade-offs could erode trust.
Why this matters for credit unions
For credit unions, the rise of AI-powered insurance represents both opportunity and responsibility. Partnering with insurers that embrace AI responsibly can enhance protection products, from faster claims payouts to stronger fraud prevention. But the bigger opportunity lies in meeting the expectations of a new generation of members.
Millennials and Generation Z now make up the fastest-growing share of borrowers, homeowners and policyholders. Their needs look very different from previous generations. They expect digital-first convenience — mobile apps, instant answers and seamless onboarding. They demand personalized coverage, from usage-based auto insurance to protections that match the gig economy. They value transparency and trust, which means insurers and credit unions must be clear about how AI is used. And increasingly, they want their financial providers aligned with sustainability values.
AI makes all this possible. It enables tailored product design, instant service and proactive risk management in ways that would have been impossible just a few years ago. For credit unions, embracing this change is about more than keeping up, it is about strengthening member loyalty and opening new doors to the next generation.
The finish line
Insurance is on a new track, and AI is driving the change. The winners will be those who move beyond pilots and embed AI deeply into their operations, balancing speed with trust, efficiency with transparency. For credit unions, the path forward is clear: Partner with forward-looking insurers, harness AI to deliver personalized protection, and meet the expectations of younger members who are redefining the financial services landscape.
The question is no longer whether AI will transform insurance. It already has. The question is: Will credit unions seize the opportunity to lead the way for their members?
