The life, annuity, and benefits (L/A/B) insurance industry is undergoing significant technological transformation, with carriers investing in advanced capabilities to remain competitive in an increasingly digital marketplace. A recent report from Datos Insights, Competitive Capabilities for Life/Annuity/Benefits Insurers, 2025, provides valuable insights into how insurers are deploying and piloting technology-enabled capabilities across their organizations. The report analyzes data from life, annuity, and benefits insurers, measuring their maturity across 70 key technological capabilities spanning digital, data/analytics, and core systems.
The Rise of AI-Driven Customer and Distributor Engagement
Artificial intelligence has emerged as a focal point for insurers’ technology investments, particularly in customer and distributor engagement. AI-related capabilities are driving the most significant pilot activity across insurers in 2025. Among these, GenAI-enabled chatbots represent the most widely piloted capability, with 50% of surveyed customer engagement teams and 36% of distribution teams actively testing these solutions.
This investment reflects a strategic shift toward more advanced AI applications beyond traditional automation. Insurers are increasingly exploring synthetic voice technology, sentiment analysis, and emotional analysis as they seek to create more intuitive and responsive customer interactions. These capabilities address the growing expectation from customers for digital experiences comparable to those they encounter in retail and airline industries. With all customer engagement capabilities in digital and data being widely piloted, it’s clear that insurers recognize the critical importance of AI in shaping future customer relationships.
Evolution of Distribution Systems and Capabilities
Distribution systems are evolving more rapidly than other business capabilities, highlighting the industry’s focus on enhancing distributor efficiency and effectiveness. Key investment areas include improved onboarding experiences, streamlined new business management, and enhanced transparency in book-of-business oversight.
The study indicates significant pilot activity in distribution, with GenAI-based offer guidance and partner network optimization being piloted by 29% of carriers. These investments reflect the industry’s recognition that distributor time optimization directly impacts profitability. By providing distributors with more powerful tools and better information access, insurers can improve both distributor satisfaction and overall sales performance. The emphasis on these capabilities acknowledges the independence of many distributors, who can choose their carrier partnerships based partly on technological enablement.
Claims Processing Transformation Through Digital and Data
Claims processing has become a key investment priority for carriers, with insurers showing increased maturity in digital and data capabilities compared to 2022. Digital investments are expanding to serve multiple stakeholders—end consumers, agents, and internal employees—creating more efficient and effective claims-handling processes.
Carriers are increasingly leveraging external data sources and automated adjudication to streamline operations and enhance customer experience. These innovations help reduce processing times and minimize back-and-forth communications, addressing two traditional pain points in the claims process. However, core systems continue to present challenges, with many carriers struggling to consolidate operations across multiple platforms. The industry is moving toward composable architecture solutions to integrate with modern claims processing tools, though the complexity of modernizing legacy systems remains a significant hurdle.
Conclusion: Balancing Innovation and Implementation
The insurance industry is actively investing in technological advancement while navigating the challenges of implementation. While capabilities across most functional areas show a slight decline compared to 2022—reflecting rising expectations and flat budgets—targeted investments in customer engagement, claims processing, advisor experience, and distribution demonstrate clear strategic priorities.
The most successful insurers recognize that enabling a capability is only the first step; truly leveraging it requires reworking business processes and sometimes reimagining insurance products or relationships with policyholders and distributors. As AI continues to drive innovation, particularly in customer engagement and distribution, insurers must balance technological advancement with thoughtful implementation to realize the full value of their investments.
For industry executives and technology providers alike, the Competitive Capabilities Framework offers a valuable tool for benchmarking current technology investments and identifying future opportunities. In an industry where technological capabilities increasingly drive competitive advantage, understanding these trends is essential for strategic planning and execution.
