Have you heard about Article 4 of the EU’s new Artificial Intelligence Act? By August 2026, organizations across Europe will be required to prove that their teams are “AI literate,” with non-compliance risking a penalty of up to 7% of global revenue. While this law doesn’t yet apply to insurers in the United States, it sends a clear signal: AI literacy is no longer optional. It’s the next phase of how technology and regulation shape the insurance industry.
And for an industry built on trust, risk management, and long-term relationships, the implications couldn’t be more relevant.
Compliance vs. Innovation: Why Literacy Matters
Most insurance organizations approach regulation from a defensive posture: meet the requirements, avoid fines, and keep business moving. In insurance, that’s second nature. But Article 4 points to something bigger. Compliance alone will not separate leaders from the pack. AI literacy is about equipping teams, from underwriters to claims handlers to executives, with the knowledge, confidence, and governance to use AI responsibly.
That literacy becomes the bridge between compliance and innovation. Without it, AI is either a black box risk or a shiny tool that never scales. With it, insurers can unlock faster claims, sharper risk assessment, and more personalized customer experiences, all on a foundation of trust.
Guardrails as Enablers, Not Barriers
Insurers know guardrails. Regulations, audit trails, and compliance checks are part of everyday life. But guardrails are not always just limitations. Often, they’re what make safe experimentation possible.
When an underwriter knows exactly how AI-generated recommendations were calculated, or when a claims adjuster can audit a decision path in seconds, AI becomes beneficial, not scary. Literacy demystifies AI, governance enforces trust, and together they allow teams to innovate without fear of missteps.
The Practical Impact Across Insurance Functions
Here’s how AI literacy reshapes core insurance functions in tangible ways:
- Underwriting: Literate teams understand how to combine actuarial judgment with AI-driven risk models. They know when to challenge an output, when to accept it, and how to document decisions for regulators and reinsurers.
- Claims: Adjusters can use AI for fraud detection or triage, but literacy ensures they know how those models work and when human oversight is required. This keeps claims decisions both efficient and defensible.
- Operations: AI can streamline back-office tasks, but literacy prevents overreliance and helps operations teams spot data or model drift before it impacts performance.
- Executives: AI literate leaders are better positioned to evaluate vendor claims, set realistic strategies, and answer to boards and regulators with confidence.
Each role doesn’t just “use” AI. With literacy, they harness it, govern it, and maximize its potential.
What This Means for U.S. Insurers Today
Even though Article 4 isn’t on the books in the U.S., it’s a preview of where things are heading. Boards, investors, and regulators will increasingly look beyond compliance and ask for and expect AI competency.
For insurers, the takeaway is clear:
- Start building AI literacy now. Tailor AI training by role so that teams understand both the “why” and the “how.”
- Elevate governance from check-box to culture. Governance isn’t a drag on innovation, it’s the launchpad.
- Treat literacy as the differentiator. Carriers that can explain, audit, and stand behind their AI decisions will earn the trust of customers and regulators faster than those that can’t.
This shift raises three critical questions every insurance executive should be asking. First, are teams ready to explain AI decisions to regulators and customers? Can they accurately defend how and why a decision was made?
Second, do training programs go beyond generic instruction to provide role-based literacy? Underwriters, claims teams, and executives all face different risks and challenges, and a generic training model won’t cut it.
Finally, are carriers treating AI literacy purely as a compliance cost, or are they capitalizing on a competitive advantage? Those who see literacy as a differentiator will build more trust with customers, partners, and investors, and that trust will translate into growth.
The Insuresoft Perspective
For Insuresoft, AI isn’t just a bandwagon. After more than 30 years serving insurers, our perspective is grounded in practicality and trust. Technology only matters if it improves real outcomes for carriers and their policyholders. That means no shortcuts, no chasing hype, and no “shiny tool” of the moment.
We take a methodical, deliberate approach because the stakes in insurance are too high for anything less. Diamond, our core insurance platform for policy, billing, and claims, wasn’t built overnight. It has evolved over decades, with governance, orchestration, and auditable controls at its core. Because in our world, reliability comes before novelty.
That’s why clients trust us with high-stakes operations like underwriting, claims, and payments. Every model and workflow is carefully vetted, every process designed with guardrails, and every implementation focused on enhancing the human expertise at the center of insurance. Our philosophy is simple: move carefully, build wisely, and only adopt technology that creates lasting value.
Article 4 reinforces that measured approach. AI literacy isn’t about rushing into new systems, it’s about equipping people to work smarter and make decisions that are explainable, auditable, and defensible. For us, this isn’t new. It’s the way we’ve always operated.
Looking Ahead
The EU AI Act is just the beginning of a global wave of AI governance. Trust will be the new differentiator, and it won’t be built through marketing but through transparent, explainable, and responsibly deployed AI.
The insurance industry has always thrived by balancing protection with progress. Article 4 reminds us that this is still true today. Compliance is the baseline, but literacy is the opportunity. Insurers who embrace both will lead the market into the future.
At Insuresoft, we’ve spent over 30 years helping insurers evolve with confidence. With Diamond, our core insurance platform, we continue that commitment, building conservative, practical solutions that are designed to last. As AI literacy and governance reshape the industry, we’ll keep doing what we’ve always done: helping carriers move forward the smart way.