Datos Insights sees AI and modular cores driving P&C software in 2026

LTIMindtree's Insurance Technology Trends Radar 2025 put the share of the insurance ecosystem that had already produced GenAI use cases, or was in the middle of doing so, at almost 80%. That pace, along with demand for modular cores that let carriers modernize without a full rip-and-replace, is shaping the next P&C spending cycle. Datos Insights' Top Trends in P&C Insurance 2026: AI, Modular Core & More puts those ideas at the center of planning, not the edges.

AI is moving from pilots into operating workflows

The clearest signal across the market is that AI is no longer being treated as a side experiment. That is a different posture from the proof-of-concept era. The practical use cases now cluster around underwriting support, claims triage, document processing, customer communication, fraud detection, and operational orchestration.

That shift is visible in vendor priorities. Underwriting, claims, and enterprise operations are the main targets, and the market is increasingly a stack problem rather than a single-model problem. Damco Group published its article on agentic AI in P&C insurance on March 18, 2026, and FurtherAI published Insurance AI Stack for Underwriting & Claims on April 21, 2026. For executives, that means the budget conversation is moving away from isolated experiments and toward workflow design, exception handling, and how AI fits inside the policy and claims lifecycle.

The near-term priority is not broad autonomy. It is bounded automation that can be measured in straight-through processing, faster referral handling, and cleaner handoffs between intake, underwriting, and claims. That makes submission ingestion, FNOL automation, claims routing, and document classification the first places to fund.

Modular core is the sequencing strategy

Modularity is emerging as the more pragmatic response to core replacement fatigue. Digital insurance architecture is increasingly modular, with a policy administration system that exposes events and a claims platform that consumes those events. Decerto published Legacy to Modern: How US Insurance Carriers Modernize Core Systems in 2026 on September 25, 2025 and last updated it on April 29, 2026. That architecture matters because it lets insurers add components around the core instead of forcing a single cutover that can destabilize billing, policy, and claims at once.

That sequencing logic is especially useful in the mid-market and in specialty P&C, where speed to value often matters more than perfect feature completeness. A stable core with specialized layers for claims, billing, document generation, and workflow can shorten implementation cycles and reduce operational risk. Tier-1 carriers can adopt the same pattern, but they usually do so more slowly, with heavier controls around integration and release management.

Vendor selection changes in a modular world. The winning checklist is less about a monolithic feature grid and more about whether the platform exposes events cleanly, supports APIs and orchestration, and allows discrete components to be swapped without rebuilding the whole stack. That is the point where budgeting and architecture meet: fund the core that keeps records authoritative, then buy the layers that create speed and customer impact.

Claims is where the business case becomes visible

Claims is the fastest place to prove, or disprove, the value of both AI and modularity. In Decerto's claims-processing update, published on April 9, 2026, severe weather events can overwhelm claims operations in hours, with phone lines spiking, adjusters falling behind, and document queues growing faster than teams can clear them.

Accenture found in 2023 that 78% of policyholders say a seamless claims experience is a key factor when choosing an insurer, a figure VCASoftware highlights.

For 2026 planning, that pushes a few items to the top of the budget list:

• FNOL automation that can absorb first notice intake under surge conditions
• Claims triage that routes simple losses fast and escalates complex ones cleanly
• Document processing that reduces manual queue growth after weather events
• Customer communication tools that keep policyholders informed without adding call-center load
• Event-driven integrations so claims, policy, and billing stay synchronized

Governance decides whether AI scales

AI only works at enterprise scale when data, controls, and accountability are in place. Governance has become central to insurance AI planning. Cherry Bekaert published AI Data Governance in Insurance: How To Build a Compliant Framework on November 26, 2025 and last updated it on July 17, 2026. Poor data quality and loose controls can turn an AI layer into a fast way to automate bad decisions.

AI layered onto weak data and legacy architecture amplifies friction instead of removing it. Modular systems help only when the interfaces, event definitions, and data standards are disciplined enough to support them. Without that discipline, insurers end up with more integration points, more exceptions, and more audit risk.

Sequence modernization around a modular core, choose vendors that can participate in event-driven workflows, and invest in governance before expanding AI beyond narrow, well-bounded use cases.