The insurance sector under Industry 5.0 has begun reshaping its focus on live invention, centering on humans and fostering an AI and machine-learning-enabled real-time, data-based environment across various sectors. Industry 4.0 promotes automation; Industry 5.0 which aims to enable a combination of human cognition and digital technology as part of collaborative innovation. The present study examines the disruptive potential associated with Industry 5.0 for the insurance sector regarding Digital Transformation Readiness (DTR), Human Capital agility and Innovation Index (HCAI) and environmental engagement (EE) concepts. For instance, human-centric AI can help insurers understand consumers' holistic needs and wants, customize risk management, and achieve operational efficiencies through understanding-based, contextual decision-making to create products and collaborate experiences to serve them better. DTR and HCAI disclose progress due to the development of the labor force and the requirement of flexibility with people management. EE integrates Sustainability into Digital Transformation with the ESG concept which drives trust and innovation. The composition has a competitive edge by optimizing resources and capitalizing on AI-informed insights, leading to strategic performance excellence and resource management proficiency as enablers. This study introduces Industry 5.0 as an advanced inclusive framework above and beyond technological innovations, which accounts for the ethical, sustainable practices and human-centric quality norms that will empower the insurance industry sector to cope with complexity, accrue resilience and remain sustainable in a stable setting.