With the rapid development of medical insurance informatization, efficient processing of massive medical insurance data has become one focus of informatization construction. This article explores the application of KMP algorithm in the field of medical insurance, elaborating on the principles, workflow, and advantages of KMP algorithm in string matching, and analyzes its mathematical principles. Through case experiment data display and comparison with traditional algorithms, the implementation principles and advantages of KMP algorithm in core business processes such as medical insurance data matching, cost accounting, and fraud detection have been demonstrated, which provides strong technical support for the efficient operation of medical insurance information systems and precision medical services, and helps to carry out medical insurance informatization more accurately and efficiently.