Insurance industry executives share what to expect in 2025

The latest research from Digital Insurance, Predicting the Future for Insurance: Areas to Watch in 2025, asked insurance executives their views on technology adoption, particularly with regard to artificial intelligence, the risks that concern them for their businesses and customers, and the trends they will be watching over the next few years.

The study was conducted last fall and included executives in P&C, life insurance, commercial lines, third-party administrators and payers, as well as agents, brokers and independent adjusters.

With the advent of a new administration, 58% of the respondents believe that 2025's macroeconomic climate will be favorable to the insurance industry. While inflation rates fell for the 12 months ending in October 2024, 38% of professionals who responded still identified inflation as the primary macroeconomic risk to the business of insurance in 2025.

Rounding out the top three risks were climate change (18%), which encompasses wildfire and flooding risks, hurricanes and other weather-related events, and regulatory uncertainty (17%), since insurance is regulated at the state level, particularly when it comes to rate setting.

Several other factors that could affect the industry include: cyber risks (9%), a recession (8%), supply chain issues (3%) and the talent gap (3%).

The importance of technology and innovation

Major events like hurricanes Milton and Helene, as well as the massive wildfires in Southern California underscore the need for the industry to move toward digital payments. For policyholders whose homes have been damaged or completely destroyed, mailing a paper check seems unproductive and not the best approach from a customer service perspective. Survey respondents agreed, with 74% thinking that instant access to digital funds is very important (33%) or critical (42%) for claimants.

Staying abreast of ever-changing technology to improve customer service and reduce operating expenses were two of the reasons insurers will make technology spending a priority in 2025. For carriers, improving their customer experience centers on three areas: customer service, sales and claims. Other areas where they will be focusing on technology investments are the use of artificial intelligence and machine learning, big data and analytics, and the cloud and other aspects of their digital infrastructure.

The adoption of artificial intelligence and generative AI requires anticipating some unknown risks and developing guardrails to protect against data and privacy violations, as well as monitoring ethical issues and the possible spread of misinformation. According to the report, one-third of insurance firms have deployed Gen AI in their business applications, with health insurance companies and payers (37%) more likely to have fully launched it as part of their internal and external applications. Forty-one percent of agencies and third-parties, and 30% of carriers said they are still in the early stages of investigating how they could utilize GenAI in their operations.

To see the areas where respondents anticipate an advantage to using AI, check out the full report here.