It is 2025, just five years until a new decade that promises to be dramatically different from when we entered 2020. In 2020, COVID was a jolt to the industry, pushing insurers to digitally transform. In 2030, we will have seen 5-6 years of rapid advancement of AI and other technologies that will be a deeper and broader jolt than previously experienced.
2025 is a wake-up call for insurance. We are in the midst of a business model and technology-driven change due to the realization that the decades-old operational models and technology foundation, no longer meet the challenges and opportunities of a fast-changing world. We are in a race to prepare for a new future where insurance becomes more relevant than ever. The world has shifted. Insurance must as well.
Insurers’ traditional mindset of “this is how insurance is done” must be challenged to maximize the potential of technology. And the slow, steady 3%-4% of DWP technology investment will not suffice to meet the pace of change and demands in this changing marketplace.
The challenging industry financial picture and the increased cost of insurance for customers due to rising operational costs painfully highlight how necessary new operating models and technologies have become. And while the industry’s core business model of premiums, claims, reserves, and capital is not changing, how we think about the operating model and technology foundation must change.
Past Trends – A Precursor to the Future
Throughout history, people have tried to forecast the future to gain strategic advantages. Many have failed to interpret it correctly, or have failed to grasp the potential or limitations. Some chose to ignore the future, hoping to ride it out as if time would somehow go backward just this once and everything return to the status quo. But the future and change always emerge, bringing discomfort to those who ignore the trends and signs.
Over the last five years, Majesco has outlined many different trends that point to the need for action. Some trends have accelerated, some have morphed and expanded, and a few are still evolving. Together these trends define a very different future for insurance and were a precursor to the future. Some observations:
- In our 2022 blog on key trends, we noted that next-gen technology adoption and innovation would redefine leaders. This is now playing out. The AM Best report published May 2, 2024, had a very telling financial assessment of insurers. Those with highly correlated innovation assessment scores had significantly higher net premium written growth, lower expense ratios and greater efficiencies.
- Legacy debt and the need to transform, optimize and innovate the business and technology across the value chain has only intensified during this decade. The macroeconomic and market challenges have elongated or paused initiatives, adding to the operational challenges. In our Strategic Priorities 2024 research, we found no movement or a slight decline in dealing with legacy as compared to 4 years ago.
- Risk resilience, a key topic for an industry grappling with growing and intensifying risk, is more important than ever. In the last five years, the U.S. has had, on average, 18 separate billion-dollar disasters.[i] The impact on insurers’ financial results and the growing protection gap for insureds are both unsustainable.
- Data and analytics, a stalwart for the industry, has shifted from a long-term, incremental strategy to a near-term necessity across the entire spectrum of capabilities, including GenAI. Insurers that are executing on data and analytics initiatives are emerging as AI titans in the industry, demonstrating tremendous value and competitive differentiation as noted by an October 2024 Boston Consulting Group report.
- A next-gen technology foundation for the core business has accelerated and is now mandatory to adopt new technologies like GenAI, AI, and IoT that empower the business to meet modern-era insurance demands – to empower new business models, products, services and channels – breaking free of legacy technology debt that constrains insurers operationally and financially.
2025 Trends
So, what are the trends for 2025? It feels different than the past five years.
Everything seems to be changing or shifting. Customers are shifting and changing. Risk is changing and intensifying. Technology and AI adoption is accelerating. The pace of catastrophic events is increasing and intensifying. The pace of retirements and loss of industry knowledge is accelerating. The increase in cost for insurance is widening insurance protection gaps which ultimately is not good or sustainable for customers or the industry.
We are once again at a crossroads for change. We need to see and respond to the future differently. We need to view these trends through a lens that embraces these trends and inspires the industry to rethink and reimagine the future differently than the past.
Here are four trends out of the eight identified in the 8 Trends Shaping the Future of Insurance in 2025 thought leadership that reflect the opportunity to reimagine the future of insurance in 2030 and beyond.
Growing Protection Gap Creates Consequences
Along with increased risk and claims, we are seeing increased costs for insurance, placing increased pressure on customers’ financial wellbeing, particularly given inflation and high interest rates. At just the time when insurance purchase and use should be growing due to increased risk, it is underutilized because of perceived affordability issues. The result … a growing protection gap for insureds.
The headlines tell the story. CBS News noted that more than 95% of people and businesses in hurricane Helene were not insured, putting victims in a deeper financial hole.[ii] Hurricane Milton is likewise estimated to have exposed a large gap between insured and non-insured losses. The large gap of uninsured losses, while financially not impacting insurers, negatively influences the brand and trust of insurance overall.
The uninsured losses as well as insured losses that do not cover the actual loss reflect a massive societal risk, one that governments and taxpayers, as well as insureds are burdened with. The protection gap is now growing due to insurance price increases that are unaffordable. In Majesco’s 2024 Consumer Research we found that 76% of the younger generation (Millennials and Gen Z) and 61% of the older generation (Gen X and Boomers) had to cut back and tighten their budget, highlighting the pressure of price.
Today’s customers are increasingly disillusioned with the “traditional” insurance approach and rising costs, creating a trust and loyalty fault line between customers’ expectations and insurers’ ability to deliver what they want and need, at a price they can afford, even from trusted brands. It is changing buying behaviors and shifting expectations for different products, creating long-term consequences in customer acquisition and retention, growth, profitability, and brand loyalty and trust.
Rise of Climate Technology
Banking is in the early stages of determining how they will measure the impact of climate change on their financing portfolios – the homes and businesses that have loans. It is likely that most banks are underestimating their exposure to climate-related risk, just like many property insurers have underestimated their risk exposure. The convergence of insurance and banking around climate risk and the impact to property and businesses will drive a new view and focus on risk assessment.
Emerging climate tech such as new AI models that leverage new data sources and the power of advanced analytics is crucial to stay ahead and address climate risk. IoT technologies that can track changes in air quality and temperature, or detection of wildfires can help provide alerts for health and safety reasons. Ag tech is also beginning to leverage data to manage agricultural risk, helping to measure weather, rain, and production.
And rethinking the use of loss control beyond high-value or high-risk properties can address a large portion of insurers’ portfolios commonly untouched due to the cost because of primarily using “boots on the ground.” Leveraging technology with self-surveys and videos that use advanced analytics to assess the risk can assess the broader property portfolio cost effectively, either in-person or digitally. More importantly, the assessment provides a guide of recommendations to reduce, eliminate or mitigate risk – creating greater risk resilience.
Democratization and Demonetization of Data Accelerates
Access to data can be challenging and expensive. From siloed data, to limited access to core operational data, consolidation of data providers, and access at a price for some data, the industry has a significant gap between those with access to data and those without. This results in competitive disadvantages and market opportunity disparity. For some insurers, the cost of 3rd party data can be one of their largest operational expenses.
Democratization and demonetization of data breaks down these barriers and makes data more accessible, understandable, and actionable to anyone. This is accomplished by using next-gen intelligent core systems which provide access to all operational data (as compared to limited pre-defined data) from the systems into a data lake, making it available for use across the spectrum of analytics – BI, AI/ML models and GenAI.
Next-gen core solution providers may also offer a contributory database of all customer operational data anonymized and used to develop embedded AI/ML models. In this way, insurers can capitalize on the knowledge of larger datasets than the ones they own.
AI and GenAI adoption is making all of this data accessible and understandable using capabilities that analyze vast datasets – both structured and unstructured, identify trends and patterns, and create scores and insights that are highly valuable and digestible.
The emergence of a new data management approach leverages data mesh technology and blockchain to distribute data ownership and create domain-oriented data offerings. These can be queried and shared as well as managed closer to the source, enhancing quality, security, and governance while eliminating layers of cost for the same data that is available for a price within the industry.
Market Shifts Fuel New Product Growth Opportunities
Today’s modern world is expanding and reshaping the future of insurance products to meet demographic needs, customer expectations, and changing risk.
In our 2024 Consumer Research, the top-of-mind issue of finances was reflected in concerns about the increasing cost of insurance and how they were trying to decrease the overall cost with changes in deductibles, lowering coverages and more. This is reflected in products based on usage leveraging technologies such as wearables, telematics, or other sensors. The result is protection as a service based on usage – across both P&C and L&AH, including Gig worker-based usage.
Specialty insurance is tailored to meet unique or niche risks that typically are unavailable or unaffordable within traditional, standard P&C products. Given the increased risk environment as well as increased pricing for traditional products, a new “golden age” for specialty insurance is emerging. The surge in demand will take advantage of technology advancements for pricing, rating, underwriting, and core by leveraging native Cloud, new data sources, APIs, document ingestion, AI and GenAI to elevate automation and decisioning for specialty insurance.
Parametric insurance is expanding the options available to customers to cover a wider range of threats, exposures, and perils. In addition to traditional weather-related risks, parametric insurance is expanding into new markets, including cyber risk, supply chain disruption, and pandemics as well as traditional areas such as earthquake, travel, fire, and more. There is an increasing recognition of the need to cover some aspects of risks when comprehensive coverage may not be financially viable.
Majesco’s 2024 Consumer Research found that only 48% of part-time workers have individual LA&H and a paltry 21% have employer-provided benefits, exacerbating a protection gap. Given that Gen Z and Millennials move jobs more often, there is a need to reach them with products they need for protection and can take with them between jobs. Furthermore, as Boomers and Gen X approach retirement, they want to keep or add new insurance coverage. These demographic trends make supplemental and worksite products increasingly important.
Create Your Future
Rapid advances in data, technologies, risks, products and the shift in buyers in the next five years will accelerate change and disruption. Winners will use new technologies to create innovative products, harness AI-driven insights, redefine the operational model and lower costs, which will collectively help drive insurer growth and close the protection gap.
If there was ever a time to let necessity drive change in the business, it’s now. The future won’t be captivated by yesterday’s achievements, and tomorrow’s plans won’t come to fruition without an insurance business model that understands there are different demands and expectations than in the past.
View these four trends and the other four in the thought leadership report and join us for our annual January Trends webinar with a panel of industry leaders and influencers to rethink and reimaging your future today.
Time is moving fast. You need to as well.
[i] Rice, Doyle, “’Sobering’ data shows US set record for natural disasters, climate catastrophes in 2023,” USA Today, September 11, 2023, https://www.usatoday.com/story/news/nation/2023/09/11/us-sets-record-weather-climate-disasters-2023/70822661007/
[ii] Gibson, Kate, “Most U.S. homeowners hit by Hurricane Helene don’t have flood insurance,” CBS News Moneywatch, October 4, 2024, https://www.cbsnews.com/news/insurance-hurricane-helene-florida-north-carolina-fema-flood-homeowners/
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