5 trends shaping and challenging the insurance industry

By Khalid Lahraoui, Kenneth Saldanha and Naoyuki Shibata

The insurance industry's strong performance in 2024, as reflected in its results and fueled by rate hikes and favorable interest rates, paves the way for a transformative 2025. We see the industry increasingly leaning on technologies such as generative AI to boost operational efficiency, streamline corporate functions and accelerate accurate underwriting and claims processing, all while driving material economic impact. Amid shifting landscapes, from geopolitical change to climate impacts, we predict the following key trends will shape the future of the industry.

1. The aging population becomes the dominant industry force

The global median age is expected to rise to 32 in 2025, up from 30.9 in 2020, due to longer life spans and lower fertility rates. This shift is redefining traditional milestones such as retirement, marriage and homeownership. As such, insurers will find new opportunities to innovate and tailor health, life and hybrid retirement products to meet the complex needs of older adults, particularly Generation X, whose oldest members will turn 60 in 2025. This innovation will become a matter of urgency for such demographics as retirement services become a strategic priority for the industry and carriers reinvent how to serve this economically powerful segment.

The increasing number of retirees also presents challenges for health care providers, governments and communities, as they struggle to scale up services for the elderly in a competitive labor market.

2. Property insurance creates an existential crisis

Personal and commercial property insurance make up about 30% of global property/casualty premiums and have fueled top line growth with strong rate growth in recent years. This rising tide has waned as increasing claims from catastrophic events linked to climate change push many insurers, reinsurers and even the public “insurers of last resort” to exit the segment.

Regulatory changes such as those in California and in Italy are a start, but systemic solutions that address pricing as well as resilience at the community level are necessary. In 2025, we expect to see more public-private partnerships aimed at increasing climate resilience in the communities most affected.

3. Instability drives insurers to focus on what they can control - cost

In an uncertain geopolitical world that will drive volatility into the macroeconomic environment, insurers will turn to what they know and what they can control. Costs are knowable. To the extent that costs are controllable, that is where insurers will look to improve combined ratios.

4. AI is the new talent segment that reshapes talent strategies

In 2025, insurers will focus on sourcing skills needed to scale AI across market facing and corporate functions. The historical apprenticeship-based career path has been disrupted by AI. Insurers will take new approaches to talent sourcing and development, including looking well beyond their own walls for expertise and capacity for the full spectrum of low to high domain expertise roles.

5. Legacy technology pricing ends “kick the can” for chief information officers

Carriers and CIOs hoping to get a few more years out of their legacy technology by delaying resource-intensive technology modernization will find they are kicking that can down a toll road. The industry will see more of the dramatic price increases for legacy technology. The risk and economics of modernization will fundamentally change in 2025, forcing the industry to take action.

Bolstered by steady economic growth and resilient labor markets in 2024, our industry has reason to be optimistic in 2025. Four years ago, we predicted that global insurance industry revenues would grow to $7.5 trillion by the end of 2025 and current research continues to support our prediction. With the industry expected to exceed this figure with a worldwide total premium volume of $7.7 trillion by the end of this year, our identifiable challenge now will focus on whether that premium growth translates to profitable growth.

Khalid Lahraoui is insurance lead, global, with Accenture. Contact him at [email protected].

Kenneth Saldanha is Insurance Lead, Americas, with Accenture. Contact him at [email protected].

Naoyuki Shibata is insurance lead, Asia Pacific, with Accenture. Contact him at [email protected].

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