Conning research: Insurers must be flexible in the 2025

A new administration in Washington continues to add uncertainty to the broader macro environment. So this is the year that insurers must be strategically flexible.

That was the word from Conning as the research company gave its outlook for the coming year in a recent webinar.

Insurers must remain adaptable to seize emerging opportunities as several key trends will shape the 2025 insurance landscape. Scott Hawkins, head of insurance research for Conning, listed four forces that will drive the insurance industry this year: economic growth, insurance regulation, growth of artificial intelligence and shifts in reinsurance.

President Donald Trump’s proposed tariffs on imports also can impact the insurance industry, Hawkins said. Increased import expenses due to tariffs could lead to inflation, affecting life and annuity carriers by raising investment yields and claims costs. Property/casualty insurers face rising claim expenses from tariffs on construction and vehicle repair materials, with reshoring potentially increasing workers’ compensation claims.

High employment rates forecast for 2025 are good news for insurers, Hawkins said. High employment means more consumers are able to buy insurance and businesses will have more employees to provide benefits for.

Insurers are focusing on efficiency for the coming year, said Alan Dobbins, Conning’s director of insurance research. Carriers are increasing automation, streamlining operations and continuing to find opportunities to reduce costs – whether through increased use of artificial intelligence or reduced staff.

Life insurers show solid profitability

The life/annuity industry will be impacted by market growth, portfolio yield and new product development in 2025, Hawkins said.

Life carriers show solid profitability and capital growth. Hawkins said that positive growth is expected to continue through the year, provided that another pandemic does not occur.

Annuities also show strong premium growth going into 2025, he said. “Premium growth will remain a hot topic of conversation this year and next,” he added.

The life insurance industry has opportunities for growth as four generations of Americans – baby boomers, Generation X, millennials and Generation Z – look to purchase coverage. “Life insurers will be marketing to four distinct generations with distinct needs,” he said.

Conning also is predicting that the life insurance industry will increase its market penetration as well as policy sales in 2025. However, excess mortality among men ages 25-50 also will impact the life insurance industry.

“But the flip side of excess mortality is increased longevity,” Hawkins said. “This is fueling interest for guaranteed income products.”

P/C industry strong despite high cat losses

The trends that will impact the P/C industry in 2025, Dobbins said, are the homeowners insurance crisis, improving the auto insurance market, adverse litigation trends, increasing cyber liability, stabilizing reinsurance, integrating data, and excess and surplus lines opportunities.

“These are challenging trends in 2025,” he said. “When you layer them with uncertainty over the new administration’s agenda, insurers must prepare for flexibility.”

Conning predicts strong P/C premium growth in 2025 as the U.S. economic outlook picked up following the 2024 elections. Premium growth is expected to be highest in commercial property, commercial auto and homeowners insurance.

However, the P/C industry was hit with well-above-average catastrophe losses in seven of the past eight years, and 2025 got off to a bad start with the catastrophic wildfires in the Los Angeles area.

The evolving litigation environment will be a challenge for P/C insurers in 2025, Dobbins said. “Nuclear” verdicts, third-party litigation funding, expanded liability and social media platforms that amplify risks are all factors in that litigation environment.

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Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].