Top 8 trends that will impact insurance in 2025

Now is the time to reshape the insurance industry’s business model and technology foundation, according to a Majesco white paper on trends impacting the future of insurance in 2025.

“Insurance is waking up to a realization that the operational models and technology foundation no longer meet the challenges and opportunities of today’s fast-changing world and must move beyond the legacy and internal mindset of ‘this is how insurance is done,’ to one that recognizes the world has shifted and they must as well, the report said. “Disruption was needed. It has taken some insurers time to figure out just how much it still is needed.”

Majesco’s report said the industry is at a crossroads and a tipping point.

“Customers are shifting and changing. Risk is changing and intensifying. Technology adoption is accelerating. The pace of events is increasing and intensifying. Just look at the last 5 years’ experience with an average of 15-18 billion-dollar disasters a year. This is unsustainable for the industry. And unsustainable for insureds.”

The eight trends that Majesco sees reshaping the future of insurance in 2025 are:

1. A new era of risk demands new technology. Risk resiliency is still relevant but little progress has been made due to the operational challenges of catastrophic events and increasing claims. The insurance industry’s short-term response is raising the cost of insurance. This is unsustainable for customers as well as the industry. Insurers must change their legacy business methods and technologies for assessing and managing risks, because they no longer work.
2. The growing protection gap has consequences for individuals and businesses. Along with increased risk and claims, Majesco is seeing increased costs for insurance. This is placing increased pressure on customers’ financial well-being, particularly given inflation and high interest rates. As a result, Majesco reported an increase in the protection gap for both consumers and businesses.
3. Rise of climate-risk technologies. Adapting and creating new artificial intelligence models that leverage new data sources and the power of advanced analytics is crucial to stay ahead and address climate risk.
4. Modern insurance is constrained with out-of-sync business operating model and technology foundation. Legacy processes and business assumptions must not be allowed to leak into the new operating model and the technology foundation because of a “that’s the way we always have done it” mentality. Insurers must take advantage of technology to redefine and optimize the business model and processes that break the old ways. This technology offers a new paradigm shift to enable agility, scale, operational optimization, and innovation in a fast-changing market and era of risk.
5. Accelerating democratization and demonetization of data. Intelligent core solutions, embedded analytics, Gen AI adoption, and new data management approaches will help drive down data and analytics costs.

6. AI and Gen AI fuel business optimization. AI and GenAI are breaking barriers, fueling a rethinking of business operations, and creating a new era of operational excellence. Focusing GenAI on the front office is reducing costs and improving productivity, enabling faster product launches, enhancing risk management, and redefining what’s possible in insurance.

7. Market shifts lead to new product growth opportunities. Four areas that will see heightened interest and demand by customers are: usage-based products, parametric insurance that covers a wider array of threats, specialty insurance tailored to meet unique or niche risks, and greater demand for supplemental and worksite benefits.
8. The algorithmic economy powers intelligent core solutions. These solutions allow access to all operational data that can be used by the intelligence embedded into insurance business processes and workflows.

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].