3 Key Insurance Trends and Predictions for 2025

Every new year presents new opportunities and challenges in the global risk and insurance landscape, and 2025 trends will prove to actively shape the ways insurers grow, manage risk, and service policyholders in an evolving market. The following three key predictions will profoundly influence and impact how insurers navigate the complex market in the next year.

The Big Will Get Bigger

Several years of rate actions and margin improvement/expansion have created the conditions for a significant shift toward consolidation in 2025 as rate increases temper in the coming year. 2025 is primed for the start of a multi-year M&A cycle considering high book values and the softening rate environment in commercial lines. A mega-brand acquisition of AssuredPartners by Gallagher kicked off December and the expectation is more will come throughout 2025. We will likely see large Japanese and European insurers pursuing bigger plays in the US market to build scale and diversify their portfolios. 

This increased consolidation activity will accelerate new partnerships and collaborations, resulting in fewer but larger companies with the resources and scalability to drive innovation and industry-wide change. Smaller mutual insurers, particularly those concentrated in storm-prone geographies will be challenged to build new alliances or exit opportunities. 

The Return of Claims Frequency

Aggregate non-CAT claim frequency has remained relatively low in recent years, partly due to higher pricing and increased deductibles in personal lines. However, 2025 should see a return of claims frequency, especially in personal auto and homeowners as rate and re-underwriting actions of 2023 and 2024 slow and the broader market shifts to PIF growth. 

A snapback in claims frequency will test operating models established for more benign attritional loss levels and will require insurers to refocus scarce resources on loss mitigation strategies and find efficiency gains in processes and other expense areas. Insurers’ focus will be on the optimization of workforces, workflows, and work processes with technology to maintain efficiency while managing loss costs.

Strategic Outsourcing and Cost Containment Will Grow

Cost containment continues to be critical as the industry faces margin pressures, particularly with heightened claims frequency and lessened ability to take the easy path of raising pricing. Insurers will increasingly turn to strategic outsourcing in non-customer-facing claims and administration activities. 

Outsourcing can help insurers streamline processes and reduce overhead costs while focusing resources on improving core capabilities like underwriting and claims management. Technology will continue to advance, enabling insurers to scale and grow strategically while still meeting stakeholder expectations. Strategic outsourcing and cost management will prove to be pivotal growth strategies for many insurers in 2025.

Embrace 2025 Trends to Drive Growth

The trends shaping 2025 present challenges and opportunities for insurers to differentiate themselves in a competitive market while driving sustainable growth. M&A activity will fuel innovation and a resurgence in claims frequency will change how insurers operate. Strategic outsourcing can help insurers lower costs while improving efficiency. Embracing these trends in 2025 can lead to greater growth, sustainability, and resilience in a dynamic market.

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