An Eye On 2025: What To Watch For In Insurance

As we enter the waning days of 2024, the insurance sector finds itself staring out into a new year filled with tremendous opportunities as well as a multitude of challenges. While none of us knows for sure what the next 12 months will bring, here are a few key areas to keep an eye on in 2025:

Technology Will Remain At The Forefront

We are in the era of AI where investment and adoption in GenAI is increasing at an exponential pace.? Whereas a year or two ago many of the questions I received from clients centered on ‘why’, they’ve now shifted to the ‘how?’. How can we effectively implement the technology? How do we ensure we’re at the forefront of modernization efforts and keeping pace with other sectors? How can we ensure we have the right talent and upskill our current workforce to use the technology properly? The questions that gained steam in 2024 will only accelerate as we continue through 2025. ?We foresee GenAI applications across the value chain and we believe it will be a key component of enterprise software applications which will change the future of transformations in core systems.

The sector is still in the opening chapters of its GenAI journey, but the promise the technology holds to achieve lower costs, improve claims efficiency, and enhance customer experience will continue to come into greater focus as the year progresses.

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Managing Complex And Inter-Related Risks

Extreme weather will continue to challenge the property lines, social inflation will challenge the liability lines, and investment risk will challenge life and retirement. Advanced analytics, technology, and attracting capital remain imperative to navigate complex risks, which are often inter-related.? Disciplined underwriting and pricing has put pressure on consumers and businesses, and affordability is a growing consideration that the industry is facing.?

As insurers continue on their digital transformation efforts in 2025, enhancing cybersecurity measures will be a critical area of focus in achieving operational excellence. Insurers are fully aware that one downside of becoming increasingly digital is the increased susceptibility for cyber incidents. However, by fully embracing their digital transformation initiatives, insurers can implement advanced mechanisms for threat detection and response.

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An Improving Deal Environment

Several months back when KPMG surveyed CEOs across sectors, it was interesting to note that M&A was the top choice for insurance leaders when asked what was the most important strategy for achieving organizational growth over the next three years. At the time, however, election uncertainty was casting a long shadow as nearly half of the CEOs we surveyed said they would not make significant investment decisions until after the US elections in November. Now that the election season has ended, it is worth keeping an eye on M&A in 2025. Motivation for M&A includes expanding product lines, entering new markets, expanding distribution and gaining new capabilities, particularly in tech and digital. ?

The Path Ahead

As an insurance leader, I fully recognize the immense value the industry holds in this era of compound volatility. The path to growth remains rooted in being nimble and continuing to recognize the central role adaptability plays in addressing the challenges of today and those unexpected challenges of tomorrow. Those who can strike the right balance will be best positioned to continue to thrive in 2025 and beyond.