A report titled “Predicting the Future for Insurance: Areas to Watch in 2025” reveals that 78% of insurers are planning to increase their technology spending this year. Of those, 33% expect their investment to rise by 10% to 19%, while 14% anticipate a jump of 20% or more.
Customer experience improvements are driving the tech investments, with 18% of funds allocated to customer service, sales, and claims management each. Health insurers are particularly focused on enhancing customer service, with 42% prioritising this area.
Artificial intelligence (AI) and machine learning are at the forefront of digital transformation, cited by 36% of insurers as their top priorities. Big data analytics (28%) and cloud infrastructure (26%) are also key focuses. AI is being increasingly leveraged for claims processing, underwriting, and risk assessment, streamlining operations, and reducing costs.
Generative AI, already used by one-third of insurers, is being explored for personalised solutions and data analysis. Smaller insurers, particularly those with less than $5 billion in premiums, are in the early stages of adopting AI, while larger firms are scaling or fully implementing AI technologies.
A significant shift in digital strategies is being driven by changing customer expectations. 35% of insurers report that improving customer experience is their top priority, with many highlighting the need for instant access to digital funds in the aftermath of disasters.
Additionally, insurers are working to simplify the onboarding and licensing processes for agents to foster long-term, productive partnerships, as unnecessary obstacles can lead to agent turnover.
Risks Facing the Insurance Sector in 2025
Inflation remains the top macroeconomic risk for the insurance industry, with 38% of professionals identifying it as their primary concern for 2025. Other significant threats include climate change, driven by natural disasters such as hurricanes, floods, and wildfires, as well as regulatory uncertainty, particularly in the United States, where state-level rate-setting is under close scrutiny.
Health insurers express heightened concern over inflation, cyber risks, and the potential for a recession, while carriers across the industry continue to focus on climate-related risks.
As insurers continue their push toward digital transformation, the evolving landscape presents both challenges and opportunities in the years ahead.
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