The insurance industry is undergoing a rapid transformation driven by changing demographics, evolving customer expectations, and advancements in digital technology and analytics. Insurers are now tasked with elevating their operational and technological capabilities, innovating product solutions, and expanding their value propositions. With these growing pressures, IntellectAI looks ahead to what trends may dominate the sector in 2025 and beyond.
Traditionally slow to change, the industry has faced exhilarating yet challenging times, particularly in the last decade.
As insurers look beyond 2025, the focus will be on maintaining momentum while addressing a host of new challenges. With market turbulence likely to persist, insurers cannot rely solely on rising premiums or a hard market cycle for growth.
Instead, they must strategically reassess their approach to capture profitable opportunities in a shifting landscape.
Operational excellence as a growth driver
McKinsey’s 2025 Global Insurance study highlights that operational strategies are crucial, contributing to 60% of an insurer’s overall performance. In contrast, the specific lines of business written account for just 40%.
Leading insurers stand out by achieving loss ratios six percentage points better than their competitors and by investing significantly in underwriting operations—nearly twice as much as those in the bottom quartile.
Advances in technology, including AI, machine learning, and generative AI, are enabling insurers to reimagine end-to-end processes. By utilising diverse data sources and innovative decision-making frameworks, top-performing insurers are improving efficiency and scalability.
To stay competitive, significant investment in underwriting innovation has become a critical component of their operational strategies.
The generative AI shift
Insurers have experimented with AI tools for years, but the rise of publicly accessible generative AI has ushered in a transformative moment.
According to a Deloitte survey in June 2024, 76% of U.S. insurance executives reported integrating generative AI into at least one business function.
While many are still in the proof-of-concept stage, applications in claims processing, customer service, and commercial underwriting are gaining traction.
Generative AI is being used to automate underwriting, enhance submission workflows, and streamline market intelligence, creating scalable solutions for insurers.
However, fewer than 5% of insurers are expected to realise direct, tangible gains from AI in the near term. Most will focus on leveraging AI for operational efficiency and improving customer and employee experiences, with longer-term gains likely to unfold gradually.
Laying the foundation for AI success
For insurers to capitalise on AI’s potential, it is vital to establish a strong operational foundation. This involves creating scalable, automated end-to-end operating models and building robust data ecosystems to support AI at scale.
Many insurers have spent the past decade prioritising data foundations for analytics and digital capabilities. The focus now is on leveraging these digital investments for differentiation through innovative products, partnerships, and engagement models.
Success with AI also requires a cultural shift. Insurers must adopt agile processes, promote experimentation, and reward data-driven decision-making.
The goal is not to replace human expertise but to capture and replicate it, particularly in underwriting and claims management. Clear, standardised procedures and streamlined processes are essential to maximising the benefits of generative AI.
The future
To remain leading players in the insurance industry, insurers must focus on distinct capabilities, targeted strategies, and modernised operations. Investing in underwriting innovation, streamlining business processes, and aligning AI capabilities with organisational goals will help insurers capture profitable growth and separate from competitors.
While the promise of AI is undeniable, success requires patience, persistence, and a commitment to building a strong foundation.
By 2025, insurers must prioritise proven AI solutions, strengthen their data infrastructure, and implement strategies to integrate AI meaningfully across their operations.
Read the full blog from IntellectAI here.
Copyright © 2024 InsurTech Analyst
