Based on the notion that sunlight is the best disinfectant, I've long advocated that homeowners insurance companies give clients as much information as possible about the risks they face. Don't just quote me a premium. Tell me that, perhaps, I'm at more risk of flood or wildfire than old government maps show--and help me understand what I can do to reduce those risks.

Zillow just took a step in the opposite direction. 

It had announced 15 months ago that it would feature detailed climate risk information for flood, wildfire, wind, heat and air quality, but the company quietly dropped that information last month. 

The reason is obvious: pressure from sellers who didn't want the risks to their properties spelled out.

The implications are disheartening. 

What Zillow was attempting was always going to be tough, because we humans aren't wired to think rationally about probabilities. If some political poll says a candidate has only a one-in-10 chance of winning, and they win, we leap to the conclusion that the poll was wrong and the pollster incompetent. Maybe. But maybe not. 

The only way to test is to look over a body of work and over time. Did those predicted to have a one-in-two chance win about half the time? Did the one-in-fours win a quarter of the time? Did those one-in-10s win a tenth of the time?

But models like the one from First Street that Zillow used haven't been around long enough for us to have much evidence about whether they're right when they say there's a one-in-50 chance of a wildfire affecting a home each year. 

A spokesman for First Street said, "During the Los Angeles wildfires, our maps identified over 90 percent of the homes that ultimately burned as being at severe or extreme risk — our highest risk rating — and 100 percent as having some level of risk, significantly outperforming CalFire’s official state hazard maps.”

But we humans are still wired to think, "Zillow said I was at severe risk of flooding, and I didn't have a flood this year, so those bozos were wrong." In the context of the risk ratings provided by Zillow, someone with a house to sell would surely also think, "And their error is costing me money."

While that sort of thinking led to enough pressure on realtors, a key constituency of Zillow's, that Zillow pulled the ratings, there's still some hope for the long run. Even Zillow still provides a link to First Street so those curious enough can find information about risks to properties they might buy. And good models like First Street's will not only get better but will be more accepted over time, as they build up a track record.

It'll just take longer than I had hoped, perhaps much longer.

Sorry, I don't make the rules. I sure wish I did....

Cheers,

Paul

P.S. So I don't end on a total downer, I'll share two links that contain a healthy dose of encouragement. First is a webinar I did recently with Francis Bouchard, a managing director at Marsh McLennan who has focused on resilience for years, and Nancy Watkins, a principal at Milliman who has developed a Data Commons to help mitigate wildfire risks in the wildland-urban interface. Second is the ITL Focus from September on resilience and sustainability, featuring an interview with Francis and parts of an interview with Nancy. 

Both describe the sort of conversation that insurers need to have--and are starting to have-- with architects, builders, city planners and others so that, as a group, we can build resilience into properties from the outset and can at least offer advice to homeowners and communities on how to reduce risks related to severe weather. 

The P&C insurance industry is about to lose nearly half of its workforce to retirement in the next five years, driven by the baby boomer exodus from the workforce. Much of that loss is deep expertise about underwriting, decades-honed claims handling skill, and the undocumented tribal knowledge that carry the day for carriers.

This "Great Retirement," also called "The Silver Tsunami," is fast approaching. According to a recent survey by APQC (American Productivity and Quality Center), 93% of insurance CxOs are genuinely concerned ("mission-critical", "strong", or "moderate" concern) about this knowledge hemorrhage. Coincidentally and paradoxically, the same percentage of carriers are not capturing knowledge consistently from departing employees before they walk out the door.

The result of this concern-complacency disconnect? A perfect storm of knowledge drain, compliance exposure, operational disruption, and customer experience degradation—unless insurers leap out of the "boiling frog" syndrome.

Methods Create Barriers

According to the survey, 83% of respondents capture knowledge using manual methods such as people-to-people transfer and time-consuming documentation, a Sisyphean approach that is neither scalable nor sustainable. No wonder time (mentioned by 62% of respondents) and resources (mentioned by 41% of respondents) topped the list of barriers to knowledge capture and management in the survey.

While interest in AI remains high, a stunning 87% of carriers surveyed have yet to operationalize it to automate knowledge capture and management. AI adoption has been slowed down by concerns about compliance (cited by 59%) and correctness of answers (cited by 38%). AI initiatives have been stymied by "garbage in, garbage out" where some carriers tried to slap AI onto enterprise knowledge silos of dubious consistency, accuracy, and compliance. No wonder a recent MIT survey found that only 5% of AI deployments have created any business value!

Trusted Knowledge Foundational to AI Success

The precious few AI-savvy carriers succeed in AI with a trusted knowledge infrastructure, which addresses adoption barriers such as correctness of answers and compliance head-on. At the same time, these organizations use AI to automate the knowledge capture, management, and optimization process:

• Capture questions that are the highest in volume, value, and complexity, and mine gold-standard answers for them from customer interactions with high-performance agents and intra-enterprise conversation stores among SMEs
• Capture procedures from flowcharts into in-band guidance for customer conversations
• Create drafts of knowledge articles that are aligned with the brand voice for human experts in the loop to review and approve
• Curate content to make it findable and AI-ready
• Analyze and optimize to identify gaps and improve knowledge performance

Winning best practices

Leading carriers treat knowledge as a strategic asset rather than a collection of documents and unstructured content. Their best practices include:

• Using AI to continuously capture expertise from daily work, not just end-of-career interviews
• Embedding trusted knowledge in claims, underwriting, and customer service systems
• Including compliance checks in knowledge workflows to ensure that answers are correct and aligned with regulatory requirements
• Training employees to use AI tools as assistants and not adversaries

A 10X acceleration in creation and curation of knowledge and a 3X acceleration in time-to-value is possible when companies use AI well.

The Bottom Line

With AI-powered knowledge capture and management, forward-thinking carriers capture, preserve, and activate institutional knowledge at scale—so every employee—from new adjusters to seasoned underwriters—can access trusted answers and the best thinking the organization has to offer exactly when they need it. Others are well advised to follow suit lest the Silver Tsunami sweep them away!

Around the world, political, economic, and social uncertainties are on the rise. They can affect every aspect of a company's operations, as well as lead to significant changes in financial, regulatory, and legal environments. Failure to anticipate and adapt can expose companies to operational failings, financial loss and reputational harm with consequences for the companies' directors and officers.

According to Allianz Commercial's latest Directors and Officers (D&O) Insurance Insights report, D&Os can be held accountable for misjudging the impact of geopolitical developments on their company's operations or for failing to adequately adapt to the legal or regulatory requirements in different countries. Liability for D&Os may arise from shareholder lawsuits or regulatory penalties directed both against the entity and individual decision-makers.

At the same time, cyber liability risks for directors and officers have risen sharply in recent years with higher expectations for board level oversight of cyber security and a trend toward more litigation and regulatory actions. Exposures for D&Os typically arise from their duty to oversee the organization's cyber security posture.

Claims against directors have been triggered by a wide range of events, including data breaches, ransomware attacks, and even technical failures. Ransomware accounted for around 60% of the value of large cyber insurance claims (>€1mn) seen by Allianz Commercial during the first six months of 2025, according to its annual Cyber Security Resilience Outlook. Should a cyber incident result in financial loss, directors could face legal claims from shareholders, customers or suppliers if the board is seen to have failed to implement adequate risk controls or business continuity planning.

Insolvencies drive D&O claims globally

Bankruptcy and regulatory enforcement actions are among the top sources of private D&O claims, although claims can also arise from allegations for breach of fiduciary duty, such as misleading or inadequate disclosure, or negligence. According to Allianz Trade, global business insolvencies are expected to rise by 6% in 2025 and 5% in 2026. Next year will mark five consecutive years of increases to reach a record high number of bankruptcies, 24% above the pre-pandemic average. Insolvency risks are particularly concentrated in the automotive, construction, retail, and consumer goods sectors.

There has also recently been a notable rise in "mega bankruptcies" in the U.S. – those filed by companies with over US$1bn in reported assets. The first half of 2025 saw 17 such bankruptcies, the highest number since the Covid-19 pandemic, with 32 in the past 12 months, well above the historical average. The current challenging business environment – marked by factors such as tariffs, weak demand, rising costs, technological transformation, growing competition, and regulatory changes – is heightening the risk of bankruptcy and also claims against directors.

Claims activity is increasing in the highly dynamic D&O market

Over the past three years, there has been a continual increase in the frequency of new claims against directors and officers, now approaching or exceeding pre-pandemic rates in most regions of the world. Claims severity continues to be an issue in North America. For D&O insurers, the U.S. especially is a highly complex market due to its high frequency of securities class action claims and surging average settlement costs, which rose by 27% in the first six months of 2025 to US$56mn. Meanwhile, shifting governmental policy in the U.S. and parts of Europe regarding DEI (diversity, equity, inclusion), ESG (environmental, social, governance), and artificial intelligence (AI) have introduced new complexities for boards to navigate.

To read the full Allianz Commercial D&O Insurance Insights report, please visit: Report | Directors and officers (D&O) insurance insights 2026

There's nothing like starting the year off with some good news. Conning's Year-End Life-Annuity forecast for 2025-2027 certainly has a lot of that. For life-annuity industry executives, statutory net operating results, after tax and dividends, are forecast to increase from $27 billion in 2025 to $30 billion in 2027.

Those strong results start with premiums, of course. Due to an increasing number of individuals saving for retirement and pension risk transfers, annuity premiums are projected to increase 16% from 2025 to 2027. Meanwhile, life insurance remains a key financial need for younger generations starting or building their families. As a result, life insurance premiums are forecast to increase 8% from 2025 to 2027.

While premium headlines grab attention, life-annuity insurance executives know profitability depends on successfully managing investment returns, reserves and capital. At the same time, both life and annuity insurers need to begin grappling with the potential impact of GLP-1 drugs on claims and pricing.

Investment performance drives sales and profitability

Life-annuity sales and profitability are sensitive to General Account investment performance. That performance depends on two broad factors: the external rate environment and asset allocation strategy. As we look out to 2027, we see the continuation of a favorable external interest rate environment. We also expect insurers to continue diversifying their asset strategies to achieve higher portfolio yields.

Portfolio yields forecast to increase through 2030

Even if the Federal Reserve cuts rates over the forecast period, we project life-annuity insurers will benefit from higher portfolio yield. Higher portfolio yields support fixed annuity and universal life interest-crediting rates, which are favorable for more sales over our forecast period.

Our portfolio projection uses the moving average ten-year Treasury rate and models three scenarios. The first is based on the third quarter of 2025 Philadelphia Federal Reserve's Survey of Professional Forecasters. The second assumes credit losses reduce the spread over Treasuries achieved in insurer portfolios. The third is an aggregate blend of one and two. By 2027, our aggregate projection is for the portfolio yield to reach 4.22%, up from 4.03% in 2024.

Continued asset diversification supports higher portfolio yields

During the longer-for-lower interest rate period of 2015 through 2021, life and annuity insurers began diversifying their assets to generate higher General Account portfolio yields. They decreased allocations to bonds and redistributed to mortgages and Schedule BA assets (alternative assets such as joint ventures, hedge funds, and private equity investments) to gain yield. In addition, there has been a marked shift within the bond portfolio towards private credit.

Even with the recovery of interest rates, we anticipate that diversification efforts will continue through our forecast period.

Reinsurance Continues to Support Growth

Whether onshore or offshore, reinsurance remains a key reserve and capital management tool for life annuity insurers. For example, in 2024, 21% of direct and assumed premiums were ceded. In 2025 and through 2027, we expect that key role will continue. What will be noticed, however, is the growing use of sidecars to support life-annuity reinsurance transactions.

Since 2019, over 15 new sidecars have formed. Looking ahead, we believe sidecars will continue to bring more capital to support life and annuity reinsurance growth. This is a strong positive for the life and annuity industry's forecast capital strength and profitability through 2027.

GLP-1s Affect Claims and Pricing

When we think about claims through 2027, the good news is that excess mortality has receded from the COVID-19 pandemic peak. At the same time, an increasing number of retirees use annuities to generate retirement income and increase annuity benefits. However, the impact of GLP-1 drugs on mortality, morbidity, and longevity is a new factor we and insurers need to consider. These drugs hold the potential to affect life insurance underwriting as well as life insurance and annuity pricing.

There is a concern that applicants may be using the drugs when underwritten for new policies, but then later stop using the drugs, leading to a return of weight and/or other health conditions the drugs treat. On the annuity side, longevity improvements due to GLP-1 change longevity expectations and strain original annuity pricing assumptions. The current impact of GLP-1 on life-annuity profitability may not be large. That said, these drugs may have a long-term effect on claims and pricing beyond 2027.

A Forecast for Strategic Adaptation

How should life-annuity executives respond to the good news in this forecast? The next three years give insurers a rare alignment of strong earnings, improving yields, new sources of third-party capital, and a return to more normal mortality. The companies that use this period to adapt and realign strategy, instead of simply enjoying favorable conditions, will be the ones that lead the industry in the decade ahead.

To position for continued growth and success, life-annuity insurers should accelerate product innovation. Developing flexible products that can adapt to shifting longevity and morbidity trends will help address emerging customer needs and market dynamics.

At the same time, enhancing the investment strategy remains essential. Continued diversification of the General Account portfolio, with a focus on private credit, mortgages, and alternative assets, will help optimize yields. Partnering with key asset management partners will be crucial to executing successful diversification strategies.

Leveraging reinsurance and third-party capital is another strategic priority. Expanding the use of reinsurance, including innovative structures like sidecars, can help manage capital efficiently and support growth objectives.

Driving operational excellence is crucial for sustainable growth. Investing in technology and analytics can improve underwriting, claims management, and customer engagement, while streamlining operations will enhance efficiency and scalability.

Finally, strengthening regulatory and capital management practices will help companies stay ahead of evolving requirements, maintain robust capital buffers, and support business expansion in a volatile market environment.

By executing on these strategic priorities, life-annuity insurers can capitalize on favorable market conditions, manage emerging risks, and position themselves for sustainable growth through 2027 and beyond.

Four years ago, days after Mark Zuckerberg debuted the Metaverse, I wrote a Six Things commentary that began: "The vision of a metaverse laid out by Mark Zuckerberg last week is bonkers. Nutso on steroids. It won't be realized in my lifetime, yours or his, even if some of the wildest claims about longevity come true and we all live to be 150."

Since then, the Metaverse group within the company Zuckerberg renamed after what I referred to in that commentary as "a fever dream for gamers" has racked up $70 billion in losses, and Bloomberg and the New York Times reported last week that he is planning to cut staff by between 10% and 30%, possibly in January.

So, in retrospect, I'm just sorry I pulled my punches. :)

Trashing the Metaverse on Day One was not a remotely hard call, because it violated one of the cardinal rules of innovation: As much as possible, an innovation has to fit within the existing work environment or lifestyle of the prospective user. Yet the Metaverse required radical changes in how individuals interact — with, as far as I could discern, no appreciable benefits.

It's worth taking a minute to look at where Meta went wrong, because the mistake is awfully tempting for all of us. 

The Metaverse assumes that people want to live online a huge percentage of the time. You have to produce an avatar to act as you and learn all sorts of new behaviors to interact with other avatars and with everything else that populates the online world. (I tried this a couple of years into the Metaverse experiment, courtesy of a consulting firm that was enthusiastic about its prospects, and it was still quite hard just to maneuver, let alone to talk with others' avatars or to conduct a transaction.) 

The rule of thumb in Silicon Valley is that an innovation has to be 10 times better than anything it is intended to replace, yet the Metaverse was far less useful than the Zoom calls and other technologies we already used, while requiring huge changes in people's routines. 

Apple made a similar mistake with its Vision Pro virtual reality device — and yes, I trashed that, too, right after it was announced at the beginning of last year. I wrote: "There's simply no reason to strap a 1 1/2-pound device to your face (nearly the weight of a quart of milk) and put a three-quarter-pound battery in your back pocket so you can type with your two index fingers in mid-air while strangers or officemates gawk at you. Not when some combination of today's laptops, tablets and phones will do just fine."

The Vision Pro has been a dud for precisely the same reasons the Metaverse has flopped. 

By contrast, Metaverse has a budding hit with the AI it has built into Ray-Ban "smart display" sunglasses. The capabilities are still pretty limited but are enough to get started: You can use voice commands to snap photos, record videos, send messages, make calls, and ask questions of Meta's AI. And Meta isn't asking customers to do anything out of the ordinary. Just about everybody wears sunglasses. Besides, Ray-Bans look cool.

When you look at the history of major technology innovations, they almost all replace something similar. Smartphones replaced iPods, which replaced the Walkman, which replaced transistor radios. Smartphones also replaced early cellular phones, which replaced hardwired phones in homes. There was almost no need for changes in behavior; everything just became easier and better.

Note that once you get a new device into people's lives, like a smartphone, you can start to get them to change behaviors that have nothing to do with the original purpose — when I first saw a smartphone demo, some 25 years ago, I had no idea I'd be doing my banking and shopping on a phone, or listening to podcasts on it and having it monitor my driving.

The insurance industry seems to mostly get this principle, that innovation has to fit into existing behaviors. That's why we're seeing so many dashboards that incorporate the advances in generative AI, gathering information and making evaluations in the background and presenting them to underwriters, claims professionals or agents and brokers as part of their normal workflow. I think chatbots were initially seen too much as a standalone technology but are now being integrated much better into the customer experience.  Whisker Labs' Ting device has taken off because a customer simply has to plug it into a wall socket to have it monitor for electrical issues and prevent home fires. Roost built another Predict & Prevent business by offering batteries that can be plugged into existing smoke detectors and ping a customer's cellphone when an alarm sounds, in case they aren't at home to hear it.

Still, the principle is worth keeping in mind, because the temptation — which I've witnessed across industries in my decades of writing about innovation — is to think that what you're doing is so useful that people will adapt to you, freeing you from worrying about how to adapt to them. 

If Meta and Apple can make that mistake, you can, too.

Cheers, 

Paul

P.S. While I've patted myself on the back for dumping on the Metaverse and Vision Pro right out of the gate, I need to acknowledge that I've made mistakes, too. While I can't recall a time when I savaged an idea or product and been wrong, I've certainly been too optimistic about how quickly change would happen. I try to live by the Silicon Valley dictum that "you should never confuse a clear view for a short distance," yet, well, I sometimes do.

For instance, I wrote an article in 1991 or 1992 that said paper forms no longer had a reason to live, given that we could all input information into personal computers connected to whomever or whatever needed the data. That was more than three decades ago, and, hmmmm....

But at least the article only ran on the front page of the second section of the Wall Street Journal, so only a few people read it, right? 

Workers’ compensation insurers are turning to generative AI to improve injured worker outcomes, strengthen performance, and build safer workplaces—here’s how:

Read Now

Sponsored by ITL Partner: PwC

From ROI and productivity gains to AI adoption and new market entrants, every signal influences how much trust you place in insurtech today.

Share your perspective in this anonymous survey about the insurtech your company relies on. Have a say in determining where trust is built and where it breaks.

Take the 5-minute survey

Sponsored by Benevolent Marketing

Transparent health reinsurance may now emerge as one crucial and in all probability uncontemplated reform of the government shutdown crisis. The shutdown drew attention to a perfect storm: legislators, impotent to distribute patronage to donors and sponsors dependent on a malfunctioning health care system animated by the best of intentions as Congresswoman Nancy Pelosi (D-Calif.) pointed out in the House recently yet now so overburdened with special interest profit taking that it fails too many participants.

Transparent health reinsurance fills a missing link achieving health freedom and presents nonpartisan solutions addressing Democratic leadership challenges to Republican Senate and House majorities to bring forward workable healthcare policy.

Traditional reinsurance affords risk transfer, often with defined risk exposure parameters, percentages, and ratios for certain lines of risk (treaty reinsurance), facilitates specified claim reimbursements, and frees insurer capital, otherwise set aside for catastrophic claims, for investment. And, it accommodates negotiated deal making for specific policies an insurer may seek to reinsure (facultative reinsurance). It typically mitigates insurer exposure for large scale natural disasters and sustains reinsurer solvency during incidents impelling insurer reimbursements for exceptionally catastrophic claims.

Transparent health reinsurance, by contrast, assures, constitutes, and advances marketplace solutions to "managing risk in connection with healthcare costs," absorbing applicants, and legislating and implementing public policy in synch with technology and the times. The approach is equally ideal for health freedom as it is for remediating current, partisan, patronage system shortfalls.

Timing could not be more propitious. Health and Reinsurance Market Report 2025, a Research and Markets expert report, forecasts that "health and medical reinsurance market size… will grow to $103.25 billion in 2029 at a compound annual growth rate (CAGR) of 7.8%. In the forecast period, growth is expected to be supported by the expanding adoption of digital health platforms, increasing demand for customized reinsurance models, greater participation by self-insured employers, a stronger focus on financial risk mitigation, and rising awareness of reinsurance benefits among smaller insurers. Key trends anticipated include innovations in underwriting models, the development of AI-powered risk assessment tools, increased investment in data analytics and automation, and advancements in health claim management systems."

Transparent health reinsurance, in consequence, now embodies an instance in which corporate and public interests align for consumer welfare.

Health reinsurance innovators enjoy appreciable investment opportunities. "At Qatar Investment Authority [Qatar's sovereign wealth fund], we believe healthcare investments should aim to solve big problems for societies – and the businesses that are doing this are the ones that should thrive and survive…. QIA…can provide patient capital…This long-term approach to growth works best for our partners and aligns with our mandate," Dr. Mohamad Ghanem, QIA healthcare head, observes.

Market liberalization through transparent health reinsurance would also achieve President Trump's vision of empowering citizens to become entrepreneurs with their health care. Transparency animates voluminous data markets, which would enable all market participants to monetize the value of their information. These liberalizations should generate new revenues for all participants.

"Affordability" characterizes contemporaneous sensibilities, and transparent health reinsurance expedites and decongests easy passes to reasonable costs, rational profits, competitive prices, and high quality.

For instance, transparent health reinsurance could compensate outcomes. So doing would provide incentives for physicians to treat and cure patients.

Instead, contemporaneous health insurance compensates services. Just about everything palliates symptoms and protracts illness while patients struggle to get and be well.

As importantly, transparent health reinsurance can initiate systemic reforms by creating and rationalizing markets to address cost and price, key Trump Administration goals and concerns. So doing would liberate and empower all participants to loosen and break the shackles of current health insurance by vastly increasing market reach, size, and variety.

Like the old saw that doing good is doing well, transparent health reinsurance creates wide varieties of new products for the insurance and reinsurance industries 1) rewarding physician, health care provider, institution and hospital supply, and 2) responding to health care consumer demand.

For instance, transparent health reinsurance could broaden insurance coverage for homeopath physicians, whose remedies are often as, if not more, effective than allopathic pharmaceuticals at a fraction of those costs achieving timely cures rather than dependencies on recurrent symptomatic treatments.

There would, of course, be some heavy lifting. Homeopathy is all constitutional while allopathy focuses on addressing and, ideally, curing symptoms afflicting specific systems in one's body. So, pricing and coding integrating homeopathy would have to be conceptualized and tested, and it would have to achieve practitioner, insurance industry and patient consensus and adoption.

National Institutes of Health Director Jay Bhattacharya is especially insightful on systemic health reform in a wide ranging conversation.

The current state of health insurance is vastly more expensive than the original 2010 legislation. Key Obamacare risk coverage, notably risk corridors, went by the wayside. Premiums, point of service costs, and taxes are all higher. Legislator and regulator are each distinctly prey to industry capture. And, going forward, ever ballooning taxpayer contributions and higher health care insurance prices loom.

Unless we do something. 

The insurance industry is facing a critical challenge driven by significant staffing shortages and rising turnover rates. Data from the U.S. Bureau of Labor Statistics suggests the industry is expected to lose nearly 400,000 workers through attrition. This trend highlights the urgent need to backfill an aging workforce and bridge the worker gap, especially as retaining employees for tedious back office work becomes increasingly difficult amid shifting regulatory and customer requirements.

While there has been plenty of hype surrounding artificial intelligence (AI), the real opportunity today lies in using AI agents to strategically fill this impending claims management workforce shortage. By focusing on practical, proven use cases, carriers can determine what tasks can be automated, what will remain a human function, and how AI agents can interact to maximize the benefits for the workforce and overall back-office throughput. The goal is to incorporate the human-in-the-loop so that AI is safe and actually used. Let AI agents do the boring, repetitive tasks so adjusters can focus on judgment, negotiation, and empathy. Humans will be kept in command via review queues and escalation rules.

Here are three ways AI is actually changing claims management and where humans still matter most:

1. AI Handles the Clerical, So People Handle the Critical

The biggest gains in efficiency come from removing friction so that claims professionals can spend more time on strategy, empathy, and problem solving. AI is currently adding real value in focused, repetitive areas and big data applications. Success can be measured by metrics such as intake resolution rate (% calls/emails fully handled by agent), AHT (average handle time) delta (minutes saved per claim) and error rate on field extraction (when extracting knowledge from data).

Key practical and proven use cases where AI is delivering value today include:

• Omnichannel claim intake across email, SMS, and telephony, with entity capture (name, policy, plate/ID) and automatic case creation.
• Knowledge-mining and data processing over large document sets per claim/patient; agents extract tasks and schedule nudges for upcoming visits or missing paperwork.
• Risk signals and fraud triage by comparing millions of claims to spot outliers for SIU review.
• Subrogation and recovery automation: detect subrogation opportunities from facts, generate demand letters, track recoveries.

These applications highlight the concrete ways AI can address the rising difficulty of retaining employees for back-office work.

2. Keeping AI Safe and Trusted Through Human-in-the-Loop Design

As AI systems handle more aspects of the claims process, it is paramount that organizations design systems where humans stay in control, ensuring both safety and trust. This approach is known as human-in-the-loop design, where the AI assists but the human remains in control.

To keep AI safe and trusted, organizations must prioritize the following design principles:

• Confidence Thresholds and Guardrails: These are necessary to decide when AI acts independently versus when it escalates the task to a human. (For example: LLM as a judge "license-plate number ≥0.95, name ≥0.90"→ auto-apply vs queue)
• Designing the Handoff: Claims leaders must focus on designing the precise interaction and transition between the human and the AI, rather than just the underlying model. An incremental adoption example of this is seen in IVR systems with forwarded calls serving as human escalations.
• Trust as a Feature: Transparency, explainability, and auditability must be prioritized at every step. This means showing the sources for information, not just providing answers.

3. Driving Adoption – Because Tools Only Matter If They're Used

AI tools can only deliver strategic advantage and address the workforce gap if they are actually incorporated into daily workflows. Focusing on adoption over mere availability is crucial. Successful incorporation depends on leveraging behavioral and cultural levers.

Agents should join like a new teammate: they sit in channels, see only the data they're allowed to see, and can @mention humans when confidence is low. Companies that route people to a separate 'AI dashboard' will lose adoption; companies that embed agents into existing flows win.

The drivers of real adoption can be broken down into three areas:

• Ability: AI solutions must meet users in their existing workflows; employees should not be asked to change tools. For example, AI functionality should be integrated within claims management systems or email platforms like Outlook.
• Motivation: Organizations must identify champions within the workforce and highlight peer success stories to drive internal motivation.
• Prompts: Adoption can be encouraged through in-workflow nudges, such as prompting a claims adjuster when creating a plan of action note. Other effective reminders include in-system messages, like "You saved 2.5 hours using AI drafting this week," or social/peer prompts sharing success stories.

By focusing on these three foundational approaches, the insurance industry can strategically leverage AI to address its critical staffing shortage and elevate the remaining workforce to focus on high-value, strategic functions.

A Note about Privacy, Security, and Governance

AI in claims is cultural, not just technical: every claimant is a human with an inviolable right to privacy. Agents should be designed to honor that first, then apply industry controls.

• Privacy principles: Data minimization by default; purpose-bound processing; least-privilege access; explicit consent for recordings; subject access and deletion flows.
• Security controls: Encryption in transit and at rest; envelope key management with regular rotation; short, business-justified retention windows; immutable audit trails; per-tenant isolation and row-level security; tamper-evident logs for model/tool outputs.
• Governance: Data Processing Agreements and BAAs where required; vendor due diligence; model/version change logs; approved "never-autonomy" actions; periodic access reviews.
• Regulatory alignment: Designed to align with HIPAA principles for PHI, GDPR for EU data rights, and SOC 2 control families for security and availability.
• Human accountability: High-impact actions require human approval; overrides and escalations are attributed to specific users; exceptions are reviewed in weekly ops.

For insurers, 2025 marked a reset in core systems strategy. After a decade spent patching legacy and modern-legacy platforms, layering point solutions, and stitching together data across disconnected architectures, insurers are now shifting toward rebuilding the core operational backbone required for resilience, agility, and sustainable growth. This is not a cosmetic upgrade; it's a structural re-architecture. The industry signal is now evident: competitive advantage will hinge on the agility, intelligence, and adaptability of an insurer's core platform.

This shift reflects a clear market reality: after years of incremental fixes and deferred modernization, insurers are being forced back to fundamentals. Achieving long-term, risk-adjusted profitability in a volatile environment while meeting rising customer expectations now depends on strengthening the foundations — systems, data, and operating structures — before meaningful innovation can take hold.

Insurers are entering 2026 with one clear mandate: Strengthen the core to unlock scalable, AI-enabled growth. GenAI and agentic AI have transformed expectations across underwriting, claims, and service, but legacy architectures cannot support the data fluidity, governance, and orchestration required. Modernization is no longer a technology upgrade; it is a business model reset.

Below are the key trends and imperatives that I believe will define the insurance sector in 2026:

1. Legacy Systems

Across all lines of business, insurers recognized that 'legacy' and 'modern-legacy' systems — platforms and systems built in the last 10–15 years, but architected on monolithic design principles — are already outdated and have become a structural barrier to progress.

As volatility increased across climate, capital, and customer expectations, the constraints of modern legacy systems became harder to work around and impossible to ignore. These platforms were never designed for API-first distribution, dynamic product configuration, governed AI, continuous delivery, cloud elasticity, or complex ecosystem integration. The result is the same across markets: slow product development, limited data flow, high integration cost, and constrained customer experience innovation.

Imperative for insurers: Seeking efficiency improvement alone is no longer enough, nor should it be the goal. Insurers must shift from a traditional, technology-centric ('inside-out') process automation approach to a more customer-centric ('outside-in') operating model redesign that is squarely anchored on customer journeys, contextual intelligence, and connected data. This requires replacing rigid, policy-centric architectures with data-fluid, AI-ready core platforms that evolve at market speed.

2. The Legacy–AI barrier 

It is real, and insurers are prioritizing platforms that remove it. AI advanced at extraordinary pace in 2025, but insurers discovered a hard truth: AI cannot deliver value if the core platform cannot provide clean, contextual, real-time data. Siloed, batch-based architectures choke AI's ability to reason across the customer lifecycle, perform real-time risk adjustment, orchestrate multi-step workflows, and meet regulatory explainability standards.

Imperative for insurers: The market trend is clear: 2026 is the year AI becomes operational, moving out of innovation labs and into the core workflows of underwriting, claims, billing, service, and distribution. However, AI is only as powerful as the governance and data lineage behind it. To ensure confidence in execution and enable the system to operate at its full intelligent potential, the next generation of cores must embed intelligence at the platform layer, ensure end-to-end traceability, support natural-language workflows, orchestrate AI agents safely, and provide explainable models by design. Systems that can't meet these requirements will be replaced, not augmented.

3. Continuous underwriting

Prioritizing continuous underwriting and real-time risk intelligence will be key in 2026. Static pricing models tied to annual cycles can no longer keep pace with market volatility. 2025 exposed a fundamental shift in how data works inside an insurer: the archive-and-retrieval model of the past is no longer viable in a market that demands real-time intelligence. Data has moved beyond being a historical record that's stored and is now a live, strategic asset that powers real-time decisions, customer engagement, and regulated AI at scale.

Imperative for insurers: Insurers need platforms that treat data as live, structured intelligence rather than historical policy snapshots. That requires event-driven cores capable of ingesting continuous signals, recalculating exposure dynamically, and orchestrating rules and AI-driven decisioning in real time. Only with this architecture can insurers shift from reactive loss absorption to proactive risk mitigation, precision pricing, and real-time portfolio steering embedded directly into operational workflows.

4. Trust, transparency, and governance 

They are now hard requirements, not optional values. In 2025, trust became a measurable business KPI. Regulators, and increasingly customers, are demanding clarity on how insurers handle data, automate decisions, and deploy AI. From the EU AI Act to new North American standards, scrutiny now requires model accountability, explainability, auditability, bias monitoring, and transparent decision trails.

Imperative for insurers: Trust will become the defining currency of the insurance industry and it will hinge on core system governance, not just goodwill. Trust must be engineered, not declared. Core systems will increasingly differentiate on their ability to provide full data lineage, governed workflows, explainable AI, audit-ready logic. This governance layer is becoming a top-three buying criterion for CIOs, CTOs, and CDOs.

5. Climate volatility 

It is forcing a radical re-engineering of property risk assessment. The convergence of climate shocks, fraud complexity, and operational pressure is accelerating demand for unified data orchestration, embedded fraud detection, advanced claims automation, and predictive resilience modeling.

Imperative for insurers: The static, inflexible policy-centric architectures of legacy systems must give way to intelligent, adaptive platforms. Insurers need cores that can merge climate data, IoT telemetry, satellite imagery, fraud analytics, operational AI, and human oversight into governed, auditable workflows. Modern platforms must support real-time risk signals, predictive resilience modeling and event-driven orchestration, enabling insurers to manage volatility, prevent loss and maintain trust at scale. Efficiency, accuracy and resilience must now co-exist in the same system.

6. Group benefits

They are evolving into intelligent, portable well-being ecosystems. Employers and employees alike are demanding personalized, adaptive propositions. Traditional product-centric systems cannot support the flexibility needed for next-generation benefits design.

Imperative for insurers: Success depends on cores that can orchestrate outcomes, not just administer products. This means platforms that support continuous personalization, governed data flows, multi-party ecosystems, and contextual well-being journeys. These platforms must enable outcomes such as benefits that adjust automatically to life events, proactive well-being support, and seamless portability as people move between roles or working patterns. In this model, value comes not from the product but from the continuous, connected experiences that surround it.

7. Pet insurance 

It is rapidly becoming a proving ground for ecosystem-driven, customer-centric transformation. Rising vet costs, increased pet humanization, and demand for digitally enabled care are accelerating the shift from transactional reimbursement models to proactive well-being ecosystems. As pet insurance evolves, insurers are beginning to confront foundational complexities, especially the lack of standardized coding and wide cost variability across veterinary services, which makes product design, underwriting, and pricing more difficult than in human health. These challenges are precisely what next-generation platforms must address.

Imperative for insurers: Pet insurers must operate on platforms capable of turning real-time data into proactive care. This means ingesting real-time pet health telemetry (e.g., wearables, vet diagnostics), integrating across vet, nutrition, and behavioral care networks, orchestrating digital ecosystem partners, and dynamically adjusting coverage and pricing based on evolving health and lifestyle data.

Competing in this new model requires a modern core platform that turns real-time health and lifestyle data into personalized care at scale. Leaders will use intelligent, AI-ready core systems to bring order to this fragmented landscape, enabling data ingestion from wearables and vet systems, dynamic pricing based on real behavior, personalized wellness plans, and preventive care journeys tailored across a pet's life.

The future of pet insurance isn't in replicating traditional health coverage, but in creating connected well-being ecosystems that anticipate needs, deliver real-time value, and position insurers as trusted care partners, not just payers of last resort.