While oil prices crested at a bit over $110 a barrel In April, some 65% higher than when President Trump began his second term in January 2025, they came nowhere close to economists' forecasts when it became clear that Iran would close the Strait of Hormuz. They expected prices of $150 to $200 a barrel. Some economists feared we might hit $250. 

That oil prices didn't cause a global economic crisis shows that the world has become more resilient in the face of oil shocks. I remember, as a kid, seeing lines around the corner at gas stations after OPEC imposed an oil embargo in 1973, but we came nowhere close to that this time.

The world will now move to become even more resilient, especially to possible events in the Middle East, given that we've seen that supplies can be curtailed just with some mines, speedboats and drones in the world's major oil thoroughfare. The shift toward a global economy no longer dominated by oil considerations will take many years to play out and won't be complete for decades, if ever, but the change will put the world on a new trajectory with profound changes for every industry, including insurance. 

So it's a good idea to start shifting to a new mindset as soon as possible.

My thinking about a post-oil world traces back to 2010, when I was part of a sort of SWAT team at the Department of Energy distributing tens of billions of dollars to drive innovation and help stimulate the economy as part of the Recovery Act following the Great Recession of 2008-9. The leader of the project, Matt Rogers, was the leader of the oil and gas practice at McKinsey, and he had developed a thesis that was radical, especially for the time. While the conversation among economists was about "peak oil" (when global oil supplies would max out and start to diminish), he calculated that the issue was peak demand (when demand, not supply, would crest).

Matt and Stefan Heck, also a senior partner at McKinsey, developed the peak demand idea much more broadly in their 2013 book "Resource Revolution," which I helped them write. So I was intrigued when a columnist in the Washington Post declared yesterday that: "The 53-year-long oil crisis is now over, leaving the world in a better place.... The black, sticky stuff just doesn’t matter as much as it used to."

The soaring output from fracking in the U.S. over the past two decades did a lot to cushion the oil shock this time around. So did impressive flexibility by China, which reduced its imports by some 4 million barrels a day, to less than 8 million, while barely tapping its oil reserves. In coming years, Venezuela may become a major oil exporter again, and the growth of power from renewable sources will keep surging. The Post column notes: "Renewables account for 47 percent of electricity generation across the European Union and 26 percent in the U.S. The share in America is rising fast, with solar last month overtaking coal in power generation."

The columnist says the end of the oil crisis will have three major consequences, and I think he's mostly right:

"First, the Middle East won’t matter so much anymore.... Next, inflation will be subdued. Oil was a crucial enough input in a wide range of products that it helped determine their prices. The U.S. should now expect a decade or more of the cost of living barely changing from one year to the next. Finally, and most significantly, the global economy will be far more stable. Over the last half-century, soaring oil prices accompanied five major recessions or stock market slumps (1973, 1979, 1990, 2008 and 2022).... Chaos was always just around the corner."

I'm not quite as sanguine as the Washington Post writer is, mostly because I've seen too many long-term assurances get derailed. Remember Francis Fukuyama's 1992 book, "The End of History and the Last Man," which assured us that liberal democracy and free market capitalism represented the final stage of human evolution? Look around today and tell me how that worked out.

I can also see plenty of short-term hurdles. The Trump administration is actually paying companies NOT to develop renewable energy, compensating companies for canceling off-shore wind projects. This administration has also recently announced some $700 million to support coal-burning plants, even though coal is on the way out as a source of electricity. In addition, the Trump White House is trying to halt or even reverse the transition to electric vehicles, even though the shift in strategy has caused U.S. car companies to take tens of billions of dollars in write-offs and will help Chinese companies widen their already considerable global lead on the cars of the future.

But I'm still convinced that the half-century-long oil crisis is, in fact, dissipating. 

The geopolitical implications will extend well beyond the Middle East. Other major oil producers, including Russia, Norway, Mexico and, perhaps, Venezuela. will lose huge amounts of revenue and, thus, influence. The world's largest producer, the U.S., won't be immune. Industries, such as chemicals, that rely on cheap energy prices in the U.S. will also lose out. 

Meanwhile, China should gain influence because of its dominance in the rare earth metals that are needed for batteries, in solar panels and in electric vehicles.

The changes should, in fact, reduce global tensions in some areas, though that doesn't mean that peace is at hand. China's increasing influence could, for instance, embolden it to try to retake Taiwan, which could touch off a geopolitical crisis. 

Insurers will have to tack continually as the geopolitical winds shift, and will have to guide clients wisely as they assess their risks. Insurers will likewise have to adapt as industries evolve — probably including shorter, more local supply lines at least for now, in reaction to the Iran war, and to the rise of isolationist politics, including America First. 

Again, there will be lots of twists and turns. Look at how fast Trump reversed U.S. policy in support of electric vehicles. But I think the move toward a post-oil world — at least one far less vulnerable to oil shocks — is accelerating because of the Iran war, and it's never too early to start reshaping our brains to prepare for such a profound change.

Cheers,

Paul

The World Cup always produces breakout stars. Think of 2018, when the teenaged Kylian Mbappe announced himself to the world by scoring four goals as his French team won the title. So far this year, you might lean toward Folarin Balogun as the possible breakout; he scored twice for the U.S. and looked brilliant as it dominated Paraguay in the opening round. For a team? Perhaps you're partial to Cabo Verde, a country of 500,000 that I confess I did not know existed but that tied mighty Spain, 0-0, on Monday.

For me, the clear breakout star is Freddy. 

The young German has taken social media by storm, growing his follower count on Twitter to 635,000 from the 11,000 he had when he arrived in the U.S. with some friends in early June for a six-week road trip to experience the World Cup. His earnest observations about the U.S. have made him so popular that when he posted that the group was headed to Houston, he arrived to find that former Houston Texas J.J. Watt had paid for a huge room for the group at a posh hotel, and that local businesses had stocked the room with gifts. When Freddy expressed admiration for the music of country music star Ella Langley, she invited the group to meet her backstage after a concert in Oklahoma City. A resort offered to send its plane to pick the group up in Oklahoma City and fly them to Las Vegas for a watch party for a game involving the U.S. men's team. 

There's a reason Freddy has become a sensation, and it suggests something that all businesses, including those in insurance, should do periodically.

An adage attributed to Marshall McLuhan (though with earlier roots) says, "We don't know who discovered water, but it wasn't a fish" — the notion being that anyone immersed in an environment can't understand it the way someone outside that environment can. And Freddy (@FreddyLA7 on Twitter/X) is an outsider providing an unvarnished, unbiased view of America to those of us immersed in it.  

He has shared video of his drive through Alabama and Mississippi and marveled at how beautiful the landscape is — something I certainly missed when I drove through the states on my way from Georgia to Louisiana. Freddy posted a picture of a pile of food at a Taco Bell and called it "the holy land." He wrote: "We were about to walk an hour to the stadium in the rain to save on an Uber, and the receptionist at the hotel we were parked in front of decided to drive us there." Freddy discovered that a Bass Pro Shop had a shooting range inside.

My favorite is a post with two pictures. On the left is a building so big and lit it up it looks like it could be the entrance to an amusement park. On the right is a line of gas pumps stretching way out into the distance. Freddy wrote: "DUDE LMAO THIS IS A GAS STATION." (Someone else said there are 120 pumps and wondered if the travel stop was designed to refuel the U.S. Air Force.)

.           

Freddy then added a photo of the mountain of barbeque he bought inside the Buc-ee's in Texas.

He has surely resonated partly because he's so positive about what he's experiencing in the U.S. Everybody likes to be told they're great. But he still demonstrates the power of outside, objective observation, which is something every company and every individual should solicit as a regular exercise. 

A BCG study I've cited before and will surely cite again found in the early 2000s that 80% of senior executives thought their product was superior to competitors' — and that 8% of customers agreed. Businesses unintentionally erect filters that distort what insiders see, so they have to try extra hard to either remove those filters for themselves or solicit feedback from Freddies who never faced those filters to begin with.

I once interviewed Colin Powell, between his time as the chairman of the Joint Chiefs of Staff and his term as Secretary of State, and he described what I thought was an insightful way to get around the filters. He set up half a dozen phones in his office and gave the number of each phone to a single person whom he trusted to provide a smart, non-DC perspective and reliable, unfiltered information. He told his assistant to never answer any of those phones, to hide the identity of the callers. (I note that the interview was before his time as Secretary of State under President George W. Bush because, after initially resisting the plan to attack Iraq, Powell let himself be sold a bill of goods and made a speech at the United Nations that relied on distorted intelligence to sell the world on the disastrous invasion.)

As I've written before, I think the best way to get unfiltered insight is to experience your company without identifying yourself or to sit with randomly chosen customers as they interact with your company. Make up a persona and call your call center or text it, so you can see what your chatbot actually does. Sit with a relative as they try to decipher the language in the policy you've issued them, without helping. Call people after they've had a claim processed to see just how smoothly your theoretically seamless handoffs from call center and app to adjuster to collision repair shops and rental car companies actually went. And so on.

You surely won't get the sort of joyful feedback Freddy is giving to the U.S., but you'll be able to improve faster than the companies you're up against — and business, like soccer, is a harsh competition.

Cheers, 

Paul

P.S. For those of you who, like me, have been immersed in America so long that the environment feels completely natural, here are a few other observations from visitors for the World Cup:

To start with the negatives, Americans are loud, the U.S. is expensive, and the distances are inconvenient. Traffic is awful. The culture of tipping is baffling. And why are so many items, such as toiletries, locked up in stores?

That said, Ranch dressing seems to be quite a hit. One woman marveled at being able to order a chicken waffle with Ranch dressing and ice cream in an iHOP. Another wrote: "Ranch dressing should be a human right." He added: "The portion sizes are hilarious."

Our grocery store culture has struck a chord, too — the enormity of Walmarts and Costcos, the extraordinary variety of foods offered, and the quality in some of the upscale stores. A Frenchman posted a hilarious screed about how he arrived in the U.S. intending to be a snob but has to admit that the bathrooms in Buc-ee's are nicer than in his apartment. He says, "You could eat the brisket off the floor. It's cleaner than a hospital."

One woman wrote: "I can’t lie… the food in America is ridiculous. Everyone talks about portion sizes, but nobody talks enough about how GOOD everything tastes. Even the ‘quick’ food feels elite compared to what I’m used to in the U.K."

Portion size does come up a lot. One man wrote: "Nobody warned me that American portion sizes are actually a threat to your health. I ordered a medium coffee and received what my country would classify as a bucket."

My favorite, non-Freddy post is a lengthy, almost poetic, one from a Japanese tourist about the biscuits and gravy that a waitress recommended to him at a breakfast counter:

"When the plate arrived, I thought something had gone wrong in the kitchen. I say this with shame. The dish looked like a construction site after rain. Pale mounds. Gray ladle-fall. Speckles I could not identify. In my land, the eye eats first. A meal is arranged like a garden. This meal was arranged like weather.

"I must now formally apologize to the biscuits, the gravy, the waitress, the kitchen and the entire breakfast tradition of the American South. 

"It was magnificent. Warm. Peppered. The biscuit drank the gravy the way a field drinks rain — THAT is why it is shaped like that, you fool — and every mound I had insulted was a soft fold of comfort that my homeland, in 800 years, never once thought to invent."

I'll never look at biscuits and gravy the same way again.

Surging demand for artificial intelligence is reshaping the data center landscape at a remarkable pace. McKinsey projects that companies will invest nearly $7 trillion in data center infrastructure globally by 2030, with more than 40% of that spending concentrated in the U.S.

Much of the near-term opportunity is on the development side, with new construction ranging from ground-up hyperscale builds to core-and-shell projects that will eventually be converted into data centers. Beyond new construction, market activity is also being driven by owners and operators of existing facilities, ranging from colocation providers to large enterprises managing their own infrastructure.

As a class, data centers present property insurance exposures that differ significantly from other commercial risks. Understanding the full scope of exposures and the coverage required to address them is critical to building an insurance program that responds as expected when a loss occurs.

TOP EXPOSURES AND RISKS

While data centers are designed for resiliency, meaningful exposure still exists across every stage — from construction and commissioning to continuing operations — and extends beyond the physical asset itself.

Business interruption and downtime are the primary concerns. These facilities are built for continuous uptime that developers and owners depend on, meaning even a brief outage can generate a significant claim. Location compounds that exposure. Data centers are increasingly being built in areas where severe weather is common, considerably raising the risk for catastrophic losses. Even if a major weather event takes a facility offline temporarily, it can produce revenue losses that far exceed the physical damage. As such, carriers are focusing attention on loss control, engineering standards, business continuity and disaster recovery planning. They want confidence that construction can resume at a development site or that a facility can return to operations quickly after a disruption.

Secondary exposures also complicate the risk picture. These include:

• Power and grid reliability. Power disruptions stemming from grid instability, utility constraints, or insufficient local infrastructure are increasingly common. When operational disruptions occur that don't involve physical damage to the facility, a standard property policy may not respond to losses.
• Community opposition and project approval risk. Public pushback has become a defining obstacle to data center development. Last year saw 25 project cancellations — more than quadruple from 2024 — largely driven by intensifying community opposition across the country. Access to the power grid and water supply are among the most common sticking points, with the potential for municipal resistance to derail projects persisting well into the development process.
• Equipment procurement delays. Waitlists are already common for critical, high-value components that are in short supply. If equipment is damaged, stolen or lost in transit, sourcing replacements can further extend a project.

SPECIALIZED COVERAGE TYPES TO CONSIDER

A standard property policy covering physical damage and business interruption is foundational, but data centers frequently require additional layers to address the range of exposures that fall outside traditional coverage triggers.

Builder's risk coverage addresses the construction phase — a critical window of exposure for data center projects. With contractors, lenders, and third-party operators all at the table, each with their own coverage requirements, structuring a program that satisfies every stakeholder is critical.

Parametric and alternative risk transfer products are increasingly relevant for data centers, particularly when the cause of a financial loss doesn't stem from physical damage. Parametric coverage, captive structures, and self-insurance components can be structured to fill gaps where a standard policy doesn't respond. They can also serve as deductible buy-downs on programs with large retentions as well as supplemental capacity where needed.

Transit, cargo, or stock throughput policies are essential given the value of equipment moving through the supply chain. Millions of dollars in power equipment, servers and GPUs may be in transit, held in interim storage, or staged on-site before a facility is operational. If something goes wrong at any point in that chain, both replacement costs and project delays can escalate quickly.

Environmental insurance is worth considering for new construction, given the scope of ground-up development activity and its potential effect on the surrounding site and community. Contamination, pollution, and construction-related environmental liability are exposures that a standard property policy won't address.

Political risk insurance is particularly relevant for international projects. Geopolitical instability, strikes, riots, and government actions can affect data center operations in ways that generate both physical and financial loss.

WHAT THE CURRENT INSURANCE MARKET MEANS FOR OWNERS AND OPERATORS

The property insurance market is in a soft cycle, with data centers largely seen as a desirable class of business. Some insurers are deploying staggering single-line limits on data center risks, which translates to more options and more competitive terms for owners and operators. This is a welcome stance as many lenders and other sources of capital currently require full value limits of insurance vs. limits set by modeled losses based on probabilities and site attributes.

But questions remain as to whether that dynamic will last. Data centers remain a relatively untested class, and how the market responds when significant losses arrive is still an open question. Owners and operators who use the current environment to structure comprehensive, well-designed programs will be better positioned as conditions evolve.

Paul Carroll

We not only had strong job numbers in the U.S. for May, which would reduce the need for the Fed to cut interest rates, but also had 4.2% annual inflation in the latest report, which would tend to encourage the Fed to keep rates flat or even to raise them. Has your outlook on inflation and economic risks evolved since we last spoke, particularly given what's happening in Iran?

Michel Léonard

You're entirely right. Since we last spoke, I've grown more cautious. 

When the conflict started, nobody expected it to go into a third or fourth month. As a result, we didn't expect the conflict would last long enough for increases in oil and gas disruption to be  transmitted into the price of gas and petrochemicals and as sunk costs throughout the economy. We made the same assessment about the conflict being unlikely to last long enough to significantly alter our P/C replacement forecasts. 

But that transmission is taking place and driving up the price of products key to our replacement costs: construction plastics, PVC, rubber; construction materials; not to mention increases in the cost of transporting all these goods and more. 

That said, I would to share some caution. The price increases we’re already seeing are not solely due to actual price transmission; they're also about the anticipation of transmission. Some companies are pricing up before the higher costs hit them. We saw that during and since COVID. We can’t deny that there is price gouging: Why wait until your margins get compressed? Especially when the wider price narrative in the press and elsewhere is increasing consumer willingness to accept price increases. 

Paul Carroll

What does this mean for P&C insurers next year in terms of replacement costs relative to inflation in the broader economy?

Michel Léonard

Because of the anticipation, I think the trajectory—the pace of increase in inflation, including P/C replacement costs—is above what the underlying supply disruption would warrant. That’s partly because some people have been expecting a bigger disruption than has happened and partly because of gouging by some, who say, "Okay, we can charge a bit more." Right now, the regular CPI and the CPI-core (without energy and food) are increasing in lockstep. What it means is that we should expect P/C replacement costs to increase at the same pace as CPI-core (without energy), at a faster pace than they should given transmission alone, before gouging. 

Paul Carroll

Given the strong jobs report and high inflation, what is your outlook for Fed policy?

Michel Léonard

The Fed has put rates on hold but, in my opinion, still within the wider framework of an easing cycle. The unemployment rate is improving, and though one quarter is not a trend, it’s likely telegraphing to the markets that it the Fed is going from holding rates within an easing cycle, to holding rates between easing and tightening. I would be very surprised if the Fed went directly to telegraphing tightening.

There are a few things to consider here, especially for P/C insurance. Let's put this in context:

The Fed continuing to delay on interest rate cuts, or telegraphing a shift to tightening interest rates, would likely once again reduce homeowners and commercial property insurance’s underlying growth. 

Concerns about inflation, especially if the Fed gets fully on board with shifting to tightening rates, will further accelerate increases in P/C replacement costs – by signaling to producers that they can raise costs ahead of actual price increases. This is before we see more actual transmission from oil prices in to the wider economy.

This is bad news for P/C’s combined ratios – and it could not come at a less opportune time. 

We had COVID inflation and post-COVID inflation that led to carriers working with regulators to implement, in some cases, double-digit or high-single-digit year-over-year increases in premium rates. That's where we came from.

We had finally reached an equilibrium that would justify premium rate increases returning closer to historical averages—low single digits, around 2% to 4% year over year. Now that equilibrium is being challenged.

Now we’re faced with renewed inflation – but instead of doing so in a hard market, we’re doing it as we’re heading into a soft market. Depending on how fast we get there, the impact on combined ratios may be significant.  

Paul Carroll 

What's your assessment of the state of the U.S. economy, given all the stresses?

Michel Léonard

I’m still an optimist and think the U.S. economy remains resilient. Looking at the core drivers of monetary policy and how economists assess the economy —employment, inflation, and growth—let's start with employment. There have been a few months of improvement. If we look at nominal growth, it's healthy. But if we take out inflation from nominal growth, we see the problem. Real GDP is struggling. And inflation is getting worse.

Two out of the three, growth and inflation, are facing headwinds, which I read as the “balance of risks” is still tilting toward the downside. At best, we’re at an equilibrium. I would be wary if the Fed started to talk about raising rates – that would likely worsen the unemployment rate again, accelerate inflation, and bring growth to a halt. In my assessment, such talk would be a significant miscalculation. 

Paul Carroll

Given the enormous amount of geopolitical risk—from the situation in Iran to the Ukraine-Russia conflict to concerns about China and Taiwan—would you point to that risk as a major source of uncertainty that maybe hasn’t been priced into expectations about the economy?

Michel Léonard

Geopolitical risks keep piling up, and, at least for the time being, I would suggest that they aren’t being fully priced across unemployment, growth, and inflation. I did geopolitical risk stress tests 20 years ago about Iran, Taiwan, and war in the Middle East – they all resulted in equity and interest rate corrections much more significant than we are seeing now. Consequently, the tests showed economic performance deteriorating much further than it has now – not to argue that we’re in a good place at this time.  

You asked about what kind of other geopolitical risks are out there that may not have been priced in economic forecasts? A few truly raise alarms for me and not just as an economist: Putin attacking Finland or the Baltic states; China deploying cyber warfare against the U.S. and shutting down transportation, electric cars, or power grids; a new pandemic such as Ebola ,with few of the institutional capabilities we had during COVID; the looming threat of Jan. 6 on the coming midterms in the U.S. 

Paul Carroll

Where do tariffs figure in all this? I certainly have no idea what the tariff regime will look like in six months.

Michel Léonard

Thanks for bringing that back up. The tariff issue hasn’t gone away. There's an economics principle about risk tolerance. For example, folks winning at a casino become more risk-averse and prudent. Folks losing become more risk tolerant and bid more aggressively. With all that's going on in our world right now, folks are actually getting more risk-tolerant, and that's always the problem. 

Paul Carroll

What final words of wisdom would you leave us with?

Michel Léonard

I don't know if it's wisdom. But I would say that, regardless of everything, I remain optimistic. The U.S. consumer is resilient, U.S. companies are resilient. There's a lot of strength there.

For the P/C industry, we’re coming from a good place, even if we’re heading into a soft market. We’ve seen a lot of improvement in the last two years on replacement costs, and more recently we’re seeing better trends for combined ratios. Both provide some protection against the risks ahead of us.

Paul Carroll

Thanks, Michel. I always feel smarter after we talk.

The FBI’s Internet Crime Complaint Center (IC3) just gave the world a $21 billion wake-up call. According to its 2025 report, cybercrime costs reached a record $20.8 billion in losses last year, sounding the alarm bells on the critical need for personal cyber insurance policies that offer proactive risk management.

The FBI IC3’s annual report states that business email compromise (BEC) and financial fraud are the two leading methods of cybercrime. Long considered a corporate network issue, BEC is now the primary way cybercriminals infiltrate enterprises by targeting the personal vulnerabilities of key leaders. At the same time, high-net-worth individuals (HNWIs) are increasingly victims of cyber-enabled fraud, with AI playing a central role in enabling cybercriminals to create deepfake impersonations and realistic phishing emails and texts, thereby lowering the barrier to entry for malicious hackers.

As the adage goes, “an ounce of prevention is worth a pound of cure.” For cyber insurance underwriters and brokers, offering a policy that only covers remuneration for damages after an event is no longer enough. To manage risk effectively for HNWIs and business leaders, insurance must pivot toward a preventive cybersecurity model that stops incidents – and the long-lasting financial and reputational consequences that follow – before they can happen.

Modern Executives and the Expanding Attack Surface

The FBI IC3’s 2025 report findings highlight growing dangers and underscore the rapid expansion of the personal attack surface, fueled in large part by the rise of AI:

• Business email compromise: Scams that compromise business and individual email accounts to conduct unauthorized transfer of funds accounted for 15% of all 2025 losses, totaling slightly more than $3 billion.
• Cyber-enabled fraud: 85% of all losses reported in 2025 were due to cyber-enabled fraudulent activities, including theft of money, data, or identity, or the creation of counterfeit goods or services, totaling $17.7 billion in losses.
• Tech/customer support fraud: In 2025, nearly 48,000 complaints were filed by individuals about cybercriminals posing as technical or customer support/service representatives, resulting in losses totaling $2.1 billion.
• AI-fueled threats: For the first time, the report includes a section on AI-enabled cybercrime and scams, reporting that IC3 received 22,364 complaints in this category, which accounted for over $893 million in losses.

High-profile enterprise executives and high-net-worth individuals are caught in the crosshairs of these attacks. Because they have broad digital footprints, typically own multiple homes with numerous smart devices, and maintain significant public profiles, they are now prime targets of cybercrime. Additionally, it’s a tremendous challenge to maintain privacy in the digital era, with social media and the instant, broad dissemination of information. Events we prefer to keep private can instantly become public knowledge, creating a risk profile that corporate cybersecurity policies typically fail to address.

Personal cyber insurance brokers are ideally suited to help their clients consider how a single personal indiscretion or data leak can have long-term career and reputational impacts. Beyond that, however, they have a professional and ethical responsibility to protect their clients – not just provide reactive cyber coverage.

Making the Case for a Digital Bodyguard

In the modern cyber landscape, fraught with potential exposures and points of vulnerability at every turn, highly vulnerable individuals can benefit from personal cybersecurity protection that fills the gaps left unaddressed by enterprise cybersecurity. By shifting from a reactive cyber policy to a proactive, preventive risk-management offering, insurance brokers and underwriters can provide clients with a “digital bodyguard” to protect them while safeguarding their bottom line. I’m not talking about security software; I’m talking about a preventive capability that protects people and stops incidents from ever causing harm.

The core elements of comprehensive, proactive protection include:

• Minimizing digital footprints: Actively reducing an individual’s "attackable" surface area by minimizing how much information they share online.
• Data broker removal: Scrubbing personal info from the sites that feed cybercriminals.
• Hardening accounts and devices: Moving beyond basic passwords to elite-level security to ensure personal accounts and devices are not vulnerable to malicious access.
• Home network scanning: Continuous monitoring of home networks – the "soft underbelly" of executive security – to detect suspicious activity before it causes harm.
• Training & hygiene: Empowering individuals and their families on appropriate online behaviors, how to spot scams and threats, and continuing ways to minimize their attack surface.
• Incident response: Around-the-clock expert support to respond rapidly when a significant threat is detected.

The reasons for offering this type of personal cybersecurity protection and risk mitigation to corporate and individual clients are a no-brainer: insurance brokers can foster greater trust, improve client retention, and safeguard their clients’ financial posture. Preventing a $1 million breach and the resulting reputational and financial repercussions is far more advantageous than paying out on a claim.

Demand for this type of specialized protection is rapidly growing, as organizations and individuals gain a better understanding of what’s at stake. Insurance underwriters and brokers have a window of opportunity to capitalize on this growth before other trusted advisors step in and bolster their own service offerings.

Don Poster, vice president and senior director - national family office leader of Aon Private Risk Management, states: "Our clients rely on us to preserve both their legacy and their lifestyle. In 2026, you simply cannot protect a client’s wealth, assets, family, and privacy without also protecting their digital identity. We view digital executive protection not as a tech add on, but as a fundamental component of holistic risk protection.”

Diane Delaney, executive director of the Private Risk Management Association (PRMA), agrees. “The PRMA recognizes that the most successful brokers are those who offer more than just an insurance policy safety net. By taking proactive risk management approaches such as integrating digital executive protection, brokers can provide a holistic layer of protection that helps mitigate the reputational and financial fallout that traditional cyber insurance policies are meant to cover,” she said.

Locking Down the Future

Traditional insurance reacts to and repairs damage – in simple terms, it’s like getting a broken arm treated at the hospital. Proactive personal protection prevents the break from happening in the first place. In the modern digital realm, AI-powered threats targeting high-profile, high-net-worth individuals are rampant, and the personal attack surface continues to expand. The unfortunate reality is that corporate defenses often fall short of protecting individuals.

The solution is a proactive "digital bodyguard" approach – the best and most sustainable way to manage and mitigate executive risk, and protect people and corporations from significant, costly attacks and breaches. It’s time for insurance brokers and underwriters to stop viewing personal cyber as a standalone policy and begin offering a comprehensive service to lock down an individual’s digital footprint and safeguard their future.

Insurance carriers spend considerable time vetting roadside assistance vendors on coverage geography, service level agreements, and cost per dispatch. What many risk managers are beginning to evaluate more closely is operational continuity: how roadside programs are supported and maintained if ownership structures, business strategies, or vendor relationships change during the life of a contract.

This is not a theoretical concern. The motor club and third-party administrator space is undergoing meaningful consolidation. Industry consolidation, acquisitions, and evolving service models are reshaping how roadside assistance programs are structured and administered across the insurance ecosystem. For insurance carriers whose policyholder benefits include roadside assistance, this creates a category of vendor risk that rarely appears in actuarial models.

The Customer and Operational Impact of Service Disruption

When a roadside program experiences operational disruption during a contract transition or organizational change, the consequences are immediate and visible to policyholders. Policyholders may experience delays, inconsistent communication, or uncertainty during periods of operational transition. Claims workflows and member support processes can become more fragmented during periods of organizational change, particularly if continuity planning and data portability measures are not clearly established. Contract terms become points of contention precisely when both parties have the least incentive and capacity to resolve them collaboratively.

Regardless of how roadside programs are administered behind the scenes, the policyholder ultimately associates the experience with the carrier’s brand. For the policyholder, roadside assistance is not experienced as a vendor relationship. It is experienced as part of the carrier’s overall promise of support and protection. They know who sold them the coverage. That is the brand that absorbs the complaint, the churn, and in some cases the regulatory inquiry.

Non-standard insurance carriers face particular exposure here. This segment is experiencing accelerated consolidation as standard carriers recognize that higher-risk customers, when priced correctly, generate stronger margin. As non-standard carriers are acquired and their operational infrastructure is reorganized, the roadside and ancillary benefit programs they administer are among the first services to face disruption. Policyholders in this segment often have fewer alternatives and less financial cushion to absorb a lapse in service quality.

Why Vendor Solvency Is Not Yet a Standard Criterion

Procurement teams evaluating roadside assistance vendors typically score against a defined set of criteria: dispatch network density, average time to service, claims processing accuracy, technology integration capability, and price. These are legitimate and important measures. What these evaluations do not always fully capture is how operational continuity will be maintained throughout the full lifecycle of the program relationship.

Vendor financial health is harder to quantify than SLA metrics, which may partly explain its absence from standard evaluation frameworks. But difficulty of measurement is not the same as immeasurability. Private companies operating in this space do have observable indicators of financial stability, and the insurance industry, of all industries, has the analytical infrastructure to assess them.

The argument for adding solvency assessment to vendor evaluation is straightforward: a multi-year roadside program agreement is a contingent liability. The carrier is making a promise to policyholders that will be fulfilled, in part, by a third party. The creditworthiness of that third party is directly relevant to whether the promise can be kept.

A Practical Framework: Three Questions Before Signing

Before committing to a multi-year roadside assistance agreement, risk managers should require answers to the following:

1. What is the vendor’s ownership structure, and has it changed in the past 24 months?

   Ownership changes are among the most reliable leading indicators of operational disruption. A motor club or TPA that has recently been acquired, merged, or restructured is in a period of internal uncertainty that frequently affects service delivery before it affects financials. Asking for ownership history and any pending transactions as part of the RFP process is a reasonable and proportionate due diligence step.

2. What does the vendor’s dispatch network actually depend on, and who owns those dependencies?

   A vendor’s coverage map reflects contracted service provider relationships that must be maintained and funded. Carriers should ask whether those service provider contracts are held directly by the vendor or by a parent entity, what happens to those contracts in the event of an acquisition or wind-down, and whether the vendor maintains a reserve adequate to sustain dispatch operations through a transition period. The answers reveal whether the network is a durable operational asset or a dependency that could evaporate quickly.

3. What continuity obligations does the contract impose on the vendor, and are they enforceable?

   Many roadside assistance agreements include standard termination and force majeure provisions but lack specific obligations around business continuity in the event of insolvency, acquisition, or operational wind-down. Carriers may benefit from clearly defined continuity expectations related to member data portability, transition support, and operational oversight. Legal review of these provisions is standard practice in other vendor categories and should be equally routine here.

Rethinking the RFP

The insurance industry prices risk for a living. Vendor solvency risk in roadside assistance programs is not priced in because it has not been formally recognized as a category of exposure worth measuring. That gap is worth closing. A vendor that scores well on geography and SLA performance but cannot demonstrate financial stability, ownership transparency, or contractual continuity obligations presents a risk profile that a responsible procurement process should surface before the agreement is signed, not after the first service failure.

Adding vendor financial health as a scored criterion in roadside RFPs does not require significant process redesign. It requires treating the vendor relationship with the same analytical discipline that carriers apply to every other form of counterparty risk. As customer expectations around responsiveness, transparency, and support continue to rise, those considerations are becoming increasingly relevant to both operational performance and brand trust.

Why are insurance company boards suddenly treating CRM investments as strategic priorities rather than IT decisions? Because CRM has evolved from a contact management tool into a competitive differentiator, determining which insurers win and lose in digital markets. 

Modern insurance customers expect personalized experiences, instant responses, and seamless interactions across channels that only sophisticated CRM enables.

Board members also recognize that CRM capabilities directly affect revenue growth, customer retention, and market positioning. A recent survey showed that a CRM can improve customer satisfaction by 47%, leading to a 47% increase in customer retention, 45% increase in revenue, and 39% increased chance of upselling or cross-selling. What once seemed like an operational technology investment now represents a strategic business decision requiring board oversight and approval, given the implications for competitive advantage and shareholder value.

The Key Forces Driving the Importance of CRM

The conversation around CRM is shifting because of:

Policy Renewal Chaos

Agents lose sleep over missed renewals. When you’re managing hundreds of auto, home, or life policies manually, something always falls through the cracks. A solid CRM for insurance agents flags every coming renewal date automatically. That means no more angry calls from clients who lost coverage. The board needs to see that renewal retention directly ties to revenue, and that manual work is killing it.

The second part is the ripple effect. One missed renewal leads to a complaint, followed by a bad review, and finally a lost household account. Agents can’t afford that domino effect any more. When you bring a CRM into the boardroom discussion, you’re really talking about protecting the renewal base. That’s the safest money the agency earns. Without it, you’re leaking cash slowly and painfully.

Cross-Selling Blind Spots

An agent knows a client just had a baby but forgets to mention life insurance. Or someone buys a car but doesn’t get gap coverage. These are easy misses. A modern CRM for insurance agencies spots those gaps for you. It looks at what a client already has and suggests what they’re missing. That turns a casual conversation into an extra sale without feeling pushy.

The board should care because cross-selling costs almost nothing to deliver and adds pure profit. When agents aren’t reminded, those opportunities vanish. Leadership needs to hear that the CRM acts like a silent partner sitting next to every agent. It doesn’t replace their gut feeling; it just catches what tired eyes miss after the 10th call of the day.

Carrier Relationship Pressure

Insurance carriers are getting picky. They want clean, fast data from agencies before they give good commissions or favorable terms. If your agency sends messy client info, carriers push you down the priority list. A CRM for insurance companies cleans that data automatically. It makes sure every policy number, effective date, and claims history is where it should be.

On the flip side, strong carrier relationships mean competitive pricing for clients. And attractive pricing means happier clients who stick around. The board needs to understand this isn’t back-office fluff. It’s leverage. When an agent walks into a boardroom discussion about CRM, they’re really asking for better bargaining power with every carrier they work with. That’s a competitive edge no one should ignore.

Service Speed Expectations

Clients today want answers in minutes, not days. They’ll text an agent at 7 p.m. about a small collision. If the agent fumbles to find their policy, trust erodes. A mobile-friendly CRM puts every client file in the agent’s pocket. They pull up coverage, claims history, and carrier phone numbers in seconds. That speed turns a stressful moment into a heroic one.

From a board perspective, speed drives referrals. A client who gets help fast tells friends. An agent stuck shuffling papers gets dropped. When you frame CRM as a speed tool, not a reporting toy, leaders lean in. Nobody wants to be the agency known for “we’ll call you back tomorrow.” That reputation dies hard.

Commission Tracking Mess

Agents fight for every earned commission. But when policies change mid-term, or clients adjust deductibles, commission math gets tricky. A robust CRM ties each policy change to the correct agent and payout. No more spreadsheet fights. No more “you owe me $47 from last May.” It’s all right there, calculated automatically.

The board should care because commission disputes kill morale. An agent who feels underpaid stops prospecting. They get quiet and leave silently. Replacing an agent costs a fortune in the lost book of business. So, when an agent raises CRM in a boardroom discussion, they’re not being picky. They’re asking for basic fairness in how their paycheck gets calculated. That’s a people problem with a software solution.

CRM As Critical Infrastructure

Insurance boards now see CRM systems as critical business infrastructure because of:

Digital-First Customer Expectations

Today's insurance buyers expect instant quotes, online policy management, and immediate responses as they get from Amazon or Netflix. CRM for insurance brokers enables these digital experiences that customers now demand as standard service. Companies without modern CRM lose customers to competitors offering convenient digital interactions.

• Provides instant online quote generation capabilities
• Enables 24/7 policy access through portals
• Delivers immediate responses to customer inquiries
• Matches consumer experiences from other industries
• Prevents customer defection to digital competitors

Aging Agent Demographics

Many experienced insurance agents are retiring and taking decades of client relationships and industry knowledge with them. CRM systems capture relationship details, communication history, and customer preferences that would otherwise disappear when agents leave. Documented knowledge ensures smooth client transitions to new agents without losing business.

• Captures client relationship details before retirements
• Documents customer preferences and communication history
• Enables smooth handoffs to younger agents
• Preserves institutional knowledge securely
• Prevents revenue loss from departing agents

Competitive Pressure From Insurtechs

Startups using technology to sell insurance directly threaten traditional agencies with lower prices and faster service. CRM for the insurance industry levels the playing field by giving established companies similar technology advantages. Boards realize technology investments are survival requirements, not optional upgrades anymore.

• Matches insurtech speed and convenience levels
• Automates processes to reduce operational costs significantly
• Enables competitive pricing through efficiency gains
• Provides customer experience matching digital startups
• Protects market share from technology disruptors

Regulatory Compliance Issues

Insurance regulations require detailed records of customer interactions, disclosures, and consent tracking that manual systems can't reliably maintain. CRM automatically documents all communications to create audit trails that regulators demand during examinations. Compliance failures result in massive fines, making proper documentation a board-level risk management issue.

• Creates automatic audit trails for regulators
• Documents all required customer disclosures systematically
• Tracks consent and authorization properly
• Proves compliance during regulatory examinations
• Reduces fine risks from documentation failures

Cross-Sell and Retention Revenue Opportunities

Most insurance customers buy only one policy type when they could benefit from multiple coverage options, increasing lifetime value significantly. CRM for insurance agents identifies cross-sell opportunities, showing which customers need auto, home, life, or business insurance they don't currently have. Systematic cross-selling generates revenue growth without expensive new customer acquisition.

• Identifies customers with coverage gaps
• Suggests appropriate additional policy offerings automatically
• Tracks household members requiring separate policies
• Calculates lifetime customer value comprehensively
• Generates revenue from existing customer relationships

Data-Driven Commission and Performance Management

Boards need visibility into which agents, products, and markets generate profitability versus losses to make strategic resource allocation decisions. CRM provides real-time dashboards showing commission costs, retention rates, and profitability by agent and product line. Data transparency enables informed decisions about expansion, training, or territory changes.

• Tracks commission costs by agent accurately
• Measures retention rates across different segments
• Calculates profitability per product line clearly
• Identifies top and bottom-performing agents
• Guides strategic resource allocation decisions effectively

Lifetime Value Maximization

Acquiring new insurance customers costs five times more than retaining existing ones. This makes retention a critical profitability driver boards care about deeply. CRM for insurance agencies tracks satisfaction, identifies at-risk customers, and triggers retention campaigns before cancellations happen. Proactive retention directly affects bottom-line profitability and company valuation.

• Identifies customers likely to cancel soon
• Triggers retention campaigns before policy lapses
• Tracks satisfaction scores predicting retention likelihood
• Reduces costly customer acquisition spending needs
• Improves profitability through better retention rates

Omnichannel Customer Communication Coordination

Insurance customers contact agencies through phone, email, text, web chat, and social media expect consistent experiences across all channels. CRM for insurance companies unifies communication tracking, preventing customers from repeating information across different touchpoints. Omnichannel coordination improves satisfaction and operational efficiency simultaneously.

• Tracks conversations across all communication channels
• Prevents customers from constantly repeating information
• Maintains context when channels switch mid-conversation
• Enables consistent service regardless of contact
• Improves satisfaction through seamless omnichannel experiences

Predictive Analytics for Risk Assessment

Modern CRM systems use AI to predict which prospects will buy, which customers might cancel, and which risks to avoid. These insights help agents prioritize efforts and boards allocate resources toward the highest-return opportunities. Predictive capabilities provide competitive advantages impossible with traditional systems or intuition alone.

• Predicts which prospects will likely purchase
• Identifies policies at high cancellation risk
• Forecasts renewal likelihood for planning purposes
• Scores lead quality for prioritization decisions
• Guides resource allocation toward the best opportunities

M&A Integration and Scalability

Insurance companies grow through acquisitions, requiring the integration of different agencies and systems into unified operations quickly. CRM provides common platforms consolidating customer data and standardizing processes across acquired entities. Scalable systems support growth strategies without creating operational chaos or data silos across organizations.

• Consolidates customer data from acquired agencies
• Standardizes processes across merged organizations quickly
• Enables the rapid integration of post-acquisition timelines efficiently
• Supports growth without proportional cost increases
• Creates a unified view across multiple entities

Shareholder and Investor Expectations

Private equity investors and public market shareholders expect insurance companies to demonstrate digital transformation progress and technology investments. CRM implementation signals to investors that management understands market trends and invests in competitive positioning. Technology adoption directly influences company valuations and investor confidence in leadership.

• Demonstrates digital transformation commitment to investors
• Signals competitive positioning awareness to shareholders
• Influences company valuation in funding rounds
• Shows management understands market evolution trends
• Builds investor confidence in an enduring growth strategy

Key Issues for Board Members

Board members' key challenges are:

Lack of Clear Business Outcomes

Many CRM investments fail because the goals are unclear. Boards should define what success looks like before investing. This ensures that the system is measured on real outcomes beyond just usage and activity.

Compliance and Record-Keeping Risks

In insurance, every customer interaction matters from a compliance point of view. Missing records or unclear communication history can lead to serious issues. A CRM must capture conversations, updates, and changes properly. Board members should confirm that the system supports proper record keeping without making work harder for brokers.

Low Adoption by Brokers

One of the biggest risks is that brokers simply do not use the system. If it adds extra steps, they return to emails, spreadsheets, and personal notes. This is why ease of use matters more than features. The success of any CRM for insurance brokers depends on whether brokers find it helpful in their daily work without needing extra effort.

Hidden Costs Beyond the Initial Investment

The cost of CRM is not limited to buying the system. There are continuing costs such as setup changes, support, upgrades, and training. Many investments look affordable at first, but grow over time. Boards need a clear view of total costs over several years in addition to the initial investment.

Old Data That Never Gets Cleaned

Most carriers have client files full of typos, wrong phone numbers, and policies that ended years ago. Establishing a CRM for insurance brokers on top of that mess doesn’t fix it. It just organizes your garbage into neat folders. You pay for speed but get faster chaos. Furthermore, the cleanup takes up real work. Someone has to call clients, verify addresses, and merge duplicate records. That’s not fancy software work; it’s boring and tedious work. If your board isn’t ready to pay for that manual cleanup first, the CRM will turn into a failure. You can’t automate what you haven’t fixed manually.

Summing Up

CRM has become part of how insurance sales teams work every day. It affects how deals move, how customers stay, and how risks are managed, making it a board-level concern. Good decisions come from looking at real use cases and real outcomes. When boards stay involved, CRM turns into a support system for sales growth, not a cost burden.

Following a period of historic profitability and record capital of $785 billion at the end of 2025, the global reinsurance market is entering a pivotal transition. As rate momentum stabilizes, relying solely on broad hard-market pricing corrections to drive returns is no longer a viable long-term strategy. To defend technical underwriting margins and achieve sustainable growth, reinsurers must now shift their focus from riding market cycles to generating true operational alpha. 

For business and data leaders, the mandate is clear: The experimental phase of AI is over. The next competitive frontier demands a seamless alliance between deep underwriting expertise and enterprise-grade technological capabilities, transforming data assets into the ultimate strategic moat. This article outlines the blueprint for that transformation.

Chapter 1: The New Reality of Risk (“Why”)

For decades, reinsurers have mastered 'cycle management,' thriving in both hard and soft markets by intelligently deploying capital. However, today's connected risks are making historical cycles dangerously unpredictable. We are facing a perfect storm: climate change is intensifying natural catastrophes, state-sponsored cyber-attacks threaten global infrastructure, and geopolitical tensions are fracturing supply chains.

The new masters of the cycle will not be those who simply manage capital but those who leverage data and AI to anticipate, price, and mitigate risks before they materialize. These are no longer just "emerging risks"; they are immediate, systemic threats to underwriting profitability and operational resilience. Addressing them requires a paradigm shift in how we perceive, quantify, and aggregate exposure across the globe.

Chapter 2: The Strategic Response (“What”)

To survive and thrive in this volatile new reality, reinsurers must elevate their strategic response. This is not about making incremental operational improvements; it is about establishing robust business pillars necessary to navigate an unpredictable world.

• Underwriting Discipline: Reinsurers need to prioritize technical underwriting excellence and disciplined risk selection to ensure sustainable profitability after years of volatility. This means aligning underwriting with better data and enforcing pricing adequacy over volume. It requires a forward-looking discipline that prices in the cascading effects of modern perils. For instance, Swiss Re’s strategy emphasizes being “performance-driven, bottom-line focused.”
• “Value Added Services” for cedants: Reinsurers are increasingly focusing on client-centricity – going beyond transactional risk transfer to offer solutions and services that add value for cedants. This involves leveraging reinsurers’ data and expertise to help clients manage risks such as portfolio optimization and assessing exposure to climate risks.
• Operational Agility & New products: The ability to rapidly ingest new data streams, model novel products, and execute complex claims efficiently is now the baseline requirement for maintaining a competitive advantage. In an environment where reinsurance pricing is on the rise, parametric reinsurance for events such as severe convective storms (SCS) of a certain intensity may be an alternative for cedants for pre-determined payout. Similarly, Munich Re’s aiSure™ provides performance warranties and indemnifies clients of providers for their financial losses or legal liabilities directly related to AI errors.

Chapter 3: The Engine of Transformation (“Data & AI”)

While the strategic pillars define what must be done, data and AI determine how it will happen. They should no longer be treated as isolated IT efforts or experimental pilots; they are the core engine of the modern reinsurance enterprise.

To execute dynamic portfolio optimization and maintain underwriting discipline, reinsurers must transition from fragmented, siloed systems to an intelligent, interconnected ecosystem. Advanced predictive analytics and generative AI offer the unprecedented capability to synthesize vast amounts of structured and unstructured data—from dense legal contracts, submission in-take, and geospatial data to risk models - turning ambiguity into actionable, quantifiable foresight.

Chapter 4: “The Way Forward”

The underpinning fabric to realize the above priorities lies with data, analytics, and AI. Hence, leading reinsurers need to refresh their strategy to deliver a trusted, intelligent, and perpetually adaptable data and AI ecosystem (“cycle management”) for the enterprise. This involves building foundational capabilities rooted in principles such as domain-driven design, data product thinking, privacy by design, decision-grade data, and explainability to build trust.

• Decision-Grade Data (beyond data governance): Stop treating data governance as a compliance exercise or a cost center. The goal is to ensure that every underwriting and capital allocation decision is based on trusted, transparent, and auditable information.
• The Enterprise Context Fabric (The Digital Twin): To scale AI in an enterprise, frontier models today lack the capability to understand the business context. Hence, most AI implementations to date were limited to efficiency plays (such as contact center, Q&A, summarization) and hence have not delivered major business value in proportion to their investment. This is where ECF comes to play, a flexible semantic layer that serves as a glue to unify process and data context, and understand the complex relationships between policies, clients, risks, and capital. This "Digital Twin of the Business” enables the sophisticated, cross-portfolio analysis required to spot hidden risk accumulations.
• Agentic AI: Key processes such as underwriting, claims, and risk assessment need to be reimagined in entirety (with human-in-the-loop) using a systems-thinking approach to realize the value. For example: How might we augment an underwriter with a team of AI agents (i.e., multi-agents) that can instantly analyze a submission, research the client's risk profile, model the impact on the portfolio, and draft a set of recommended terms - for the underwriter’s review and decision making.

Final Chapter: What would you build first?

The time for isolated, disjointed pilots is over. If you were to start tomorrow, the critical step is not to build another predictive model or deploy a Q&A chatbot, but to establish an enterprise context fabric.

Why? Because without a unified understanding of your business, any AI initiative will remain a siloed, tactical solution. By first creating this semantic layer, you build the foundation to reimagine core processes like underwriting and claims from the ground up, transforming them from linear, manual workflows into dynamic, AI-augmented decision engines.

This is how you do not just adapt to the future of risk - you build it.

The insurance industry thought it understood hurricane risk in Florida. Then, in 1992, Hurricane Andrew made landfall and revealed how much the industry could not see. Twenty years later, the Insurance Information Institute reported in a white paper that Hurricane Andrew had produced $15.5 billion in claim payouts—more than triple the industry forecast—and left seven domestic insurers and one foreign insurer insolvent, while other carriers required parent-company support to pay claims.

Andrew was not just a catastrophe. It was also a knowledge failure. No one was blasé about hurricanes. No one believed coastal risk was imaginary. Yet the industry had written, priced and accumulated risk across a fast-growing market without the systems, models and institutional knowledge infrastructure it needed to see the full picture. What followed Andrew was one of the most important learning moments in modern insurance history. Andrew forced the industry to build better ways of seeing catastrophe risk. It turned loss history, exposure data, reinsurance strategy and modeling assumptions into a more disciplined knowledge infrastructure. For a time, the lesson seemed unmistakable: Memory needed to be part of the operating system.

Then came Hurricane Katrina less than 15 years later. Katrina was not a repeat of Andrew, but it tested many of the same institutional muscles: catastrophe preparedness, claims capacity, capital adequacy and the industry’s willingness to apply lessons from the past. Yet within a decade, underwriters were already warning that those memories were fading, creating the risk of “unintended complacency” about future catastrophic events. This is how insurance forgets: Hard-won knowledge becomes new practice, then old practice, then somebody else’s problem.

The Memory Paradox

Insurance may be the oldest continuously practiced risk management profession on earth. Lloyd’s traces its beginnings to a coffeehouse in 1688. The Philadelphia Contributionship, which Benjamin Franklin and his fellow firefighters founded in 1752, describes itself as the nation’s oldest successful property insurance company.

And yet, for all that longevity, all too often the industry treats history as just a marketing and communication asset or, worse, merely decorative—for example, history may only appear in the form of portraits of long-forgotten industry captains adorning boardrooms. But while a strong heritage can and should be a brand and cultural asset, that’s just the tip of the iceberg when it comes to how the industry’s deep and well-documented history can serve today’s leaders. Properly structured, preserved and activated, insurers’ archives are a key source of memory that can improve judgment.

Insurance has an underwriting cycle. It also has a memory cycle. The Insurance Information Institute describes the property and casualty cycle as moving between soft markets, when premium rates are stable or falling and insurance is readily available, and hard markets, when rates rise and coverage becomes harder to find. Every CEO in the room knows the pattern. The question is why the industry keeps mistaking the next turn of the cycle for something new.

Part of the answer is that lessons learned in hard markets often lose force in soft ones. Discipline that feels obvious after a major loss can begin to look overly cautious when capital is abundant, competition intensifies and growth targets reassert themselves. What began as institutional learning slowly becomes institutional folklore: respected in theory but easy to dismiss in practice.

The industry doesn’t just forget but also does so predictably, cyclically and at great cost. Unlike many sectors, insurance has the receipts—documented in archives, actuarial records, claims files, underwriting manuals, catastrophe reviews and loss histories going back centuries. Often, the information it needs to challenge the cycle already exists. It just is not always accessible, connected or used.

The Cost of Forgotten History

The insurance profession is facing not merely a talent shortage but also a memory crisis. Insurance Thought Leadership recently reported, citing Bureau of Labor Statistics data, that by the end of this year, an estimated 400,000 insurance professionals will have retired in the U.S. since the beginning of 2021. Datos Insights puts the stakes even more bluntly, estimating that by 2036, that lost expertise could cost the industry up to $124 billion annually.

The danger is not only that there will be fewer people in the roles. It is also that the people leaving often carry tacit knowledge that has not been written down, indexed, connected to training or made usable to the next generation. Underwriting judgment, claims instincts, market memory, broker relationships, regulatory context, catastrophe assumptions, product lessons, pricing scars and more: These do not live only in systems. They live in patterns of experience.

The cost of forgetting is not theoretical. Consider asbestos: Milliman notes that asbestos and pollution continue to affect general liability books written decades ago. As of year-end 2019, the U.S. insurance industry recognized approximately $92 billion in asbestos liabilities. That is the brutal nature of legacy losses. Liabilities written in one era have financial repercussions in another.

The broader pattern should sound uncomfortably familiar: long-tail casualty exposures, long-term care pricing assumptions, catastrophe accumulation blind spots, social inflation and emerging risks that look manageable until they do not. Insurance is very good at modeling uncertainty. It is less consistently good at remembering how former certainties have aged.

AI Needs More Than Data. It Needs Memory.

A handful of carriers have begun connecting historical loss data directly to current pricing assumptions using AI. Berkshire Hathaway Homestate’s wildfire underwriting model, trained on 20 years of loss history, is one documented example. But external catastrophe data is not the same as institutional memory. The deeper archives—how your organization priced that risk, what your underwriters believed, what your claims teams learned and what your leadership decided—remain largely untapped.

AI can be a powerful level setter for lost institutional memory. It can help surface what new employees don’t know they don’t know. It can make archives searchable. It can connect decisions, losses, claims, correspondence, research, product history and oral histories in ways that were impractical even a few years ago. Used effectively, it can codify and reduce the risk of losing knowledge such as how to access relevant information and use archaic software or processes from decades past.

But AI is not the solution by itself. It learns from data. If the most valuable institutional knowledge is scattered across shared drives, paper files, retired employees’ memories, uncatalogued archives and disconnected systems, AI will not magically convert it into wisdom. It will produce generic intelligence, not competitive advantage. I made a related argument recently in Fortune: AI may transform how organizations operate, but it still needs records of how they have made decisions, navigated crises and earned trust over time. The age of AI requires infrastructure that preserves and activates institutional memory, including archives, internal documentation, oral histories and digital knowledge systems.

For insurance, that means archives are no longer simply a heritage function. They are also data infrastructure, training data and risk intelligence. They are the corporate DNA that can help AI understand not just what a company knows but also how it gained that knowledge.

From Archives to Operating System

So what should carriers do? Inventory the records that explain consequential decisions: underwriting guidelines, claims reviews, catastrophe response reports, product launch postmortems, board materials, market-entry analyses, regulatory correspondence, internal publications and more. Capture oral histories with retiring leaders and technical experts, especially those whose expertise is so fundamental it has become invisible. Then connect those materials to the systems where work actually takes place.

And finally, start treating institutional memory as an enterprise asset, not just a marketing and communications one. Corporate history and archival line items generally find a home in marketing and communications budgets because these activities are viewed as supporting brand storytelling. But these budgets rarely have the resources necessary to support business transformation projects that require year-over-year commitment.

More than 15 years ago, the CMO of a Fortune 100 insurance company said to me with no sense of irony, “We’re in a period of transformation: We’re trying to make the transition to the 21st century from the 19th.” The comment has stuck with me after all of these years, because I’ve seen firsthand how slow the industry can be to change.

AI raises the stakes, because knowledge infrastructure is now competitive infrastructure.

Humans forget. Risk management is supposed to make sure we remember. That’s why historical archives and institutional memory are not a soft asset in insurance—they’re part of the operating system. Lloyd’s has records dating back to at least 1734. What are you doing with yours?

No matter which side of the argument you land on over AI job creation or destruction, an AI image crisis looms. Phrases like, "AI job apocalypse" say it all. Growing negative sentiments about data centers have found their way into political campaigns with concerted efforts to halt or divert construction. To the surprise of many, the mere raising of the AI topic drew jeers by young graduates at several recent commencement ceremonies. According to Pew research, just 10% of Americans say they are more excited than concerned about AI, down from 37% when first asked in 2021. 

Of late, however, the tenor of the AI job destruction conversation is softening to creation of capacity. In other words, using new capacity for people to do other work instead of merely cutting jobs. 

Capacity Creation

Capacity creation happens when AI, especially agentic AI, unlocks productivity by performing all sorts of tasks around the clock with no days-off.  More than just AI productivity gains, repurposing people work so they can do more. For instance, both underwriting and claim handling include large portions of routine, manual work. Gathering, validating, summarizing and sharing information for decision making are prime areas for AI. Once AI does all of this heavy lifting, employees will be freed to shift to new and higher-grade work – at least in concept.

Instead of mass layoffs, companies must contemplate what to do with new capacity by redirecting employees to focus on more meaningful tasks. “More meaningful,” higher-value work is loosely defined, but, either way, the precept of shifting resources to higher importance is well-suited to fit the P&C insurance industry, which runs on people and prides itself on doing business through people and relationships.

Aside from the constant chatter about huge AI productivity gains reducing insurance workforces, reality shows little evidence of overall job loss so far. However, even with the emerging mindset to repurpose work, there is expected to be considerable job disruption. This is important to distinguish from net job losses considering negative AI sentiment comes from real people, whether based on perception or reality. Job disruption should not be taken lightly even if the net amounts remain modest. It is also worth contrasting industries because some job types outside of insurance, such as coding, factory work, taxi driving and administrative tasks, are already being hit.

The insurance industry also takes great pride in resilience which has proven helpful in attracting and retaining talent offering “job security” in good times and bad.  At the same time carriers are eager to automate a wide-range of manual tasks while already outsourcing others. So, what should the insurance industry do with all of this expected future capacity?

Where to Deploy New Capacity

Nearly all functions of insurance could make a case for greater resources – essentially having more hours in a day. Some of the sentiments expressed include:

• CEO’s are certainly eyeing how to reduce both expense and loss ratios to boost profitability with AI, trying to gain first-mover advantages to take market share and outpace competitors across the value chain
• Stakeholders are considering how fraud may be reduced and better contained
• Insurance insiders are enthusiastic about avoiding or mitigating losses to accelerate Predict & Prevent initiatives
• Customers are wondering how AI efficiencies translate to lowering the cost of insurance

Here are some of the top contenders for more people resources:

Customer Service

True customer service has become a rare commodity despite digital self-service adoption and better communication tools. Because of inherent insurance complexities, customers still demand human touch and often have more conversational needs. Whether point-of-sale, renewal, billing or claims, there are elements of consumer distrust and lacking confidence to make the right decisions without talking with an expert. Shortcomings in service often revolve around communication breakdowns and difficulty in reaching the right person. Meanwhile digital tools and work habits have distanced human interaction. Customers vent about repeating the same information and navigating the onerous insurance process and just want help.  Improved customer service and touch would be a top contender for any new capacity. 

Lower Expenses

For every dollar of premium, about 25 cents is spent on expenses. While this amount is generally accepted in today’s environment, new capacity to absorb growth-related work, gap filling for the retiring insurance workforce and enhanced management of expenses are prime areas for focus. AI can also play a direct role to advance underwriting and claim automation and vendor management and, in more specific ways, such as litigation expense control. Simply having deeper insights to control and better manage expense is also on top of this new capacity list.

Loss Avoidance and Mitigation

A Predict & Prevent mantra has gained in popularity with the advent of sensor technology and obvious demand for resilience from evolving climate exposures. Loss control has long served the upper insurance markets well, where resources, experts and actions invested can support effective ROI expectations. Such efforts have made some inroads in personal lines through telematics, water and fire detection. Yet, adoption remains a struggle, as does customer engagement. Similarly, loss mitigation efforts are inconsistent and limited, with some bright spots during CAT events to emulate and expand. However, prevent and mitigating losses is widely underserved and screaming for more attention and resources.

New Insurance Products/Services

The core principle of insurance, commercial risk transfer, has been heavily tested over the last decade. Catastrophes, soaring premiums, restrictive policy language and higher deductibles are reshaping the degree of risk transfer; policyholders are absorbing more risk, particularly in homeowner lines. New requirements such as fire prevention, resilient roofs and new construction standards increase these burdens. In several scenarios, such costly measures are required just to be insurable. An older roof can be uninsurable altogether and most definitely will be on a predetermined actual cash value (ACV) schedule, paired with a huge wind/hail deductible. Translation, the homeowner bears all or most of the risk, which begs for new solutions.

New insurance and financial solutions must be in the forefront to address homeowners' resiliency and prevention investments. The healthcare industry addressed high deductible and out-of-pocket issues through Health Spending Accounts (HSA). Perhaps some sort of home spending account would be similarly beneficial. Because exploring and developing new products require time and resources, these also make the list for new capacity. 

Another way to prepare for capacity shift is to look at underserved areas in which there currently are not enough resources. Although insurers work hard on these areas, most are far from optimized. Interestingly, most are highly important. Here’s a partial list:

• Training and Development
• Upskilling for AI with attendant Change Management
• Auditing and Quality Control
• Legal and Regulatory Compliance
• Vendor Management
• Subro/Salvage Recovery
• Fraud investigations and deterrence
• Working with Communities on Resiliency
• IT Project backlogs
• System Integration waiting list

There are numerous and exciting possibilities for deploying new capacity, but it will take some significant alignment and rethinking. Visionaries see a future of abundance, with some extreme views that depict little to no time spent working and living lives of fulfillment in other ways. Such majestic predictions only fuel AI skepticism and outright rejection of what feels like turning society completely upside down. It is daunting enough for businesses to get started with AI and even more ambitious to prepare for capacity redeployment. 

At present state, there has been marginal readiness to retool roles, and perhaps timing is premature. Consider how claim adjusters and underwriters are anticipated to operate in the future when all or most of the administrative portions are solved, with AI accounting for 70% or greater of the work. It’s a stretch to suggest claim adjusters and underwriters will readily concentrate on “approving” AI decisions and naturally spend much more time interacting with customers and agents without significant change management. 

Any plans to deploy AI in ways that preserve human jobs by reallocating work must apply equal effort to thoughtfully address the many people and structural barriers. The scope is wide and will include new requirements around; hiring/selection, differing skill needs, role redefinition, rewards/incentives alignment, workload expectations, workflow and process reengineering, to cite just a few. As the use of AI expands and solves problems, there will be unintended byproducts that are likely to be as difficult if not harder to solve.

The good news is the continuing discussion to shift future people capacity upward – inspiring for all stakeholders, especially employees (and not to mention the whole value chain and economy built around them). 

Time will tell if this budding attitude sustains or is simply more AI washing.