The Co-Op's recent cyber attack, costing the organization an estimated £206 million, is an urgent reminder that no amount of cybersecurity spending can guarantee total protection. Despite substantial investment in defensive technologies and training, a single sophisticated social-engineering attack was enough to trigger a major financial loss.

For many UK businesses, particularly SMEs, the Co-Op incident raises a concerning question: if a national giant with advanced defenses can fall victim, what chance do we have? Yet, according to industry data, one in three SMEs still operates without any cyber insurance. The misconception that strong cybersecurity alone is sufficient continues to leave firms dangerously exposed.

The evolving threat landscape

Cyber threats are no longer static, nor are they confined to traditional realms such as ransomware or data theft. We're now seeing the rise of AI-powered phishing campaigns, adaptive malware and real-time dark web trading of stolen credentials. These tools evolve faster than most defensive technologies can keep pace with.

Human-centric manipulation tactics are becoming more sophisticated and more complex to spot thanks to readily available Gen-AI tools. Malicious actors no longer need to breach technical barriers when they can simply influence an employee to grant access. The recent surge in Business Email Compromise (BEC) attacks exemplifies this trend: a persuasive message, an urgent tone and a brief lapse in vigilance can bypass even the most advanced security systems.

As these social engineering techniques evolve, conventional perimeter-based security measures are increasingly inadequate. The most vulnerable component is rarely the software itself, but rather the individual operating it. Stopping the breach is only the first step; protecting the business's financial stability that follows is just as critical.

Lessons from the Co-Op

The Co-Op incident illustrates a harsh truth: resilience can be incomplete without a financial safety net. Despite its advanced infrastructure, the organization lacked comprehensive cyber cover. That absence meant the full cost of response, recovery and reputational damage fell squarely on its balance sheet.

This is not an isolated case. Many businesses, large and small, still view cyber insurance as optional or redundant, something to consider after implementing technical controls. But as the Co-Op's experience highlights, even the best security architecture can't always account for human error, insider threats or sophisticated deception.

Cyber insurance is there, in the event of a breach, to support a business in minimizing the impact of associated losses. Best-in-class policies can cover everything from forensic investigations and legal costs to lost revenue, data restoration and communications support. In an environment where the average UK cyber incident now costs £10,830 for SMEs and well into the millions for larger firms, that safety net can be the difference between recovery and collapse.

The Trojan horse problem

Think of cybersecurity as the walls of a fortress, essential, strong and well-maintained. But history shows that many fortresses have fallen not because the walls were weak, but because someone unknowingly let the enemy in. A single misplaced click, a compromised supplier or an outdated plug-in can act as a modern-day Trojan horse.

Even companies with specialized IT departments, advanced monitoring systems and extensive backup plans are susceptible. The combination of opportunism, psychology and technology poses a threat that goes beyond simple external factors. Furthermore, when an incident happens, continuity, trust and cash flow are all at risk in addition to data.

Cyber insurance: a partnership, not a replacement

The narrative shouldn't be cybersecurity or insurance, but more like cybersecurity and insurance. The two are partners in resilience, not rivals. A well-designed cyber policy complements technical defenses by absorbing the financial shock that follows a breach, while also providing incentives for strong security controls through lower premiums and enhanced underwriting confidence.

Leading providers work closely with clients to provide risk management support, staff training and incident response planning. There are also policies that champion a collaborative model to ensure businesses aren't just insured, but genuinely prepared.

The road ahead for SMEs

For UK SMEs, the takeaway is clear. Cyber resilience is not just a technical issue; it's a financial and strategic one. With margins already stretched by inflation and economic uncertainty, few small businesses could absorb even a fraction of the Co-Op's losses.

Yet, too many still dismiss cyber insurance as an unnecessary expense. In reality, it can be the final line of defence, the parachute that ensures survival if prevention fails. As threat actors continue to evolve faster than any software patch can keep up, combining robust cybersecurity with comprehensive insurance is no longer optional. It's essential.

When it comes to cyber risk, perfection doesn't exist, only preparation does – that preparation must include both protection and recovery.

The unseen forces of AI and cloud computing are never out of the news, yet behind the headlines lies a story of growth and innovation as tangible as bricks and mortar. The heavy computing power required by AI workloads, and the growing global demand for AI technologies, have seen a building boom take place around the world as developers scramble to build the facilities required to meet these needs.

According to market research, up to $7 trillion will be spent on data centers by 2030 – a huge sum driven largely by technology companies in the US and China, while Europe lags a few paces behind. The tech industry's big three, Amazon, Microsoft and Google Cloud, accounted for almost two-thirds of global cloud revenue in Q2 2025. Combined with Chinese companies such as Alibaba and Tencent, their capital expenditure budgets for 2025 reach hundreds of billions of US dollars, much of it geared toward the industrial scale infrastructure and dependable energy sources that high-performance AI and cloud computing now demands.

The latest Allianz Commercial report, The Data Center Construction Boom, explores the extent of this global buildout and questions whether the building bonanza can last. Despite the expansion, several factors could limit growth, including the surging costs of construction. These have escalated dramatically from $200-$300 million to projects exceeding $20 billion. According to Allianz Commercial construction experts, average-sized facilities now cost between $500 million and $2 billion. Along with higher construction prices, the complex nature of data center construction and operation requires specialized insurance coverage for risks such as power supply concerns, faulty workmanship, fire or natural catastrophes.

Data centers are fueling the construction industry

A global buildout is underway to construct the infrastructure needed to support the digital economy. The US will be the largest market for data centers, covering about two-thirds of the total global data center power demand, with 81 gigawatts (GW) by 2028, while China's data center market is building out equally aggressively. Greater Beijing alone now accounts for roughly 10% of global hyperscale capacity. Europe is trailing behind the two superpowers but is experiencing a 43% annual increase in pipeline activity, with London and Dublin as the largest markets (each with over 1GW capacity), followed by Amsterdam, Frankfurt, Paris, and Milan.

The bigger data centers have a huge footprint. The scale of a $20 billion+ facility can involve tens of thousands of workers on site at peak times, with significant equipment and building supplies moving in and out. Timings can be tight. This requires expert coordination, as any missteps or faulty workmanship can lead to potential losses or costly delays.

Data centers' unique risk profile

Building a data center is a complex, multi-disciplinary undertaking, which presents a multitude of risks. One of the main issues is the soaring power demand that threatens to outpace grid capacity and infrastructure. The electricity demand from data centers worldwide is set to more than double by 2030, to around 945Twh. This is slightly more than the consumption of the whole of Japan today, with its population of 124 million.

To avoid power issues, which are the main source of significant outages, with 45%, data center operators are increasingly seeking to reduce their reliance on the grid by generating their own power onsite, including renewables, gas, and even potentially small nuclear reactors.

Fire, heat, and water are also significant risks for data centers, potentially leading to severe property damage or business interruption losses. Lithium-ion batteries are increasingly being used as backup electricity storage. The fire risk associated with these batteries is well documented, particularly in relation to electric vehicles and charging infrastructure.

Large data centers have increased cooling requirements that could drive up water and electricity demand. This may alter the risk profile of data centers and could contribute to an increase in construction and insurance costs. Clients need to work with an experienced team of underwriters who know the business and can support the project from beginning to end, including multi-year coverage and policy extensions as needed.

To read the full Allianz report, please visit https://commercial.allianz.com/news-and-insights/reports/data-center-construction-risks.html

Over the past two decades, building technology for complex, regulated industries, I've seen how legacy systems can persist long after the problems they were designed to solve have evolved. Workers' compensation is one of those systems. Built for a different era, it now faces a modern workforce shaped by hybrid schedules, shifting risk profiles, AI integration, and rising expectations from both employers and workers.

Workers' comp needs today go beyond incremental upgrades, calling for a strategic shift. The tools we rely on must reflect how people actually work: connected, digital, intelligent, and adaptable. That means platforms built on cloud-native infrastructure, automation that reduces rework and lag, intelligence that drives decisions, and real integration across every part of the claims lifecycle.

A System Under Pressure

While overall claim frequency has continued its long-term decline, dropping 5% in 2024 alone, according to the National Council on Compensation Insurance (NCCI), this doesn't necessarily signal improved efficiency. In fact, claim severity rose 6% in the same year, pointing to greater complexity and resource demands per claim. The trends vary widely by industry. NCCI data shows remote office workers continue to see lower claim rates, while sectors like private education have experienced increases, particularly related to workplace violence. Restaurant-related claims declined in both 2022 and 2023, whereas other hospitality segments remained unchanged.

This uneven landscape challenges systems that were never designed for such variability. The result is delayed resolutions and missed opportunities to prevent disputes or speed recovery.

The Case for Cloud-Native

Legacy infrastructure, while dependable in its time, now limits the adaptability required to meet today's evolving demands. In contrast, cloud-native platforms enable continuous improvement, universal access, and scalable performance. They reduce the friction of system upgrades, allow faster deployment of new capabilities, and offer enhanced data security and disaster recovery, essential for industries handling sensitive health and personal information.

When cloud-native architecture is combined with AI-driven automation, the impact becomes transformative. Claims processing can be streamlined end-to-end, accelerating settlements and improving accuracy. Regardless of role or organization, stakeholders across the claims lifecycle gain real-time access to shared data, enabling faster, more confident decision-making. Automated, auditable workflows ensure that key actions are completed without delay, minimizing errors and improving the overall experience for injured workers. Only a modern cloud foundation makes this secure, coordinated collaboration possible.

How Automation Unlocks Productivity

According to McKinsey, insurers that adopt end-to-end claims automation can reduce operational costs by up to 30% while improving claim settlement times and customer satisfaction.

By automating routine administrative tasks, professionals can redirect their time and energy toward higher-value work: applying judgment, building trust with injured workers, and resolving complex issues more effectively. Industry adoption is already underway. A recent survey by Guidewire and Celent found that over 60% of P&C insurers invest in claims automation technologies, prioritizing automated triage, intelligent document processing, and workflow orchestration. These tools reduce cycle times, eliminate rework, and enable consistent handling of high-volume claims. Some insurers have reported measurable gains: 20–30% faster settlements, 15% fewer processing errors, and stronger claimant satisfaction scores.

Making Data Work Smarter

Workers' comp generates immense data, but far too little informs real-time decisions. The next evolution involves applying intelligence to that data in practical ways. Predictive alerts can flag claims that are likely to escalate. Benchmarking can help leaders allocate resources more effectively. Pattern recognition can pinpoint the root causes of common delays.

More innovative data use means fewer surprises, more consistent outcomes, and better support for injured workers and the teams managing their claims. New actuarial models like Mixture-of-Experts (MoE), highlighted by the Casualty Actuarial Society, show how blending different predictive approaches can improve forecasting for claim frequency and severity. In parallel, academic research points to the value of connecting claims data with nontraditional sources to generate more accurate and timely loss estimates.

Why Integration Matters

Workers' comp involves a broad network of employers, TPAs, healthcare providers, attorneys, and vendors. Without integration, information gets trapped in silos, increasing errors and reducing transparency. Integrated systems, by contrast, allow for synchronized data, faster updates, and a more consistent experience for every stakeholder.

This also enables better accountability. When the entire claims process is connected, it's easier to track what's working, identify inefficiencies, and continually improve.

Looking Ahead

The way forward is clear. We need to build a workers' comp system that reflects the realities of today's workforce and the demands of tomorrow's economy. That means designing platforms supporting clarity, speed, coordination, and trust across every step of the claims process.

The system's pressures aren't easing, and expectations are rising. However, the opportunity ahead of us is significant if we align our strategy with the tools and insights already available.

We're not waiting for the future of workers' comp, we're building it now. The time for cautious upgrades is over. Let's deliver systems worthy of the people they serve.

Following last week's elections in the U.S., it seems that for every two pundits you find three opinions about what the elections tell us about the prospects for the midterms coming up in a year. But seemingly everyone has settled on a theme that politicians must and will hit hard: 

Affordability. 

That word is everywhere, and not just among Democrats, who used it to win elections for governor in New Jersey and Virginia, for mayor of New York City and for a host of down-ballot offices, including in areas thought of as Republican strongholds. President Trump has vowed to wrest ownership of the affordability theme from Democrats, and a high-profile acolyte of his running for governor of New York says affordability will be her watchword, too — as does the current governor, who will represent the Democrats. Everybody loves affordability.

No matter who wins the arm wrestling match, you can be sure that billions of dollars in ads will run in the next 12 months hammering home the need to make goods and services more affordable in the U.S.

That represents an opportunity for the insurance industry. 

If you want to understand more about how hard politicians will push on affordability for the next 12 months, here are two good articles: 

• The Atlantic explores how Democrats turned affordability into victories across the board, adapting the core theme for a wide variety of offices in a host of different political environments. The article warns that the winners now have to live up to their ambitious promises, which will likely be hard to do. "Politics isn’t just about the words you put on your bumper stickers," the article cautions. "It’s about what you do if the bumper stickers work." But the writer predicts that affordability will show up in just about every imaginable form in Democratic campaigns across the country.
• The New York Times documents how Trump, and by extension the whole Republican party, has repeatedly claimed that everything is already affordable. Even though economic cheerleading by the Biden administration and the Harris campaign failed to convince voters in the 2024 presidential election, Trump has strained to create an alternate reality where grocery prices are down (they're up 3.1% in the past year), where inflation has disappeared (it's 3% in the past 12 months and has been rising, albeit slowly), where gasoline prices are plunging toward $2/gallon (they're down a penny since Trump took office, at $3.08/gallon, and show no signs of plunging), etc. He will surely continue making up numbers — he always has  — but since last week's elections, the Times says, Trump has declared that "affordability" is "a new word" and has vowed to claim it for his own. Buckle up.

I think insurers can ride this wave.

That may seem like a stretch at a time when rising car prices and disrupted supply chains have combined with some dangerous driving habits to send auto claims soaring and when natural disasters have exacerbated similar inflationary issues for homeowners insurance. There are obvious limits to what the industry can do to make insurance more affordable. Rates have to be sustainable. 

But policyholders are already sensitized to rising insurance premiums, and the drumbeat will continue. Just in the past week, the National Association of Realtors reported that the average age for a first-time home buyer in the U.S. has soared to 40, from 33 in 2020 and 28 in 1991, and insurance premiums are part of the problem. The flood of advertising and attention by politicians in the next year will, if I'm remotely correct, heighten the concerns. So the industry can either ride the wave or be swamped by it. I vote for riding, both by creating messaging about helping policy holders manage costs — and then by doing it. 

For carriers, maybe the best approach is to emphasize the Predict & Prevent model as much as possible. Homeowners insurers can subsidize sensors that detect the potential for fires and water leaks, or even offer them for free if that makes economic sense — as it increasingly does. Carriers can alert people to anything about their properties that increases exposure to wildfires, floods or storms, while offering discounts if the homeowner takes appropriate action. Even outside the insurance equation, carriers could offer advice on preventive maintenance or anything else that could help people manage down costs. 

Auto insurers could emphasize programs to help people drive safely (and lower premiums), to prevent theft, to get the car under cover as a hailstorm approaches, and so on. Anything to show customers that we're on their side as much as we can be.

Claims departments and third-party administrators could work even harder than they already are to expedite payments — and let the world know about their efforts — because people are feeling financial pressure. If there's a way to advance even a partial payment, that would help some people a lot.

Agents and brokers are where the rubber meets the road. They can pay even more attention to financial anxieties among clients and help them maintain the coverage they need while minimizing increases in premiums. 

Those are just some very rough ideas. I'm sure you have better, more sophisticated ones than I do.

My point here is just to note that affordability is going to be a hot button for at least the next year, if not longer. We should get in front of the issue.

Cheers,

Paul

P.S. There's an old joke about a young politician asking an aging veteran what the secret of his long-term political success has been. 

"Sincerity," the old politician replies. 

"Once you learn to fake that, you've got it made."

To be clear, I'm not suggesting faking anything. A) It's the wrong thing to do. B) The industry couldn't get away with it. 

I'm saying insurers should do whatever they can to address the affordability problem — then take all due credit.

Paul Hill currently serves as President at Job Search Intelligence, where he leads development of salary-data tools and analytics for job-seekers, employers and higher-education institutions. With over 20 years of experience, Paul has built a strong foundation in product development, marketing and data services, bringing a strategic focus to market expansion and customer engagement across the employment-intelligence sector.

Marty Ellingsworth is President of Salt Creek Analytics and Strategic Advisor to Pinpoint Predictive, bringing more than two decades of experience in insurance analytics, data science, and risk selection. He has held senior roles at J.D. Power, Verisk Analytics, Allianz, and USAA, where he focused on transforming data into strategic insights that improve underwriting accuracy, claims performance, and customer experience across the insurance value chain.

Paul Carroll

The creditworthiness of a person factors into the risk rating that insurers develop and use to price policies, and you have an intriguing new stream of data that I think could make those risk assessments more precise. We’ll get into how that works, but let’s start with how you developed your model and gathered the data that feeds into it.

Paul Hill

We started in 2008 by collecting compensation data and wholesaling it to compensation consultancies. We sold data on starting salaries to the academic community so they could help students build career plans.

By 2010, we became known for having reliable data on students’ employment and income after graduation. We contracted to do actuarial work for student lenders because we had just about the only reliable data on young people's capacity to repay their student loans. 

We expanded to credit card debt and auto loans and assessed the wealth-building capacity for young people, looking not just at their earning capacity but at household formation and their investment plans. 

This was all rooted in their academic competency.

We saw that trajectories vary significantly. Nurses, for example, represent extremely reliable individuals from a risk perspective. Women who study computer science are very reliable, while men in the same field might hop from startup to startup, making them less predictable. On another spectrum, young people in trades like electricians, plumbers, or HVAC technicians are eminently employable with no student debt, building wealth in their early twenties, with phenomenal financial outcomes.

Complementing the data on earnings potential, we built a model called "How America Spends." We analyze the 135 million households in the U.S., breaking them into income classes starting with households earning less than $15,000 annually, up to those earning over $200,000.

We've collected finely grained data on their annual expenditures—rent/mortgage, food, energy costs, and so on. Insurance, interestingly, we always categorized as non-discretionary (you need it to drive a car), but with years of inflation, more people than ever are treating it as a discretionary expense.

We total all expenditures by different household categories and build models relating to debt burdens to understand their capacity to meet expenses. Half of households are spending 100% or more of their income every month, and understanding how financially constrained households are allows us to estimate what they'll cut back on. We can identify specific trends, like middle-income households reducing certain food categories or cutting back on dining out in favor of eating at home - a trend we observed early in the inflationary years of 2021-2023.

For insurers, we've developed what we call our "default trajectory model." We break out these same households into income categories, age classes, and geographic regions, and our model shows how members of each category respond when facing financial pressures - their capacity to service typical obligations like purchasing auto insurance, maintaining their car, and paying credit cards. 

This model enables us to view how consumers evolve over time regarding credit card debt servicing, car maintenance, maintaining certain levels of insurance coverage, or dropping coverage completely. It's tailored for auto insurance companies to understand their customer base's financial stability and predict potential coverage changes.

Paul Carroll

I could see benefits both in terms of pricing risk and in terms of deciding who to target with marketing efforts.

Marty Ellingsworth

The customer insight and prediction frameworks of customer lifetime value are critical in both marketing and insurance. When you identify a customer who's on a growth trajectory that's going to be stable, who’s going to pay their bills and remain loyal long-term, you've found better risks. They're going to take care of their house, car, and finances. These customers aren't immune to accidents, but they're not reckless either.

The ability to understand how your book is performing in small business and households is valuable—knowing which households will be the most conscientious, which will be the most stable from income, payment, maintenance, and insurance perspectives, and which ones won't.

It's not that you can predict what one person will do, but a million people tend to follow similar patterns. Looking at risks in tranches—by state, class code, or household—reveals important trends. Some households are being disintermediated, some have higher layoff probability, and others show default trajectories. The trajectory analysis is particularly clever because it helps understand how leading indicators connect to subsequent events, revealing the path that problems typically take.

From that same ingredient technology—analyzing people living in houses, driving cars, working in various occupations and businesses—you can draw important conclusions. People with high equity in their home don't stress as much, so even when something bad happens, they behave differently than someone living on the financial edge. You also see patterns in moral hazard, both occupationally and in insurance contexts, where rationalization, opportunity, and motivation influence poor decision-making around fraud or crime.

I'm not suggesting that losing your job makes you a criminal, but it does create motivation to secure money. Sometimes that means finding another job, sometimes changing insurance coverage, and sometimes dropping coverage altogether just to survive. This type of quantifiable analysis is extremely valuable for describing what's likely to happen to your book of business and your overall business performance.

Everyone knows the trend will be downward for someone experiencing income compression, but they don't know by how much, and they can't segment the risk by different types of households. That's precisely what this analysis accomplishes.

Paul Carroll

I imagine this data can shed some light on the prospects for businesses, too.

Marty Ellingsworth

If consumers are losing, the businesses they frequent will be losing, too. You can expect that the total addressable market of businesses that serve a failing consumer will fail, too. You'll just find out that the businesses you thought you were writing just don't renew, and you don't see them. You won't know why you lost them as customers, but they might have gone out of business.

Paul Hill

Exactly. Many of our clients are caught kind of by surprise by outlier behavior from their customers. A lot of insurance companies, for example, have had a surprisingly high drop rate.

For us, these issues aren't so surprising because we're looking at a 20-year pattern by occupation of how people behave over time as they get out of college and into the employment market.

Understanding their capacity to remain employed is critical. When we look at income services and all expenses, we find that 60% of material defaults are a consequence of job loss. 

So understanding employment stability provides great insights as to a person's ability to service debts or just their standard obligations such as buying insurance.

Paul Carroll

Thanks, Paul and Marty. This was super interesting.

A subcontractor's certificate of insurance (COI) looks perfect on paper. Coverage boxes checked. Dates aligned. Everything appears in order—until an exclusion buried deep in the policy triggers a gap that sends liability straight back to the hiring company.

That moment—when "covered" becomes "exposed"—is when most organizations discover underinsurance. And it's happening more often than ever.

Underinsurance isn't just about a business lacking its own protection. It's increasingly about underinsured partners, vendors and suppliers, whose coverage gaps ripple outward, creating systemic exposure for the organizations that rely on them. Rising premiums, budget pressure, and dense policy language only accelerate this quiet threat.

Why Underinsurance Keeps Growing

Economic strain remains a top driver. Smaller businesses often choose insurance based on affordability rather than adequacy, selecting policies that look good on the cost column but leave dangerous gaps in protection. Most policyholders aren't insurance experts, and the buying process rarely offers the clarity needed to make informed choices.

Studies show 75% of small businesses are underinsured, and over 70% don't fully understand what their policies cover. That confusion leaves them—and by extension, their partners—exposed when contracts or project scopes evolve.

For larger organizations, this creates a blind spot. Contract clauses may spell out required limits and endorsements, but without consistent verification, those requirements often amount to little more than words on paper.

The Burden of Manual Compliance

Traditionally, insurance verification has been a marathon of manual work. COIs arrive via email. Someone checks dates, endorsements and entity names. Renewals are tracked in spreadsheets. Exceptions pile up.

Each step is a chance for error—a mismatched name, a missing endorsement, an expired limit quietly lingering in a file until a claim brings it to light.

Outsourced or "concierge" models were once the best path to confidence in compliance. They brought expertise, structure and relief at a time when most companies lacked the internal bandwidth or knowledge to manage insurance risk effectively. Over time, limitations for those models became clear. While they eased some of the pressure, they often shifted the burden rather than eliminating it. Companies still managed follow-ups, vendors still juggled multiple points of contact and compliance teams remained buried in inbox chaos, performing invisible work that rarely got easier over time.

Manual processes move at human speed. Risk, unfortunately, doesn't.

The AI Advantage

For decades, COI tracking lived in the administrative shadows—slow, repetitive, and error-prone. Even outsourced solutions often relied on teams of people manually reviewing documents.

AI changes that.

Modern AI-powered compliance platforms act as the expert partner compliance teams have always needed. Instead of flagging a problem for human review, AI can instantly read, interpret and validate insurance documents—line by line—against contract requirements.

It determines whether a COI is compliant, identifies missing endorsements and delivers clear, real-time next-step guidance to subcontractors. That means projects don't stall waiting on paperwork. Compliance teams don't spend hours in reactive review mode. And risk management finally keeps pace with the business.

Here's how AI enhances every step of the process:

• Real-time validation of COIs and endorsements—no bottlenecks, no backlog
• Automatic interpretation of policy language, turning "legalese" into plain language for easy action
• Instant feedback to subcontractors so gaps close faster
• Predictive insights that identify trends before they trigger losses

By replacing manual review with AI precision, organizations gain consistency, accuracy and speed while freeing compliance pros to focus on higher-value strategy and vendor relationships.

The result isn't just efficiency. It's resilience.

Practical Benefits for Organizations

Companies using AI-enabled compliance are already seeing measurable results:

• Audit-ready, always: Compliance data stays up to date year-round, not just during renewal season
• Clarity across teams: Everyone—from procurement to project managers—understands where coverage stands
• Cost and time savings: AI delivers expert-level oversight without expanding staff or outsourcing
• Stronger risk posture: Continuous monitoring identifies and resolves issues before they escalate

These are not incremental improvements—they're structural shifts in how organizations protect themselves.

Lessons From the Field

In high-risk industries like construction, underinsurance doesn't show up as a shock—it shows up as a pattern: policies purchased on price rather than protection, COIs reviewed too quickly to catch critical endorsements and renewals missed amid competing priorities

Each of these oversights can create costly liability not only for the subcontractor but also for the hiring organization.

Technology-driven COI tracking isn't a luxury any more. It's a necessary safeguard in an environment where liability risks evolve daily.

A Call to Action: From Reactive to Proactive

Underinsurance isn't a minor oversight. It's a systemic risk that demands proactive attention.

The organizations best equipped to handle it are those that frame compliance as a strategic safeguard, not an administrative task.

AI doesn't replace professional judgment. It empowers it. By surfacing key details, simplifying communication and enforcing consistency, AI gives compliance leaders the guardrails they need to protect every project, every time.

Closing the underinsurance gap isn't just about avoiding claims. It's about building stronger partnerships, protecting revenue and moving forward with fearless confidence.

Auto liability insurance is mandatory almost everywhere in the United States. Although few motorists question the product's necessity, many are anxious about paying for it due to the growing distrust of private insurers. Many policyholders feel uncertain about whether they can rely on their insurance carriers in their hour of need. Countless horror stories reinforce the perception that insurers would drag their feet when it's time to pay or unfairly deny valid claims altogether — and get away with it.

Significant rate hikes erode any remaining goodwill American adults have toward auto insurance companies. In a car-dependent society, being forced to spend more on an inescapable auto-related expense would leave a bad taste in people's mouths. Charging higher premiums is justifiable and even vital in many cases, but is the insurance industry blameless for the public's prevailing sentiment?

An Epidemic of Excess Premiums

Car insurers had windfall profits in 2020. The pandemic compelled different levels of government to impose lockdowns to help curb the spread of COVID-19, which reduced the number of miles driven. Less vehicular traffic meant fewer car crashes and insurance claims, shrinking insurers' risk exposure overnight.

The business shutdowns and stay-at-home orders caused by the coronavirus outbreak economically affected tens of millions of policyholders. In the spirit of solidarity, auto insurance carriers provided relief to customers.

In April, over 80% of insurers announced that they would rebate policyholders more than $6.5 billion over the next two months. State Farm credited customers an average of 25% of premiums from March 20 to May 31. American Family paid customers $50 for every insured vehicle in April. Farmers Insurance gave a discount of 25%, while Progressive refunded about 20% of all premiums paid for April and May.

In addition, many insurers temporarily paused policy cancellation due to nonpayment and waived late fees in the spring of 2020. Most premium relief programs ended in June, but some providers continued to entertain requests for flexible payment plans or similar concessions on a case-by-case basis. They were particularly considerate of financially distressed customers, especially those furloughed or laid off.

The Consumer Federation of America (CFA) welcomed the news. The nonprofit noted that car insurers would've overcharged customers whose premiums were based on driving 1,000 miles monthly and imposed rates considered unreasonable due to the sharp decline in vehicular accidents had they not returned a portion of their revenue to policyholders.

While the premium givebacks were a positive gesture from the industry, the CFA claimed that auto insurers shortchanged policyholders. In August 2021, the pro-consumer group and the Center for Economic Justice (CEJ) analyzed the insurance providers' premiums and claims data. They found that the companies collected $42 billion in windfall profits and returned less than a third of them to payers.

About $30 billion in excess premiums remained in the insurers' coffers. The CFA and CEJ claimed that the insurance carriers used the money to inflate the payouts to their senior executives and stockholders.

Government Inaction — Regulators Becoming Bystanders

The CFA and CEJ had been vocal about the possibility of excess premiums as early as March 2020. The organizations foresaw that the then-current insurance prices would be too high when governments prohibited people from moving freely across jurisdictions.

Granted, the COVID-19 outbreak was a black swan event, and no underwriter could have predicted that American roads would be virtually empty for an extended period. However, the regulators could have stepped in and ordered car insurers to return some of the premiums they raked in during the early months of the pandemic.

The CFA and CEJ wrote letters to state insurance regulators tasked with ensuring rates aren't excessive throughout 2020, urging them to take action and require car insurers to return more of their profits. However, the warnings were brushed aside. The consumer advocates asserted that virtually all regulators did nothing to stop insurance companies from pocketing excessive premiums.

A Stern Counterstatement

The American Property Casualty Insurance Association (APCIA), the national trade association representing auto, home and business insurers, denied the findings of CFA and CEJ and called them misinformation.

In a statement released a day after the CFA and CEJ's report came out, APCIA Vice President David Snyder said everything about the consumer advocates' analysis was incorrect. Snyder said that most of what the CFA and CEJ label as profit was expenses paid to sell and service policies, handle claims, cover regulatory fees and pay taxes. The vice president added that auto insurer profits accounted for just 2% of each premium dollar.

Snyder explained that the number of miles driven quickly resumed to pre-pandemic levels after governments lifted the lockdowns — only this time, motorists' driving habits worsened. Data from the U.S. Department of Transportation's National Highway Traffic Safety Administration (NHTSA) backed this claim.

According to the NHTSA, fatal crashes jumped by 6.8% in 2020. About 45% of the drivers of the passenger vehicles involved were speeding, alcohol-impaired, not wearing a seat belt or any combination of the three risky behaviors.

A Period of Underwriting Losses

The property and casualty segment of the insurance industry was in the red in 2022 and 2023. Rick Gorvett, a Casualty Actuarial Society (CAS) fellow, described the two-year period as part of the insurance business's multiyear cycle. The market was soft, partially driven by competition and the ebb and flow of alternative risk management mechanisms.

Supply-chain disruptions contributed to the underwriting losses. The pandemic exacerbated the existing chronic semiconductor shortage due to lockdown-related production downtime, consequently limiting new vehicle production. Lower car inventories drove up the cost of new and used automobiles, ultimately increasing the value of assets insurers have to cover. Rising repair costs due to modern vehicle designs added more burden to insurance companies.

Gorvett pointed out that the social factors, like increased litigiousness, inflated insurance losses. A 2024 joint study by Triple-I and the CAS found that auto liability losses and defense and cost containment expenses spiked by $76.3 billion to $81.3 billion from 2014 to 2023 due to the involvement of billboard attorneys in claims and considerable tort awards.

A Loss-Loss Scenario

The U.S. Bureau of Labor Statistics said that vehicle insurance prices skyrocketed by 17% in 2023 year-over-year, outpacing those of food away from home, housing and electricity by a mile.

Such inflation happened at a time when car insurance underwriters were seeking sustainable rate adequacy levels. Considering that a 2019 study revealed that Americans already overspend about $37 billion yearly on auto insurance, the 2023 figure meant that car-related expenses made up a larger chunk of household budgets.

Elevated crime rates also fueled the 2023 premium hike. 2022 was the worst year for vehicle theft since 2008. Data from the National Insurance Crime Bureau showed that thieves stole over 1 million automobiles that year, some of which ended up in the hands of vehicle traffickers operating in foreign countries.

Underwriters had to factor crime rates into the equation. Underwriting decisions affected customers living in hot spots, whether or not they had fallen victim to car theft.

So consumers and insurers both lost.

The Post-Pandemic Premium Surge

Since the pandemic, 2024 has been the most profitable year for personal auto insurance carriers. The industry segment recorded a net combined ratio of 95.3 and posted a 13% increase in net written premiums year-over-year.

Pundits credited the improvement in underwriting performance to pricing realignment. Efforts to align auto insurance prices with soaring risk levels and implement more effective control loss measures paid off.

Low claim frequency was another 2024 highlight. While the number filed remained below pre-pandemic levels, claim severity was high. Shifting attitudes toward car insurance can explain these two phenomena.

The Jerry 2025 State of the American Driver Report revealed that more consumers are motivated to shop around after seeing rates balloon by over 50% over the past three years. In 2024, 55% of motorists sought better deals in the past 12 months, and some changed vendors to obtain more affordable rates.

Moreover, many drivers bought less coverage and agreed to higher deductibles to lower their premiums. These decisions suggest that more policyholders are keener on filing claims to cover larger losses. Prudent consumers know their claim histories can drive up their future rates, so they only want to call their insurer when it counts the most.

Increasing Auto Insurance Rates Legally

The compulsory nature of car insurance policies makes premium hikes unpopular at best and controversial at worst. Policyholders almost always feel the pinch, regardless of whether auto insurance turns a profit. Judging by how effective the legal system can be when compensating the insured, insurers must navigate the regulatory landscape carefully to raise premiums accordingly without breaking the law.

Independent insurance agencies are operating under pressure unlike ever before. Customer expectations are shifting rapidly toward digital, always-on service. The talent pool is tightening as seasoned producers retire and fewer younger professionals enter the field. And direct-to-consumer players as well as digital-first aggregators are compressing margins and encroaching on traditional distribution territory. In this environment, "business as usual" is no longer enough. Agencies must modernize or risk being left behind.

The good news: Artificial intelligence (AI) is not simply a buzzword. When done right, it can become foundational to how agencies operate, liberating teams from administrative burden, enabling deeper relationships, and powering smarter revenue generation. And for independent agencies that embrace transformation, it can mean resilience in a turbulent market.

Why Now?

We see several converging forces making AI not just helpful, but essential, for agencies.

Let's start with talent constraints. Industry data shows that fewer than 25% of insurance professionals are under 35, and within the next decade or so, half the workforce may retire. With fewer experienced staff members and increased pressure on the remaining staff, agents are challenged to allocate their time to what matters most.

Second, the workflows of our industry are still heavily reliant on repetitive tasks — policy checking, reconciliation, submissions triage, renewal data entry, and servicing follow-ups, to name a few. These are necessary, but they absorb time that could otherwise be spent on the complex, value-generating work of advising clients, developing relationships, and growing the book.

Third, the competitive landscape now rewards speed and precision. Clients expect the same friction-free experience they get everywhere else. Carriers are more likely to prioritize more efficient agency partners. And digital competitors are not slowing down. In this environment, agencies that still run on time-consuming, manual workflows are at a structural disadvantage. Efficiency is no longer optional. It is a requirement to be competitive.

When we recommend AI for agencies today, we're not offering aspirational, "maybe someday" theories. We're talking about a prerequisite to transform capacity, accuracy, and human focus.

Vertical AI: The Right Kind of Intelligence

It's important to clarify what we mean by "AI," as there's a big difference between horizontal and vertical AI. Vertical AI is industry-specific models trained on the terminology, workflows and data of insurance. Horizontal AI is generic, one-size-fits-all models like ChatGPT that don't understand how agency workflows work or what a "policy binder" is, for instance.

Why does that matter? Because workflows in insurance are deeply nuanced. Carriers have different requirements, agencies follow complex servicing and renewal paths, and the relationships between client, agent and underwriter are built on trust and insight. Generic AI may automate some tasks, but it often misses the context that drives value in our world. Vertical AI, by contrast, is designed to comprehend insurance-specific data, pinpoint coverage gaps, analyze risk patterns across a book, and seamlessly integrate into agency systems.

Agencies investing in AI-enabled, insurance-specific workflows can realize meaningful gains. In fact, our research concludes:

• Automating many manual tasks can free up 40-50% of an agent's time.
• AI-based renewal and cross-sell suggestions can boost cross-sell revenue by 20-30%.
• Reducing risk of errors and omissions by automating validation and data entry can cut operational mistakes by up to 90% in certain processes.

These aren't abstract numbers. They represent capacity unlocked, risk mitigated, and revenue uplift realized.

From Admin to 'Hero Work'

Here's where the transformation starts to feel concrete.

Imagine your average producer or account manager spends 10-20 hours per week on administrative tasks, including checking policies at renewal, chasing missing information, reconciling commission statements, and updating client profiles. Now imagine if a significant portion of that load is shifted to automation via vertical AI that understands your book of business, flags data gaps, pre-populates forms, surfaces cross-sell opportunities, and automatically updates the system.

That freed time can be re-invested into meaningful client conversations, strategic risk reviews, proactive outreach, renewal strategy, expanding existing accounts, building trust and loyalty – what we call "hero work." The human element doesn't disappear. It's amplified as agency staff migrates from order-takers to advisors.

When producers and service teams are focused less on "keeping the lights on" and more on value creation, the agency's relationships strengthen, the book grows, the retention rate improves, and profitability follows.

Resilience Enabled

What is resilience in this context? It's more than survival. It's the capacity to absorb disruption and convert it into advantage. And vertical AI sits at the heart of that capability.

Unlocking agent capacity creates room for people to evolve into higher-value roles as the workforce ages and expertise retires. Instead of trying to replace institutional knowledge one-for-one with new hires, AI takes on the repetitive load so existing staff can be trained and redeployed into the "hero work" that a retiring generation used to do. Automating administrative bottlenecks reduces error risk and rework, and it gives teams the time and space to build new skills while still delivering day-to-day performance.

Shifting people toward relationship work creates differentiation in a commoditized market. Direct and digital competitors may offer price, but they rarely replicate trust, insight, and service depth. An agency whose team is equipped — via AI — with the insights to talk to clients about risk trends, coverage gaps, emerging exposures, and value beyond price is one that can build stickiness.

Leveraging vertical AI's ability to identify emerging cross-sell and upsell opportunities using enriched data from public sources, your own book, and insurer signals, builds not just cost savings, but new revenue streams. That mix of operational efficiency plus revenue growth is the essence of resilience.

The Bottom Line

Independent agencies—and the people who lead them—face a choice: continue investing human effort in low-value administrative tasks or redirect that effort toward relationships, strategic advisory, and differentiated service. Vertical AI makes the latter possible.

When you move your teams from admin to hero work, you're investing not just in efficiency, but in resilience. You'll build an agency that can weather talent gaps, margin pressure, and digital disruption. You'll foster the kind of business that doesn't just survive change—but thrives because of it.

We believe deeply that the future of the independent agency distribution channel will belong to agencies that enable their staff to focus on hero work. AI and its impact are no longer theoretical. It is available today to relieve people of admin tasks and put their time back on value. The reward is an agency poised for growth, differentiation, and resilience. When your people spend less time processing and more time advising, you position your business not just for tomorrow but for the next decade of success.

According to a recent report, commercial auto insurance underwriting losses continue to climb.

As brokers and agents work with their clients, it's important they stress approaches that can enhance insurability and help manage costs. There are three major ways to do this:

• Create policies and procedures for driver screening, training and monitoring.
• Leverage technology to ensure drivers are making safe choices.
• Maintain and inspect vehicles on a regular basis.

Driver screening

While safety features are an excellent addition to modern vehicles, they ultimately can't make up for poor driving behaviors. To stay safe on the road, organizations must select drivers who have an exemplary motor vehicle record (MVR).

But maintaining safe drivers does not stop with the selection process. Employers must offer annual training programs and provide continuous monitoring (such as telematics) to ensure drivers are operating vehicles safely. It's all too easy for a driver to become complacent—especially when it comes to distracted driving.

In particular, training programs should stress no cell phone use while driving. In recent years, that has become one of the key causes of crashes. Organizations also should establish procedures their drivers can follow for breakdowns, accidents and adverse driving conditions.

Innovations in technology

In recent years, the auto industry has come far with innovation in technology. Organizations can use this technology to identify risky driving habits and offer drivers more high-level safety features that reduce the risk of a crash. Some of the most prevalent safety features include:

• Telematics – With this technology, a device installed in a vehicle collects data from the vehicle's sensors, such as speed, location and engine status. Some telematics systems provide an alert to the driver when they are exhibiting poor driving behaviors; these alerts help correct behaviors immediately, which is preferred. Telematics data is ultimately transmitted to the driver's employer, who can track how fast they are driving, what their braking habits are and how much fuel they're consuming. Telematics can be especially helpful for usage-based insurance, which bases a company's premiums directly on its drivers' habits.

• Back-up and 360-degree cameras – Many vehicles are equipped with this safety feature now. In fact, it has become so prevalent that if an organization has vehicles without a camera, it should consider replacing them. These features enable a driver to view the surrounding area when backing up and reduce blind spots. This can help prevent fender-benders in busy parking lots and potentially reduce insurance premiums.

• Tire pressure monitoring systems – These systems, too, are extremely common in vehicles. They can alert drivers to rapidly changing air pressure in the tires, which may be the result of a nail, screw or other foreign object that has punctured the tire. Under-inflated tires are more prone to blowouts, which may lead to serious accidents. These monitoring systems are vital to decreasing the risk of a crash.

• Advanced driver assistance systems (ADAS) – Collectively, these technologies in a vehicle can help drivers make safe decisions and alert them to hazards. They include:

• Lane departure warning – alerts driver if vehicle is drifting out of its lane.
• Lane keeping assist – corrects steering to keep vehicle in its lane.
• Automatic emergency braking – automatically applies brakes if it detects a potential collision with objects ahead of the vehicle.
• Adaptive cruise control – adjusts vehicle's speed on cruise control to keep a safe distance from the vehicle ahead.
• Blind spot monitoring – alerts driver if a vehicle is in its blind spot.
• Forward collision warning – warns driver of imminent collision with another vehicle or object.

• Night vision and pedestrian detection systems – In low-light situations, these systems use infrared cameras and sensors to detect people and animals.

• Electronic stability control – In icy or wet conditions, this system applies brakes to specific wheels if it detects they are skidding.

• Side-impact airbags and other airbag systems – Studies have shown that side airbags can dramatically reduce a driver's risk of severe injury and death. So if there is a crash, the driver is much less likely to be injured or killed.

Vehicle maintenance

Another important way organizations can help manage vehicle insurance costs is by making routine checks part of their policies and procedures. They can do this by:

• Creating and sticking to a scheduled maintenance plan – refer to the owner's manual for recommended maintenance checks.
• Mandating pre- and post-trip inspections – this includes tires, lights, brakes and fluid levels.
• Establishing clear reporting procedures that ensure small problems don't turn into major hazards – drivers should be required to report anything out of the ordinary.
• Requiring emergency preparedness – all vehicles should be equipped with jumper cables and a complete emergency kit.
• Conducting seasonal maintenance checks – this includes swapping to snow tires for the winter and changing windshield washer fluid.

If organizations make a genuine effort to address the above suggestions, they can help make themselves more insurable and significantly reduce their likelihood of needing to file a claim.

Ransomware isn't just another IT headache. It has become one of the most disruptive business risks of the last decade, with the average ransom demand soaring to $2.7 million in 2024—nearly triple that of the previous year. As attacks escalate, cyber insurance has emerged as both a financial safety net and a source of controversy. Critics argue that guaranteed payouts fuel the ransomware economy, while insurers counter that they provide the expertise and resources companies desperately need to recover. So, is cyber insurance helping or hurting? The answer, as usual, is more complicated than it appears.

One of the biggest misconceptions about cyber insurance is that carriers simply cut a check when ransomware strikes. In reality, insurers are often the calmest (and most experienced) voice in the room. Backed by thousands of claims, they know when paying is the only path forward and when it's a mistake. They bring in seasoned negotiators, navigate legal landmines, and keep the process grounded in facts rather than fear. For a company facing permanent data loss or days of costly downtime, that kind of expertise can be the difference between bouncing back and going under. Insurers also have a vested financial interest in the outcome, but their depth of experience allows them to make rational, non-emotional decisions when clients feel like the sky is falling.

The Strategic Blind Spot in Cyber Insurance

Despite its critical importance, cyber insurance purchasing decisions are often made without the full involvement of those best equipped to understand cyber risk. Too often, financial and legal teams drive procurement with limited input from CISOs and security teams.

This disconnect can leave companies exposed to coverage gaps they only discover after an incident. Common blind spots include social engineering attacks and third-party breaches—threats security leaders know are likely but may not be properly accounted for in policies. If CISOs, finance, and legal teams collaborated earlier in the buying process, companies could align coverage with real-world risk scenarios and avoid costly surprises. One simple but overlooked practice is to run realistic attack scenarios—like a phishing scam or a third-party outage—against your policy to confirm how coverage would actually respond.

Cybercriminals move fast. Insurance carriers, bound by regulatory requirements and the slow process of drafting and approving new policy language, struggle to keep up. While the industry has made strides in adapting to emerging risks, there is always a lag. Threat actors do not need regulatory or internal approval to change tactics. Carriers do.

That doesn't mean insurance is standing still. Carriers are increasingly clarifying how they handle new exposures, from artificial intelligence to evolving ransomware techniques. But the structural lag is unavoidable for most insurance carriers—and it means businesses must recognize that cyber insurance may always be a step behind the threat landscape.

Navigating Exclusions: "Acts of War" and Beyond

Few topics generate as much anxiety as exclusions. "Acts of war" clauses, in particular, leave many companies wondering whether they would be covered if a state-sponsored attack hit their systems. The reality is nuanced. Some carriers have introduced coverage for acts of war, while others continue to exclude them. A similar pattern is now emerging with AI-related risks, with carriers taking divergent approaches.

The best way to evaluate these complexities is by working with a broker who specializes in cyber insurance. Generalist brokers may be able to place a property policy, but cyber requires expertise and constant monitoring of an evolving market. Specialized brokers can help businesses benchmark their coverage, identify gaps, and secure policies that align with their risk profile. Specialized brokers can also pressure-test policies against evolving risks and flag areas where different carriers take very different stances.

Shifting Responsibility Back to Businesses

It's tempting to blame cyber insurers for coverage disputes, but in most cases, the real issue lies in misunderstanding. In fact, most coverage disputes stem not from insurers refusing to pay, but from policyholders assuming protections were included when they never were. Better outcomes come when organizations bring more stakeholders into strategy discussions and lean on specialized brokers to navigate a complex market.

Cyber insurance is neither a silver bullet nor the villain some portray it to be. It is one component of a larger resilience strategy—one that needs to be aligned with security investments, risk appetite, and operational priorities. When used correctly, insurance can reduce chaos, accelerate recovery, and provide much-needed expertise in moments of crisis. When misunderstood or misapplied, it can leave businesses exposed and frustrated.

The future of ransomware defense will require collaboration: between CISOs and CFOs, between insurers and clients, and between the public and private sectors. Only then can cyber insurance fulfill its role as a stabilizer rather than an accelerant in the ransomware economy.