My husband and I do our grocery shopping once a week for just the two of us and our five cats—though we don't include cat food in our weekly grocery budget. Typically, we purchase the usual staples: fruits, vegetables, meats, bottled water, soft drinks, and occasionally snack items. By the time we reach the checkout, our total averages more than $180 per trip. Yes, nearly $200 a week—for just two people.
If groceries alone cost us this much, what are households of three or more people paying—and how do they manage to afford it? And this is before adding in other common household expenses, like mortgage or rent, utilities, transportation, debt, internet and other subscriptions, family needs, savings—and finally, insurance.
Inflation pressure is real, and we continue to live it. MarketWatch reported that as of December 2024, "consumer prices were up 2.9% year over year," contributing to a steady rise in the cost of living.
And it's not just groceries and household expenses. We are also seeing our insurance premiums increase year over year.
Effects on Consumers and Business Owners
According to the U.S. Department of the Treasury, average homeowners' insurance premiums per policy increased 8.7% faster than the rate of inflation between 2018 and 2022. More recently, in 2024, the national average cost of homeowners insurance rose to $2,728 per year.
Auto insurance hasn't been spared either. Bankrate reports that the average cost of full coverage car insurance climbed to $2,638 in 2025, up 12% from 2024.
Consumers like us aren't the only ones affected. Commercial businesses are grappling with increased operating costs, pricing pressures, supply chain disruptions, wage inflation, rising financing and marketing expenses, shrinking consumer demand, and uncertainty in long-term financial planning. Like households, businesses also face rising insurance premiums. According to WTW's Commercial Lines Insurance Pricing Survey, U.S. commercial insurance rates increased by 6.1% during the third quarter of 2024. Specific lines, such as commercial auto insurance, have seen even steeper increases, with rates continuing to rise in double digits.
Effects on Insurance Carriers
Insurance carriers, like homeowners and business owners, are equally affected by these economic pressures. Rising repair costs for homes and vehicles are driving up claim payouts. The National Oceanic and Atmospheric Administration (NOAA) reported that damages from weather-related disasters in the U.S. amounted to approximately $92.9 billion in 2023. These factors are forcing insurers to raise property insurance rates.
At the same time, insurers face a raft of other issues—more frequent and severe weather events, rising reinsurance costs, and a surge in lawsuits and settlement amounts. This last factor, social inflation, was cited by Swiss Re as a key driver of higher liability claims costs, particularly in lines of business exposed to bodily injury claims.
Combatting Inflationary Pressure With Agentic AI
To manage these mounting pressures without relying solely on rate increases, insurers are turning to agentic artificial intelligence (AI) solutions. An agentic AI platform provides specialized AI agents that automate routine business processes across various operational domains. These agents operate continuously, delivering high accuracy in tasks such as data extraction, document classification, and workflow orchestration.
This approach equips insurers to combat inflationary pressures through smarter operations, tighter cost control, and enhanced customer service by delivering:
- Operational optimization: Agentic AI automates repetitive tasks such as data entry, document processing, and information verification. This minimizes manual data review, reduces the risk of errors, and accelerates process timelines to increase productivity.
- Cost savings: Boosting operational efficiency can significantly reduce administrative overhead and processing costs. Freed from routine tasks, underwriting and claims experts are able to focus on product innovation, customer engagement, and other higher-value tasks to improve overall ROI.
- Service improvement: Agentic AI enhances service delivery across underwriting and claims management workflows. It automates critical stages such as policy intake, document triage, reserve allocation, and policyholder communications. This results in greater accuracy, reduced cycle times, accelerated claims resolution, providing policyholders with quicker, more responsive service and fewer disputes or delays.
These innovations position insurers to enhance profitability, elevate customer satisfaction, and build a lasting competitive advantage, even in today's demanding economic landscape.
Faced with escalating economic challenges, including inflation that affects every part of the insurance value chain, insurers must turn to AI as a vital tool for resilience and growth.
Financial pressures from rising claims severity, operational inefficiencies, and other challenges highlight the urgent need for transformative solutions. Agentic AI offers a strategic path forward—reducing costs, enhancing service delivery, and helping insurers do more with less. As inflation makes consumers increasingly price-sensitive, AI-driven automation enables insurers to stay resilient, responsive, and competitive. By investing in AI, insurance companies can not only navigate today's economic pressures but also build a more equitable future for policyholders.
