Digital claims, AI-assisted underwriting, and automation in policy administration are all top-of-mind when it comes to insurance innovation. But there is one function that remains under the radar but underpins the entire insurance lifecycle: payments. Payments are a core function of insurers, but many are dealing with outdated, rigid payment systems that are not only clunky but a liability.

According to the National Association of Insurance Commissioners (NAIC), direct premiums written (DPW) in the P&C sector climbed to $529 billion in 2024, an 11% increase over the previous year. That growth is tremendous, but many carriers are not equipped to efficiently handle the sheer volume and complexity of financial transactions that come with it. Legacy payment infrastructure, much of it designed for a paper-based world, is cracking under the pressure.

Where Payments Fall Short

The traditional P&C payment setup is riddled with gaps. Premium collections are siloed from claims disbursements. Reconciliation happens manually. Adding payment vendors takes months, and compliance tracking is often an afterthought. This is leaving customers wondering why a refund or claim payment takes a week when Venmo can move money instantly.

These inefficiencies are costing insurers more than operational overhead. They are damaging customer trust at the worst possible moments, like after a car accident or natural disaster, when policyholders expect fast, seamless payouts. If a delay or mix-up happens during that crucial window, no amount of customer service and marketing will win that customer back.

Even worse, regulatory pressure is mounting. Payment compliance is not optional, and falling short, whether on timing, transparency, or data handling, can invite fines or audits. Old systems were not built with today's rules and expectations in mind.

From Back Office to Brand Differentiator

Once relegated to the back office, payment systems are now becoming a critical differentiator. Customer experience is no longer just about how quickly a claim is approved, or a policy is bound; it is about exceeding customer expectations across the entire insurance journey. To ensure these expectations are met, how payments are distributed is key.

Today's consumers live in an instant payout society and expect immediacy, transparency, and choice that brands like Amazon, Uber, and Apple provide. The same is true for the insurance industry. Consumers want to pay premiums how and when they want and receive claims payments just as easily. If that is not possible, they will find an insurer that can meet their expectations.

For forward-thinking insurers, that shift presents an opportunity. The same infrastructure overhaul that improves operational efficiency can also unlock brand differentiation. Real-time payment capabilities, digital wallet integration, automated reconciliation, and compliance built-in from the start are not just technical upgrades, they are critical competitive advantages.

What Modernization Looks Like

Payment modernization is not about ripping everything out and starting over. It's about building an ecosystem that is flexible, scalable, and connected. Insurers need to deploy payment orchestration platforms that plug into existing core systems while unlocking powerful new capabilities. Here are some of the benefits when payments and core systems seamlessly work together:

• Instant collections and disbursements – Customers can pay premiums using any major method (credit card, ACH, digital wallet) and receive payouts the same way, often in minutes rather than days.
• End-to-end visibility – Finance teams can track every dollar, from initiation to settlement, across billing and claims.
• Faster integration with vendors – What once took 12 months now takes two weeks. That means insurers can add or switch payment providers without stalling operations.
• Automated compliance – Built-in tools ensure payments meet state and federal regulations, with full audit trails and reporting.
• Automated workflows – Errors and bottlenecks from using paper-based, manual processes can be eliminated.

Insurers that have adopted modern payment infrastructure are not only more agile but are saving millions annually in processing costs, reducing call center volume, and scoring higher in customer satisfaction.

Real Risks of Maintaining the Status Quo

The risks of not modernizing are growing by the day. As more insurtechs enter the space with fully digitized platforms, the gap between modern and traditional carriers will only widen. And while legacy players may still hold customer trust and market share today, their lack of payment flexibility and immediacy will test that trust. Every delay, every friction point in the payment process erodes confidence. And in an industry built on trust, that can be costly.

Payment technology is evolving quickly, including initiatives such as embedded finance and real-time rails. Insurers that are not already modernizing may soon find themselves too far behind to catch up. This is especially true as regulators increase scrutiny and potential monetary fines over digital payment compliance and transparency.

Building a Future-Ready Foundation

Modernizing payments is not just about fixing what is broken. It is about building for future considerations. Payments touch every aspect of an insurer's operation. By improving how money moves, insurers can accelerate product launches, personalize billing strategies, streamline claims, and gain deeper financial insight across the enterprise.

For carriers looking to lead, and not just survive, payments is the place to differentiate and digitally transform. Because if one insurer cannot pay quickly, securely, and conveniently, another will.

Recent articles by a Wall Street Journal reporter and by a highly regarded veteran journalist suggest that generative AI could render management consulting firms obsolete. The headline in the WSJ begins, "AI Is Coming for the Consultants," and refers to an "existential" threat to McKinsey. The headline's dek reads: "If AI can analyze information, crunch data and deliver a slick PowerPoint deck within seconds, how does the biggest name in consulting stay relevant?"

But let's not get carried away just yet. 

From my perspective both as a long-time follower of technology and of insurance and as a former partner in a 2,000-person management consulting firm, gen AI will require adapting the business model for consultants and, perhaps a bit later, insurers. But gen AI will actually accentuate the value of the sharpest consultants and the best underwriters, claims professionals, and agents and brokers — not put them out of business. 

As a way of sorting through the hype and the reality surrounding generative AI, I thought it would be worth taking a look at what's really likely to happen.

Here are the two articles: the WSJ piece and one written for the Free Press by veteran business reporter Joe Nocera. The text of the WSJ article isn't as alarmist as the headline but still makes the case that gen AI can produce presentations as slick as a consultant can, so who needs human consultants? Nocera, scarred from his experience as an employee at Time Warner during the disastrous, consultant-heavy takeover by AOL, makes much the same argument, and rather gleefully. The headline of his piece reads: "The Consulting Crash Is Coming: Bloated, overpaid, and outpaced by AI—big firms confront a future they can’t outsource."

I see two major problems with the thesis, neither of which undercuts the power of gen AI but which suggest tempering expectations at least about how quickly gen AI will take over the world. Both issues also apply in insurance.

First, the articles get caught up in the glitz of AI and ignore a question that gets ignored all too often: What if the AI is wrong? 

Yes, an AI can do a remarkable amount of analysis quickly and can turn it into a slick PowerPoint presentation with breathtaking speed, leaving the usual army of 20-something MBAs way behind. But what if the analysis is wrong? 

I see this sort of assumption of AI-as-oracle all the time. But in a lot of cases, it isn't even possible to know whether the AI will be right. It can't know for sure how competitors will react to a new strategy by a client. It can't know for sure whether predictions about morality for life insurers will be accurate, not for years or even decades.

Sure, those armies of MBAs make mistakes, too—plenty of mistakes, including some big ones—and the AI will keep learning and improving over time. But the AI will have to earn its stripes just as consulting firms have over time, so we can't just assume the speed of AI will win the day.

Second, the articles gloss over the value of the seasoned, senior consultants and miss how those senior consultants—like their counterparts among underwriters, claims professionals, and agents and brokers—became so valuable.

Much of the value comes from the sort of behind-closed-doors interactions that an AI simply doesn't have access to, even as it scans terabytes of public information. With management consulting, the issue isn't just about producing the right strategy. It's about assembling the right team to implement it. Senior consultants get good at reading the room based on decades of experience across companies and across industries and help CEOs make often-radical changes in their leadership teams during a major pivot.

There is also an issue of comfort level. Consultants become valuable not just because they're smart but because they're trusted, based on years of successful interactions with a particular client, sometimes on a personal level. 

Yes, the comfort issue can lead to unseemly fawning. I vividly remember sitting at a bar at Pebble Beach after a day of golf as a Fortune 500 CEO client ordered rounds of different grappas for a few of us and explained their nuances. I nodded along and carefully sipped each shot, even though I hate grappa. It smells like nail polish remover to me.

The need for comfort can also, as both the WSJ and Nocera noted, lead to CEOs hiring major consulting firms for huge fees just to ratify decisions they would have made anyway. (At my firm, Diamond Management & Technology Consultants, acquired by PwC in 2010, we griped that McKinsey got most of that business, while we, as a far smaller brand, had our noses pressed against the window, watching with envy.)

But management teams do need support as they make decisions that risk the company's future—and their own careers—and experienced consultants at firms with long histories can provide that support in a way that an AI cannot.

Deeply experienced human underwriters, claims professionals, and agents and brokers provide the same sorts of emotional intelligence and comfort/support to those they serve, as well, making a lot of their work safe from gen AI.

All that said, gen AI will require changes to consulting firms' business model. The firms don't just make gobs of money for their partners by charging such hefty fees for their time. The firms are built as pyramids, with thousands of young MBAs at the lower tiers being billed at rates far above their salaries—the excess going to the partners. But much of the work done at the lower levels, including those slick PowerPoints highlighted in the WSJ headline, can, in fact, be automated by AI. A big chunk of revenue will disappear. 

I say good riddance to a lot of that work. I remember teams at Diamond staying up all night because, as members combined their work, they found that fonts didn't match or that someone had messed up the page numbers, and they had to get everything perfect for the presentation first thing in the morning. Who needs to pay a bunch of 20-somethings $1,000 an hour to fix formatting when an AI could do the work in seconds and let them get some much-deserved sleep?

But the thinning out of lower ranks doesn't just take away revenue. It takes away talent, too—an issue for insurers, as well. If you don't need so much research done by the lower tiers in a firm, you don't need as many people, and you don't have as much talent fighting its way up the pyramid in the up-or-out culture of a consulting firm. Those who make it will still be impressive, but what have you lost? 

The same goes for insurers. What do you lose among your senior underwriters, claims professionals, and agents and brokers in a decade if gen AI means you're drawing from a smaller base?

I remain a huge fan of the potential of gen AI, and I could tell you loads of stories mocking consultants and their firms, but I think the glee about the supposed comeuppance for consulting firms is overdone. They, like key players in insurance, will have to adapt plenty, but I predict they'll be as influential as ever. 

Cheers,

Paul

An effective strategy to optimize the work experience and satisfaction for insurance customer service agents focuses on two factors. Incorporating employee assistance technologies, like agentic AI and large language models (LLMs) into workflows, while also placing a greater emphasis on workplace culture and support, can help decrease burnout and raise retention.

Increasing employee feelings of fulfillment is good business. This approach not only helps the individual, but it also can elevate overall staff satisfaction. Customer service representatives who feel supported by both assistive technologies and management will be happier, which can improve satisfaction and long-term retention of customers.

Insurance customer service representatives experience multiple challenges. They are expected to be patient, professional, and resourceful, finding relevant answers for a wide range of customer issues in real time. Also, they must navigate complex and ever-changing insurance regulations.

Technology to the Rescue

AI and LLMs can help with this multitasking. Gone are the days when the only choice was a pre-scripted chatbot that provided callers with limited options, such as operating hours or directions, before switching them to a representative. LLMs can now handle these basic inquiries as well as assist customers with other issues using natural language processing, delivering a more personalized, context-aware solution.

These technologies allow customer service representatives to focus more time on human factors like empathy. Agents are front-line workers who help customers during times of need, such as after a death in the family, a motor vehicle accident, job loss, or other major life event. The most skilled agents use emotional intelligence to connect on a human level during these times. Simultaneously, representatives need to get their jobs done with accuracy, compliance, and speed.

When AI is implemented seamlessly, it also can alleviate other customer representative pain points. For example, AI can automatically find and analyze policy data relevant to each customer in real time, sparing a representative from jumping tabs or putting a client on hold while they search. AI augmentation can make agents' workloads more manageable and allow them to perform their jobs with greater confidence.

Technology can also ease the burden of tasks that require multiple steps. For example, automating insurance claims management can save both time and frustration when employees skip manual tasks like verifying details, checking policy limits, updating records, and sending communications.

Burnout Is Common

The technology solutions could be coming just in time. Recent research from Liberty Mutual and Safeco Insurance found that more than half of frontline agents at independent insurers are struggling with stress and burnout. The same report found:

• 65% of staff often feel stressed at work
• 57% say they feel mentally and physically exhausted
• 51% report feeling burned out
• 39% of agency staff have considered leaving their jobs

The study also revealed that employees at agencies with more digital tools report lower levels of burnout.

If left unaddressed, burnout can lead to reduced productivity, more frequent absences, and increased employee turnover. These outcomes in turn degrade customer service quality. For insurance companies, the consequences may include not just the loss of skilled staff but also potential damage to the brand's reputation.

Company Culture Must Be Improved

Insurance companies that cultivate a culture of empathy and psychological safety create a work environment where employees feel supported to do the best job possible. There is a direct relationship between engagement and customer service representative burnout, according to a study of nearly 400 representatives working in a roadside assistance call center.

Workforce management technologies can also reduce stress and prevent burnout. By anticipating peak demands and noting emotional signals, these platforms make sure agents are neither overwhelmed nor underused, which also supports greater job satisfaction.

AI and LLMs are rapidly evolving. They are accelerating a transition of agents facing high-volume, repetitive labor to a role focused on delivering genuine human connection, an essential factor in enhancing job satisfaction and employee retention. Organizations that understand the growing potential for these technologies to assist customer service representatives benefit from greater efficiency, happier employees with greater resilience against burnout, and increased customer loyalty over the long run.

Insurers that invest in LLM- and AI-augmented agent support systems will be best positioned to reduce burnout, improve employee retention, and maintain service excellence over the long term.

Running an independent insurance agency without the right technology can feel like an uphill battle. You're constantly pulled in different directions: chasing down quotes, managing multiple carriers, handling policy changes, and trying to keep up with client demands. Every day brings new fires to put out, and without the right tools, even the simplest tasks can eat up valuable time. In a fast-paced market, doing everything manually just isn't sustainable.

The old way of working limits your capacity and makes it harder to deliver the kind of service your clients expect. The good news is that modern insurance technology is changing that and can help you stay ahead.

Here are three areas where the right tech can make a real difference in running your agency.

Digital Payments That Streamline Collections and Enhance Security

According to McKinsey, nearly nine out of 10 consumers now use some form of digital payment. So why should paying for insurance be any different?

Today's insurance agencies have a prime opportunity to modernize payment collection. By offering secure digital payment options via ACH, credit, or debit card that seamlessly integrate with your agency management system, you can significantly reduce the time your team spends manually double-checking collections and reconciliations.

But the benefits don't stop at the back office. Clients also enjoy a smoother experience. With 24/7 access from any device, they can pay whenever it's convenient—no waiting on office hours or worrying about late payments. Instant confirmations provide peace of mind, so they always know where their policy stands.

With built-in security features, digital payments also help protect both your agency and your clients' sensitive information, reducing the risk of fraud and potential liability. It's a simple upgrade that delivers a meaningful impact on your operations and your customer experience.

Smarter Renewals That Save Time—and Clients

With competing renewal deadlines across multiple clients, it's easy to fall behind. If you don't reach out with enough lead time before a policy expires, you risk missing the renewal altogether. That not only reflects poorly on your agency, it can also lead to lost business.

Having a solid handle on renewals is essential, and fortunately, technology is making it easier than ever to manage the process. Modern agency management systems can automatically track your clients' policy expiration dates and send you alerts when renewals are approaching, ensuring you never miss a critical deadline and allowing you to plan your outreach strategically.

Some tools go even further by pulling updated carrier rates directly into the system, empowering you to offer better options to your clients before they start shopping around on their own. Not only does this protect your book of business, but it also turns renewals into valuable opportunities to showcase your commitment and expertise.

Real-Time Reporting That Helps You Make Better Decisions

Analytics-driven organizations are 23 times more likely to acquire customers, six times more likely to retain them, and 19 times more likely to be profitable. When you're running a business, static spreadsheets aren't enough—you need actionable insights.

Real-time data and reporting tools provide a clear view of your agency's performance, tracking everything from new business and retention rates to client growth and commissions. Intuitive dashboards simplify complex data, helping you spot trends, identify potential issues early, and focus on what's working best.

Some platforms even let you benchmark your results against similar agencies so you can see exactly where you stand and uncover opportunities for improvement. The bottom line is: When you understand your numbers, you can make smarter decisions that drive meaningful growth.

The Smarter Path to Agency Success

The insurance landscape is evolving faster than ever, and adapting to these changes means rethinking how your agency operates.

You don't have to handle everything on your own. The technology is here—and it's designed to simplify your operations and maximize your impact. That means less time spent on manual tasks and more time focused on strengthening client relationships and growing your book of business.

Insurance has always been about managing risk, but the nature of that risk is evolving faster than traditional models can keep up. Climate change, cyberattacks, and rising customer expectations are all redefining what it means to understand and respond to risk. In this new environment, artificial intelligence (AI) is emerging as the catalyst for a transformation in how insurers operate.

AI isn't just a new tool; it's becoming the backbone of modern risk management. From underwriting and fraud detection to regulatory compliance and customer experience, AI is enabling insurers to manage risk more intelligently and at scale.

AI Is Powering a New Era of Risk Intelligence

Insurers have long relied on historical data and actuarial models to evaluate risk. But these traditional methods can't keep pace with the speed and volume of modern threats. That's where AI excels, by quickly analyzing vast amounts of both structured and unstructured data to detect patterns and identify emerging risks.

New research indicates that insurers are already seeing real impact: 68% say AI is improving the accuracy of their risk assessments, while an equal percentage are realizing measurable cost savings. Whether it's identifying communities at risk of wildfires or flagging cybersecurity anomalies, AI is helping insurers stay ahead of the curve.

This shift is also reflected in investment priorities. Research shows that 81% of insurers plan to increase their AI spending over the next year. More tellingly, they expect AI to make up 20% of IT budgets within five years, which is more than double the current share. That growth signals just how central AI has become to strategic risk management.

Real-Time Decision-Making Is Replacing Static Models

AI is enabling a move from reactive risk evaluation to real-time, dynamic decision-making. Nowhere is this more apparent than in underwriting and quoting. Rather than relying solely on historical claims data, AI can incorporate real-time signals, such as behavioral data, geospatial risk indicators, and social sentiment, to produce faster, more accurate pricing and coverage recommendations.

Consumers are feeling the difference. In a world of instant feedback, people expect transparency, personalization, and responsiveness. AI helps deliver that by powering faster quoting, real-time risk profiling, and instant eligibility decisions. This is why 56% of insurers believe AI will increase policy volume, and 50% say it will significantly reduce underwriting time.

Risk Management Now Includes Customer Experience

Good customer experience is no longer a "nice to have"; it's a core part of managing brand, retention, and even financial risk. AI is proving to be a critical enabler.

When claims are submitted, particularly during high-stress moments like car accidents or property loss, speed and empathy are crucial. AI accelerates the claims process by instantly reviewing the initial notice of loss, evaluating the damage, checking for signs of fraud, and initiating the next steps. What once took days can now happen in minutes.

This efficiency isn't just beneficial for operations; it's also helpful for customers. 62% of insurers say they expect customer satisfaction to rise as they deploy AI to simplify claims and deliver more personalized service. AI is also helping tailor coverage to individual policyholders, factoring in location, age, lifestyle, and risk profile, to provide customers with exactly what they need, when they need it.

Insurers Must Overcome Adoption Hurdles to Unlock Full Value

Despite its promise, implementing AI is not without its challenges. Legacy systems continue to pose a significant barrier, with 71% of insurers citing integration issues as their top obstacle. Access to qualified AI talent and the complexity of evolving regulations further complicate the adoption process.

Currently, 46% of insurers have begun deploying AI in some form; however, this leaves more than half still navigating the early stages of strategy and implementation. Among small insurers, 44% are still developing internal policies for AI usage, a delay that could increase their risk exposure.

Unlocking AI's full potential requires more than just technology. It requires a cohesive approach that encompasses strategic governance, ethical oversight, and substantial investment in workforce training. It's encouraging to see that 80% of insurers are already creating AI training programs to upskill employees and prepare their organizations for long-term success.

AI's Expanding Role Is Reshaping the Enterprise

AI is reshaping the entire enterprise. From the front office to the back office, AI is becoming embedded in how insurers think, act, and compete.

For example, fraud detection is being revolutionized as AI algorithms identify inconsistencies and red flags in real time. This is an area where 83% of insurers already see tangible value. In compliance, 65% expect AI to help them better navigate an increasingly complex regulatory environment.

What ties all of these functions together is the need for more intelligent, faster decision-making in the face of growing risk complexity. AI provides the analytical power and operational agility insurers need to manage risk and turn that into a competitive advantage.

A Smarter Future for Risk Management

AI won't replace the fundamental mission of insurance, but it will elevate it. By integrating AI into the core of their risk management strategies, insurers are positioning themselves to deliver faster, more accurate, and more personalized services while improving their ability to detect, assess, and respond to risk in real-time.

But technology alone won't drive this transformation. The winners in this new era will be those insurers that combine AI with strong leadership, thoughtful governance, and a clear strategic vision. For those willing to act boldly and build intelligently, AI offers more than efficiency; it provides the foundation for a smarter, safer, and more resilient insurance future.

We have made it past the year's midpoint, and the auto insurance environment has exceeded expectations. The major auto insurers are flexing their muscles and operating from a position of strength. Loss ratios have improved, reserves are robust, and pricing strategies have mostly achieved rate adequacy. While the number of carriers operating in the market has remained largely unchanged, we're witnessing heightened competition through an increasingly unanimous growth mindset.

When 2025 began, some carriers pursued aggressive growth while others homed in on profitability and loss ratio management. Currently, however, the pivot is toward capturing greater market share. This shift is demonstrated by increased competitive pricing strategies, advertising spending, and renewed focus on growth-oriented distribution channels such as price-comparison marketplaces. A few insurers have even adopted targeted rate decreases in recent months, signaling confidence in their financial health and competitive positioning.

Mergers and Acquisitions

As the year progresses, mergers and acquisitions in the broader P&C market will likely pick up steam as insurers pursue growth in their core underwriting segments and investors seek liquidity for long-held investments. 

Sentry Insurance's $1.7 billion acquisition of The General from American Family Insurance is a prime example. Sentry was able to double down on its core, non-standard market focus while American Family Insurance generated a meaningful pool of capital to pursue its strategy outside of non-standard auto. Another compelling example is Munich Re's $2.6 billion acquisition of NEXT Insurance, the largest P&C insurtech acquisition on record. 

Transactions like these signal what could be the beginning of a broader consolidation characterized by major insurers leveraging strong balance sheets and high stock valuations to acquire smaller, innovative companies. These deals offer a dual advantage: acquiring cutting-edge technology to fuel growth (or profitability) while eliminating burgeoning competition from less capitalized players.

Increased acquisition activity presents an interesting paradox for auto insurers. Yes, loss ratios in the auto market have improved, encouraging growth initiatives. And yes, Wall Street favors rapid expansion, especially in favorable market conditions. But significant uncertainties are brewing under the surface, and the continuing unpredictability concerning tariffs continues to complicate long-term cost and loss forecasting. 

Buoyed by the robust market, the auto insurance industry is poised to continue pursuing aggressive growth and acquisitions. But make no mistake: The industry has to remain cautious about the prospect of an impending recession and the economic risks of inflation, stagflation, and tariffs by remaining mindful of costs, especially acquisition and staffing expenses.

The Rates Balancing Act

Even though car insurance is legally required, economic downturns can cause consumers to choose lower coverage limits or abandon coverage entirely. Shrinking premium pools and rising numbers of uninsured motorists can increase loss exposure for carriers. In addition, recessions typically reduce investment returns, further straining insurer profitability. During inflationary climates, claims costs jump, as well, creating a challenging situation where fewer premiums, higher losses, and diminished investment income coalesce.

Major tariff worries may be temporarily postponed, but they are expected to worsen next year, when their full economic impact may become evident. Rising costs could compel auto insurers to modify premiums, upping the possibility of customers choosing lower levels of coverage. This scenario would place carriers in a difficult position: balancing competitive pricing to maintain market share while managing escalating claims costs. Insurers are taking preemptive measures by booking strong combined ratios and building financial reserves while market conditions remain favorable. The objective is to remain competitive with pricing and capture profitable market share without overextending financial resources.

Regulations

On the regulatory front, significant federal intervention doesn't appear likely for the foreseeable future. The auto insurance market remains predominantly state-regulated, and while insurance pricing concerns remain, no major initiatives have emerged at the national level. 

That being said, affordability challenges and consolidation could trigger state-level discussions. Illinois is a prime example. Rapid home insurance price escalation in the state has triggered a response from the governor, who is calling for the state legislature to step in. In Louisiana, a law was enacted that empowers its top insurance regulator to unilaterally reject rate requests that are deemed excessive. As affordability concerns mount - especially in light of potentially worsening economic conditions - don't be surprised if there is more state-level intervention seeking to insulate constituents from increasing premiums.

Auto vs. Home

While major auto carriers have the green light, some auto insurtech companies may face a flashing yellow one. Many smaller, rapidly growing insurtechs struggled during the inflation surge that followed the pandemic. Without the financial resilience that big insurers enjoy, these companies have struggled to maintain growth, manage loss ratios, and compete for consumer attention and market share. Consequently, the industry may see a wave of insurtech consolidation (or bankruptcies) over the next 18 months as these upstarts lack the standalone funding to out-compete their larger counterparts.

The homeowners insurance market has also found itself at a yellow light. Loss ratios for many carriers remain strained due to the steady barrage of catastrophic weather events. Floods, severe storms, wildfires, and other worsening environmental hazards have pushed premiums higher, leaving few regions untouched by rate increases. 

It's little surprise, then, that acquisition activity in this sector has slowed considerably, with many carriers prioritizing risk management over growth. Insurers are focusing on stabilizing their portfolios and restoring profitability rather than pursuing new business aggressively. It's become harder to find profitable underwriting opportunities, and amplified regulatory scrutiny at the state level is anticipated as affordability concerns mount. 

There are some signs of hope for the market, though. Some major players have been able to escape the worst of the weather events and are starting to turn an eye toward expansion. This market is far from the growth mindset of auto, but there could be green shoots of interest in the back half of the year for the best-positioned carriers.

Overall, as we move into the second half of 2025, I am much more optimistic about the market conditions, particularly in auto insurance, than I was at the beginning of the year. Improved loss ratios among the big carriers signal stability, and consumers are hopeful that the largest rate hikes are behind us. Right now, the industry is in a cycle of aggressive growth, and we can expect M&A activity to pick up as the major players look to expand their footprint. 

On the flip side, the homeowners market remains under pressure, grappling with persistent losses and limited underwriting appetite. Still, with several months remaining, there's time for carriers to stabilize and reposition for a stronger finish to the year.

The integration of AI into insurance is not just changing operational workflows—it's redefining leadership. Where control and standardization once reigned, today's leaders must orchestrate autonomy, resilience, and trust. True strategic advantage lies not in overseeing every process but in empowering others to act wisely without waiting for approval.

Leadership in the digital era is no longer about issuing instructions or reviewing every decision. The role is shifting toward:

• Creating a culture of responsible autonomy;
• Defining clear boundaries for human and algorithmic decisions;
• Supporting decentralized teams with tools and purpose.

AI doesn't eliminate leadership—it demands a better version of it.

A Test of Principle: Ukraine's Insurance Sector Under Fire

At Arsenal Insurance in Ukraine, we've long practiced a distributed decision-making model. That model was stress-tested under extreme conditions—wartime disruption, evacuations, infrastructure breakdowns.

Yet our teams kept operating with speed, empathy, and alignment. Why? Because the architecture of trust was already there. We didn't need to "respond"—we simply continued leading the way we always had.

No panic, no paralysis. Just empowered professionals acting in real time, guided by clarity and mutual confidence.

What Global Executives Can Learn

Many leaders are waiting for full AI adoption to rethink their operating models. But the mindset shift must come first:

• Trust must precede automation. Technology can scale good decisions—but it can't replace poor leadership.
• Transparency in decision boundaries builds accountability.
• Speed and quality improve when people feel ownership, not when they're micromanaged.

The lesson: AI is not the endgame—it's the accelerant. And leadership is the fuse.

In a world flooded with new tools, the most underrated competitive advantage might still be human. Not just human capital—but human judgment, multiplied by systems that support it.

Let's not just build smarter systems. Let's lead in smarter ways.

One of the most difficult decisions for companies seeking cyber insurance is whether to rely on a longstanding, trusted vendor or defer to the insurer's panel of pre-approved incident response providers.

Let's say a company has worked with the same local IT service provider for years. They have a strong relationship, favorable pricing, and the added benefit of fast in-person support when needed. Most importantly, the provider knows the company's systems inside and out. In the context of cybersecurity, that familiarity can be a real asset.

Last year, when a ransomware threat hit a client's network, the IT team noticed abnormal file behavior within minutes, with files duplicating and renaming themselves on a shared drive. Because they knew the company's architecture, they didn't waste time scanning the entire network. They knew which user accounts had access to that drive, which departments had mapped it locally, and which machines had been prone to phishing clicks in the past. Within 15 minutes, they traced the activity to a single compromised workstation in accounting, pulled it from the network, and blocked the affected credentials, stopping the spread before encryption even began.

After the event, the company's relationship with its local IT provider only deepened. This dynamic isn't unusual, especially among smaller businesses. It's almost a trope: the IT guy who becomes part of the family. Shared history, trust forged under pressure, even overlapping personal lives, kids in the same school, weekends at the same barbeques. So when an insurer pushes for replacement with a faceless, pre-approved alternative, it's not just a business decision. It can feel like a personal betrayal.

Yet when it comes time to secure cyber insurance, the company faces a harsh reality: Keeping their trusted IT provider could mean a significantly higher premium, a tough pill to swallow in a margin-sensitive environment. But replacing them doesn't just come with personal guilt. It means onboarding an unfamiliar team, starting from scratch, and risking misalignment across the broader vendor stack.

Friction or miscommunication between vendors isn't just a logistical headache, it's a security risk. Every vendor represents a potential attack vector, and many fall outside the scope of cyber insurance coverage. If one of them is compromised, the threat can propagate upstream. So, from both a business continuity and risk management perspective, sticking with the local IT provider may seem like the safest option. But if they're not on the insurer's list, what then?

Insurers Don't Know the Ins and Outs of Your Stack—You Have to Show Them

Cyber insurers are often more flexible than companies assume, but only if they're convinced that the non-listed vendor doesn't introduce undue risk. Demonstrating that the provider is a strong fit also demonstrates that they're a safe bet, which benefits both the insured and the insurer. The key is full transparency.

Communicate and emphasize your preferred vendor's strong security controls, relevant certifications, incident response experience, and track record with your organization. If possible, bring in a third party to validate your assessment and avoid the appearance of bias. Done right, this can lead to negotiated savings or at least help justify the added cost internally.

The struggle to get non-approved vendors accepted by insurers points to a deeper issue: Underwriters often don't fully understand your organization's specific risk profile. Their approach is blunt, built on rough estimates, static questionnaires, automated scoring tools, and informal backchannels. Cybercrime is fluid and volatile, but underwriters don't have the time or expertise to stay current, nor to understand how each security tool actually mitigates those evolving threats. A common remedy for this disconnect is bringing in a cybersecurity expert who can act as a translator.

Tangled Web of Vendors

For companies pushed to justify a trusted vendor to their insurer, the process can also clarify the bigger picture. It forces a closer look at third-party risk, that is, untangling the vendor ecosystem, figuring out which relationships are worth protecting and which are safer to replace with insurer-approved alternatives.

This is more pressing now than ever, because the number of vendors organizations manage today has grown exponentially. Executives who came up during the dot-com era often feel disoriented. What once involved an IT guy and a local internet provider has morphed into an ecosystem of hundreds, spanning cloud services, cybersecurity platforms, managed providers, and niche SaaS tools.

It's not just the number of vendors that's growing, it's their complexity. The risk isn't additive, it's multiplicative. Each new vendor connects to others, creating a web of dependencies that rarely map cleanly back to the organization. These threads tangle. And that tangle isn't just a logistical headache, it expands the attack surface, introducing vulnerabilities with every integration.

Cyberattacks are escalating at an alarming rate. In Q3 2024, companies experienced an average of 1,876 cyberattacks per organization each week—a 75% increase compared with the same period in 2023. One compromised vendor can trigger a cascading breach across an entire organization.

The 2022 Uber case set a clear precedent: CISOs no longer walk away unscathed. They now face personal liability. But that doesn't mean the CISO can simply absorb the blame and serve as a scapegoat. Regulatory agencies, including the SEC, FTC, and GDPR enforcers, investigate the entire chain of failure: governance, board oversight, breach response protocols, and internal communication.

When an organization is found liable after a breach, regulators armed with new disclosure rules and data privacy laws can impose crippling fines. The reputational damage can linger for years. This isn't the age of "these things just happen" any more. If it does happen, you're accountable—and potentially ruined.

Cyber Insurance Isn't a Safety Net—It's a Last Line of Defense

With vendor ecosystems growing more entwined and the consequences of failure more severe, many executives turn to cyber insurance as a form of comfort. The often unspoken thinking is: You'll make this go away, right? They treat the policy like a safety net and sign the check. But while cyber insurance can be essential, it's reactive by nature. It covers the fallout. It doesn't stop the breach. Preventing incidents in the first place means knowing which threads are frayed, which are tangled, and which vendors pose real risk.

That requires assessing vendor exposure early, i.e., before and during the procurement of insurance. Whether done in-house or through a trusted partner, due diligence leads to stronger vendor cohesion, lower premiums, and greater negotiating power with insurers. Companies shouldn't be forced to blindly accept pre-approved vendors that don't fit their operating model. When organizations take the time to understand their vendor landscape, insurers can better understand what makes the business distinct and work to preserve that uniqueness rather than overwrite it.

Stratify, Verify, Clarify

So where do executives looking to assess their vendor risk start? They should begin by stratifying their vendors, organizing them by tiers of risk. Not all vendors pose the same level of exposure. Technically, a landscaper is a vendor—but would fall into Tier 4. A website analytics provider might sit in Tier 3, cloud-based HR software in Tier 2, and an IT managed service provider (ITMSP) firmly in Tier 1.

But just as damaging is placing too much trust in certifications like ISO 27001 or SOC 2. These should serve as a baseline, not a seal of approval. The same logic should be applied to external scoring tools. A vendor might have an "A" rating online, but that could simply reflect a clean external footprint, not the quality of their internal controls, policies, or staff readiness.

Many organizations rushing to sign with vendors often overlook weak or missing contractual language around data security. The agreement shouldn't just say the vendor "follows best practices." It should clearly define which frameworks are being followed, what controls are in place, and how often they're reviewed. Similarly, contracts should spell out concrete security obligations such as encryption standards, access controls and audit rights, as well as specific incident response expectations, including response time commitments and breach notification timelines.

When vetting, don't just assess the vendor. Understand how deeply they integrate with your systems and how they intersect with other vendors. That's where hidden risk lives.

Stress-Test Your Vendors

Even after vendors are properly vetted, untangled, and justified (to both the insurer and the organization,) your work isn't done. Further steps are still required.

Run tabletop exercises: These are simulated incident response drills involving all key internal and external stakeholders. Clarify roles in advance of these sessions, build trust between vendors and internal teams, and reduce confusion when real incidents hit.

For example, an organization can simulate a ransomware attack that encrypts customer data across multiple cloud environments, forcing its ITMSP, breach counsel, and DFIR firm to coordinate under a tight 24-hour window. In doing so, it might uncover gaps in cross-vendor communication or delays in restoring critical systems, issues far easier to fix in a drill than in a live breach.

Tabletop exercises are just the first step toward what should be every organization's ultimate goal: continuous, real-time threat monitoring.

Hydrogen will play a crucial role in driving the green transition, with demand expected to surge in the coming decades. Around 60 governments have adopted hydrogen strategies, while the number of planned projects is already exceeding 1,500 globally compared with around 200 in 2021 – an increase of around 600%. To realize these projects, a total investment volume of $680 billion until 2030 may be needed, according to the Hydrogen Council and McKinsey, which will trigger a greatly increased demand for insurance to protect against risks as this investment is activated. Europe is leading the way by far, with 617 planned projects and the highest total investment announced, at $199 billion.

While the potential of hydrogen is undoubted, there are still challenges and headwinds to overcome. The potential size and scope of the hydrogen economy will depend on a range of factors, including the evolving political, trade, and economic environment, as well as demand. Policymakers and regulators need to address costs for the development of the infrastructure, so scaling up at a level competitive with other energy sources is possible.

Across all industries, stringent safety measures will be vital to manage hydrogen's inherent risks. This is where the insurance industry comes into play. According to Allianz Commercial's latest risk, "Hydrogen: Opportunities, Uses and Risks in the Energy Transition," as hydrogen becomes integrated into the global economy, insurers can expect to see a significant increase in demand for coverage,. Allianz Commercial expects the insurance market for hydrogen project coverage to grow to over $3 billion in premiums by 2030.

Hydrogen offers great potential but also challenges and risks

While it holds much promise and has been used in the chemical and refinery sectors for many decades, hydrogen's integration into other industries brings a range of challenges, with risks such as fire, explosion and embrittlement being already well-known. Energy production facilities will involve hydrogen storage and high-temperature combustion, which can lead to leaks and explosions. Currently planned mega projects require a scale-up of risk management. 

In transport, applications like hydrogen fuel cell vehicles will also face risks of hydrogen embrittlement and leaks. Port operators, bunkering facilities and fuel handlers will need to manage highly flammable and cryogenic hydrogen fuels, bringing accident and contamination risks.

Risk management and mitigation are crucial for hydrogen projects

Given hydrogen's unique properties and high combustibility, ensuring safety throughout the value chain is crucial. Analysis of hydrogen-related incidents shows that undetected leaks can easily lead to explosions. Equipment design, maintenance and training can help prevent the escape of flammable hydrogen gas. The risks of ignition can also be reduced by locating hydrogen facilities in the open. Embrittlement risks can be managed using hydrogen-compatible materials and specifically designed resistant coatings.

In addition to preventing incidents, organizations can take steps to limit the extent of property damage, business interruption, and third-party liability. Buildings and facilities should be designed and constructed to withstand natural hazards, fire and explosion, and limit damage to adjacent property and equipment. Robust hydrogen leak detection and isolation systems are paramount. Human error is also a common factor in large losses. Operational, safety, emergency procedures, and training should be frequently updated, including having robust and well-rehearsed plans in place for accidental releases.

Given the wide reach of the hydrogen value chain and its potential uses, the implications for insurance could be far-reaching, touching on multiple sectors and lines of business over the next decade. From an exposure and potential claims perspective, product lines such as energy, natural resources and liability are likely to see the biggest impact from hydrogen risks over the next five to 10 years, followed by property and marine.

To read the full Allianz Risk report on hydrogen, please visit: Hydrogen: opportunities, uses and risks in the energy transition | Allianz Commercial.