My old friend and colleague Chunka Mui recently posted a thoughtful essay on how companies should start thinking about the next phases of the generative AI revolution — which is where the profound changes will happen. 

By now, just about every company is experimenting with gen AI, and many even have gone beyond pilots and into production. But, drawing on Doug Engelbart's classic thinking about businesses' "A, B and C processes," Chunka lays out the need to go beyond AI's usage in what Englelbart would call A processes — those that a company uses to operate every day. Companies need to institute B processes, which are designed to improve those processes that run the business. And — here's the real payoff — companies need to design C processes to improve the B processes.

I know that can sound rather theoretical, but Chunka shows how it all gets practical very fast — and the approach has worked before. Drawing on Engelbart, among others, Chunka was the co-author of "Unleashing the Killer App: Digital Strategies for Market Dominance," which was a huge best-seller and a sort of bible for innovators in the internet boom of the late 1990s. Even after the bubble burst, the publisher of the Wall Street Journal lauded the insights in 2005 and labeled "Killer App" one of the five best books on business and the internet.

I'll give you the short version of Chunka's thinking and apply it to insurance, leading up to his seven questions that will help ensure that you're seeing the full potential for generative AI in your business.

To put insurance terms to the ideas in Chunka's piece, A-level processes are how agents and brokers sell, how underwriters price risk, how claims are settled and how customer service centers operate. We've all seen stories, and probably even personally experienced, how AI is being deployed at this level.

B-level processes improve those processes, and it's easy to see how gen AI can make the improvements happen even faster. The AI can, for instance, instantly spot patterns in responses to sales pitches to see what works and what doesn't work, including nuances such as time of day, day of the week, number of weeks or months before a renewal, proximity to a life event, etc. The AI can detect emotions that humans may miss as potential customers talk; the AI can then pass the information to agents, helping shape the conversations. And so on. The AI can also speed the process by which learnings are gathered, distilled and fed back to agents so the A-level processes improve and agents can be more effective next time. The same sorts of B-level improvements can happen in claims, underwriting, customer service and other parts of insurers' businesses. 

From what I've seen, many companies are at least starting to think about B processes. I've published quite a few pieces about, for instance, using AI to catch fraud, to have results from claims fed back to underwriters to improve their appraisal of risks, and to help underwriters both gather data more efficiently and to highlight changes in the policyholder's situation since the last policy was issued.

But I have yet to hear about much in the way of using AI to get to the next level, to the C processes. They're a bit harder to characterize but are crucial. As Chunka writes, "C-level work isn't merely about scaling incremental improvement—it enables organizations to question and redefine their very purpose. It allows not just better performance, but different futures. C-level improvements accelerate the rate and type of change—unlocking exponential leverage."

From the initial internet boom, I'd say Amazon is the best example of C-level thinking. It started out selling books and continually worked to sell books more efficiently — showing A-level and B-level processes — but was always driven by a C-level vision that founder Jeff Bezos referred to as "The Everything Store." He wanted to sell everything to everybody, even as he founded the company more than 30 years ago.

Amazon Prime was a direct outgrowth of that vision. Once Bezos started to host enough other businesses on the Amazon site, he saw he could lock in customers by offering them fast delivery based on an annual fee — getting them out of the habit of factoring shipping costs into every purchase. That lock-in then helped him attract more merchants, feeding a virtuous circle that continues to this day. 

AWS wasn't foreseeable back in the early days of Amazon but is the sort of happy accident that can happen when you set out for a C-level reinvention rather than just a B-level continual improvement. Bezos saw that many merchants needed help operating their sites, so he started a cloud service — and being in the business early let him see the huge demand before potential competitors and get a massive head start that has translated into a business that generated $108 billion of revenue last year, with an operating margin north of 35%.

For insurers, I could see a C-level approach to gen AI facilitating the move toward a Predict & Prevent model, beyond today's repair-and-replace approach to risk and losses. Gen AI can gather information — even across the silos that bedevil insurers — and analyze it instantly, then send it to whomever needs to have it, in time to perhaps prevent a loss.  

A well-meaning recent attempt to get bad drivers to improve was based on a single communication to individuals with multiple moving violations, whose behavior was then monitored for the next six months. It won't shock you that driver behavior changed not at all. What we need is the sort of instant information that Nauto provides to truck fleet drivers about speeding, about tailgating, about drowsiness, about road conditions and accidents ahead, etc., based on AI analysis of images from cameras: one facing the road, one facing the driver. A C-level approach to innovation with gen AI can facilitate that sort of timely feedback — and not just for drivers. It can also help, for instance, the timely provision of information to utilities about faults in electric lines, as detected by Whisker Labs' Ting sensors in people's homes. A C-level use of gen AI could help communities monitor and encourage homeowners to harden their properties against wildfire, reducing the risks for everyone. And so on.

More generally, gen AI can be used to flesh out the sort of what-if scenarios that business leaders use to stretch their thinking and prepare for challenges and opportunities. Instead of just briefly entertaining the thought of a recession, of war spreading from Ukraine to other parts of Europe, or of even more remote possibilities, leaders can use gen AI to develop more elaborate scenarios and explore the complex interactions that may matter to a business but that are hard to see in a quick look. Even at huge companies that have planning departments, gen AI can help flesh out scenarios faster — gen AI could look at today's weak jobs numbers in the U.S. and speculate in detail on what it means for workers' comp enrollment, for employee-sponsored healthcare programs, for general economic growth, for Fed rate cuts and more.

"Killer App" explained the power of what-if analysis, in one of the many parts of the book that have stuck with me. Chunka said the invention of the electronic spreadsheet in the late 1970s led directly to the wave of mergers and acquisitions in the 1980s and 1990s. Why? While smart young financial analysts could always crunch numbers, they previously had to manually update every cell in a spreadsheet if an assumption changed. With the electronic spreadsheet, they could let their imaginations run wild.  They could just set an interest rate or a sales figure or cost savings or whatever and have the assumption ripple through a spreadsheet until the analysts got the sort of result from a potential merger or breakup that they wanted. Their bosses would then sell the idea to companies or aggressive investors — and watch the fees roll in. 

Chunka, boiling down his thoughts on the A, B, C processes, suggests these seven questions that you should ask yourself to make sure you get the full benefit from generative AI:

1. Are we using AI only to do the same work faster, or are we also using it to design entirely new ways of working?
2. What systems and processes do we have to spread AI-driven learning and improvement across the organization?
3. How are we actively identifying and challenging the assumptions baked into our current workflows, products, and business models?
4. Where could AI help us fundamentally reimagine our business model—not just optimize existing operations?
5. Who is accountable for leading and sustaining C-level improvement—and do they have the authority and resources to act?
6. How are we ensuring that AI adoption does not quietly encode and scale harmful biases, flawed assumptions, or misleading correlations?
7. Do we have the culture, skills, and adaptability to continually improve how we improve?

He writes, "The real prize is using AI to redesign the road itself—not just drive faster on the old one."

Cheers,

Paul

P.S. I've told my Engelbart story before, so I'll just reprise it briefly here.

In the late '90s, I attended a cocktail party at a friend's house in Silicon Valley and struck up a conversation with an older man, who expressed interest when I told him I edited a magazine for Diamond Management & Technology Consultants that focused on innovation through digital strategy. When he asked for an example of the sort of article I published, I told him I had just edited a piece on A, B and C processes. 

"But that's my idea," he said.

"That's Doug Engelbart's idea," I replied.

"And I'm Doug Engelbart," he said.

He was, too. Engelbart, one of the most celebrated of the pioneers of personal computing, lived next door to my friend. 

AI is revolutionizing the way insurers deal with underwriting and claims management. However, adoption still faces barriers that go beyond implementation. 

The most frequent blockers in adopting AI are not technological. Though insurers start AI projects with trusted vendors and a clear understanding of why the work is necessary, many stall. Our team has seen underwriters across commercial and specialty lines hesitate to rely on scores generated by AI. At the same time, claims teams worry about the possibility of using models to affect settlement decisions.

A Pilot That Stalled — And What Changed

I find it challenging to persuade underwriters to trust AI-generated recommendations. In a commercial P&C insurer pilot project, the AI model was ready in four weeks, but rollout stalled for several months because underwriters didn't trust scores without context. Adoption only took off after we explained how our AI advisor worked in real life. For this, we asked our partner to provide 4,000 historical data points, which we then used to train the AI model. Also, we did the following:

• Showed the top factors influencing AI scores
• Allowed underwriters to override AI outputs
• Offered to keep an audit trail of all recommendations and decisions
• Embedded AI results in the tools they already use

As a result, we've got a data-rich advisor that calculated triage, appetite, and winnability scores in a matter of minutes, but more importantly, a solution that underwriters trusted enough to start using. Such trust turned a pilot into a full-fledged software product, taking underwriting processing to a new level.

Transforming Manual Workflows Into Digital Journeys

In the case described, AI helped underwriters transform traditional, often outdated and manual, processes into an automated digital journey. Triage scores are calculated more accurately as the platform ensures that data is complete. Appetite matches submissions against preferred segments and considers the company's guidelines and rules. Winnability predicts the likelihood of winning the deal. All scores are calculated automatically, saving underwriters' time for final decision-making.

Overcoming Fears of AI Replacing Professionals

Another challenge is the fear that AI could replace underwriting and claims specialists. The key is to convince underwriters that AI is a helper rather than a rival. On a project that required a certain level of automation in claims, our solution was to integrate natural language processing to extract data from documents supporting claim submissions from customers. As a result, claim managers have 25% more time for complex cases requiring more attention and direct communication with clients.

Asking for feedback is also crucial. It allows you to discover when AI predictions and recommendations were right or wrong and use that information to refine the models. And when people see their feedback improve models, trust accelerates.

In measuring the impact of AI in underwriting and claims, it's not about providing ROI to leadership. It's more about building credibility, so the people who use AI believe it works.

From our experience, here's what works for measuring the impact of AI:

1. We measured the current state before AI was introduced (average triage time, claim cycle time, loss ratios, etc.)
2. Together with customers, we tracked the usage rate and override frequency
3. Our experts looked for early wins during one quarter to scale further

Success doesn't mean integrating complex algorithms only. It comes from addressing AI adoption challenges, delivering measurable results, and building solutions that insurers trust.

62% of HR professionals who participated in SHRM's 2025 study stated they operate beyond their normal capacity. Such heavy workloads can lead to burnout, hindering HR teams' ability to manage human resources efficiently, which can damage entire organizations.

Optimizing HR tasks with intelligent process automation (IPA) can help alleviate excessive workloads, prevent burnout, and improve efficacy. Unlike traditional process automation, which solely focuses on mechanizing structured, rule-based processes, AI-enabled IPA can be applied to a broader range of HR activities, including those requiring intelligence. Forward-thinking business leaders have already recognized the potential of IPA for enhancing various HR processes, with streamlining HR workflows with automation and AI being their top priority for the next one to two years.

Based on our experience in HRMS software development, here are key concepts of intelligent automation in HR, its common use cases, and implementation best practices.

Key technologies for intelligent automation in HR

● Robotic process automation (RPA)

Traditional RPA bots are already widely used in HR to automate repetitive, rule-based tasks, but they can't handle more complex and non-linear processes. Augmenting RPA bots with AI models enables them to process both structured and unstructured information, make informed decisions, and learn from data, which allows companies to streamline more time-consuming HR tasks.

● Smart assistants

Smart assistants use artificial intelligence capabilities to understand user queries formulated in natural language via voice or text and respond to them accordingly, from providing information upon request to performing actions across corporate systems, saving HR specialists' time.

● Personalization

Nearly 20% of employees surveyed by McKinsey in 2025 reported dissatisfaction with their employer, while 7% expressed a desire to leave their jobs, which can pose a risk of quiet quitting. Tailoring employee experiences to their unique needs and preferences is one way to make staff feel more valued and satisfied, which can improve retention.

However, providing personalized support services, career development opportunities, and wellness programs can be exhausting for HR teams already operating under heavy workload. Leveraging AI-enabled tools equipped with experience personalization capabilities is a way to address this challenge.

● HR data analytics

To identify employee skill gaps, detect turnover risks early, and make informed workforce management decisions, HR teams need to analyze large amounts of workforce-related data, which can be challenging due to its ever-increasing volumes. Automated AI-enabled data analysis tools can support HR teams in processing relevant information and generating data-based insights to accelerate and enhance HR decision-making.

Common uses for intelligent automation in HR

● Recruiting

Recruitment is often considered the most critical yet complex and time-consuming aspect of human resource management. Luckily, many recurring recruiting tasks can be streamlined with the help of intelligent process automation tools.

For example, Majid Al Futtaim, a Dubai-based retail and leisure company, leveraged a set of IPA technologies, including experience personalization and HR data analytics tools, to build a more efficient and smooth hiring process. Now, they use AI to automate candidate scheduling, personalize candidate communication, assess candidate fit for the company's culture, and even predict their likelihood of success in different roles. "We've reduced our time to hire by 30% with AI. AI has also driven a significant improvement in the quality of hires, ensuring that every new team member aligns with our culture and contributes to our vision," said Mai Elhosseiny, vice president of talent at Majid Al Futtaim.

● Onboarding employees

Onboarding newcomers is another time-consuming activity that IPA can optimize. A prime example is Santander, an Argentina-based financial services company that hires between 50 and 100 employees per month. Onboarding used to be performed manually and sequentially and required an average of six weeks per person. Santander automated this process with intelligent RPA bots, which can automatically inform relevant departments about new team members, set up employee accounts, and perform the necessary compliance checks for each new hire. As a result, onboarding was reduced to just two days.

● Supporting employee talent development

Talent development can create excessive workloads for HR teams. But AI-enabled IPA tools have already proven efficient for optimizing diverse aspects of talent development, from performance appraisal to internal talent acquisition and training personalization.

Kuehne+Nagel, a Switzerland-based logistics provider, intended to enhance visibility into career development opportunities for nearly 78,000 employees across 1,400 locations, streamline internal recruiting processes, and eventually stimulate internal mobility. To achieve these goals, the company decided to implement an AI-enabled internal talent marketplace. After employees fill in their profiles within the new system, AI algorithms automatically analyze their data, match it with open learning and job opportunities, and provide recommendations. The AI system also generates analytical insights for recruiters, which helps assess the company's current talent needs, evaluate talent gaps and strengths of employees, and identify internal candidates best-suited for specific jobs. The tool already helped the company increase conversion rate for internal candidates by nearly two times, while decreasing the time required to fill for internal requisitions by 20%.

● Handling employee queries

Companies can apply AI-enabled automation tools to handle various types of employee queries, including questions about benefits and training programs, time-off requests, and medical document submissions. 

Covestro, a German manufacturer of high-tech polymers, was looking to expedite the processing of sick leave certificates submitted by employees. Manual processing took an average of seven minutes, which was too time-consuming, given that HR teams received more than 500 certificates per week. The company deployed AI-powered RPA bots, which can classify submitted documents as sick leave certificates, extract necessary data, and then input it into employee profiles in the ERP system. As a result, Covestro saved 85% of the time HR teams previously spent on manual sick leave submissions processing.

Useful practices for implementing intelligent automation in HR

● Implement process intelligence tools

Automating the right processes is crucial, and AI-powered process intelligence tools can identify HR activities most suitable for automation.

These tools can provide process mining and task mining capabilities helping identify bottlenecks within workflows, visualize business process data for stakeholders involved in a project, and even predict the impact of automation on specific tasks.

● Start with a pilot automation project

Conducting a pilot IPA project allows companies to validate the feasibility of IPA without incurring expenses associated with a full-scale implementation, detect hidden automation pitfalls and hurdles early on, and lay a strong foundation for larger IPA initiatives.

For a pilot project, companies should select one or two HR-related processes and establish clear KPIs to measure the impact of automation. Companies need to carefully evaluate the project's success, collecting stakeholder feedback and analyzing lessons learned.

● Communicate IPA benefits to employees

According to Deloitte's 2025 report, companies are six times more likely to achieve a financial advantage from AI when employees feel they personally derive value. However, the same report reveals that 77% of companies do nothing to share the improvements AI can bring.

Managers spearheading IPA adoption should work closely with HR teams from the start of a project, articulating the improvements IPA can bring to their work and keeping them informed about the progress and impact of IPA.

Modern HR teams regularly struggle with excessive workload, which hurts their productivity. Implementing intelligent process automation to optimize a range of recurring HR tasks is a way to alleviate pressure and enhance the performance of human resources departments. 

As of 2025, more than 21 million applications for new small businesses have been filed in the U.S. But behind this growth lies a serious vulnerability: underinsurance. Just 13% of small business owners with insurance coverage feel fully prepared for risk.

This protection gap should be a wake-up call for insurers. Small and midsize enterprises (SMEs) are a rapidly growing segment, yet many remain underprotected, leaving them both vulnerable and underserved. For carriers, this is an opportunity to support a critical part of the economy while capturing growth.

But closing this gap demands a shift in strategy. Insurers must rethink how they engage small businesses, delivering solutions that are seamless, timely, and integrated into the systems SMEs already use to run their operations.

Insurers that act now can turn this unmet need into a growth engine and position themselves as trusted partners in an expanding market. Wait too long, and you risk a generation of business owners moving forward without you.

Why traditional models are failing SMEs

Consider a family-run coffee shop. For years, business has been steady and incident-free, so insurance feels optional — until a small electrical fire forces the café to close for three weeks. Without coverage, the owners pay out of pocket for repairs while losing revenue, and what once seemed like a "low-risk" business suddenly faces a financial crisis.

This story is not uncommon. Many SMEs put off purchasing insurance beyond the minimum required because the process feels inaccessible. Policy language is dense and full of jargon, leaving owners unsure of the difference between general liability, professional liability, and workers' comp. Nearly 70% of small businesses report struggling to understand coverage limits, leading to insufficient protection from the start.

Traditional distribution models compound the issue. Legacy carriers have established reputations that garner SME trust, but often rely on outdated, paper-heavy processes that feel inaccessible to busy business owners. Newer digital-first carriers offer sleek self-service platforms, yet many lack the credibility of heritage names. The result? SMEs are left without coverage that feels both reliable and convenient.

This disconnect doesn't stem from disinterest. In fact, 82% of small business owners say insurance coverage for their business is extremely or very important for their operations. The demand is real, but current products and channels don't meet the realities of SME size, budget, and needs.

Insurers have an opportunity to redesign coverage to reach businesses that traditional models have left behind. A digital-forward, personalized strategy will meet SMEs where they are by simplifying the path to purchase while building trust and long-term loyalty.

Three ways carriers can close the SME protection gap

SMEs remain underinsured because the insurance buying process often works against them. Policies are hard to compare, language is overly complex, and support isn't built for fast-moving businesses with limited resources.

Carriers that remove these friction points are better positioned to meet SME expectations and capture a largely underserved market. Here are three strategic moves that can help make it happen.

1. Get in on the ground floor of embedded insurance

Embedded insurance meets business owners at the exact moment they need it, delivered through the tools they already rely on, like accounting software, e-commerce checkouts, payroll platforms, and registration sites.

Rather than requiring a separate search or offline process, coverage options appear contextually, right where decisions are being made. This reduces friction and reframes insurance as a natural part of operations, making SMEs more likely to see its value and take action.

The opportunity is significant: Embedded insurance is projected to generate over $70 billion in gross written premiums by 2030. Investing now will position you at the center of how SMEs evaluate and manage risk.

2. Tailor communications to real business needs

Even when insurance is embedded at the right moment, the message still needs to resonate. Many SMEs don't know where to start when it comes to shopping for policies, and broad, generic messaging doesn't help. Businesses face industry-specific risks, so one-size-fits-all offerings leave owners unsure whether coverage really applies to them.

AI and data analytics are helping insurers change that. When connected to platforms that small businesses already use to manage finances, payroll, or HR, insurers can access real-time signals to tailor outreach based on how each business actually operates. A freelance graphic designer may benefit from professional liability coverage, while a growing food truck fleet is more concerned with commercial auto and workers' comp.

Personalization also helps business owners understand why coverage matters. When SMEs see that you understand their unique risks, insurance becomes less of a generic add-on and more of a practical safeguard for the business they've worked hard to build.

3. Balance digital tools with human connection

Even with embedded distribution making it easier to access coverage, trust is still earned through human connection. SMEs need the flexibility to start online and pivot to an advisor when questions or concerns arise.

Routine tasks like requesting certificates of insurance or updating information should be fast and self-service. But when it comes to claims or complex purchases, SMEs should have easy, immediate access to licensed advisors who can provide personalized, empathetic support.

Making human interaction a built-in feature strengthens SME confidence and drives long-term loyalty.

How to own the SME protection opportunity

Closing the protection gap is a win-win: Small businesses get the protection they need to weather setbacks, while insurers tap into one of the most dynamic and underserved markets.

To seize the moment, carriers must focus on embedded offerings that deliver personalized service. This ensures coverage aligns with the real, current needs of small businesses while remaining accessible and trustworthy.

SME growth shows no signs of slowing. Now is the time to rethink how protection is delivered, move beyond outdated models, and earn lasting trust from the entrepreneurs powering the next wave of economic expansion.

In an industry obsessed with innovation, one of our most under-leveraged opportunities lies in something as old-fashioned as human conversation.

Take long-term care planning (LTC). Despite decades of sobering statistics, consumer education, and product development, LTC Talk Avoidance Syndrome remains alive and well—not among consumers but among the very professionals meant to guide them.

It's a systemic issue. And for insurance executives and innovators, it's also a strategic opportunity.

Long-term care risk isn't a niche issue. According to the U.S. Administration for Community Living, nearly 70% of Americans over age 65 will need some form of long-term care, yet only a fraction are financially prepared. According to a LIMRA summary from late 2024, just 3% to 4% of adults over age 50 have some sort of insurance to mitigate the LTC expenses.

The need is obvious. So why aren't more clients protected?

Because far too often, the conversation never happens.

Financial professionals avoid the topic for fear of upsetting clients, getting bogged down in emotional resistance, or simply not feeling equipped. Clients avoid the topic because the implications are uncomfortable, the costs are intimidating, and the future is always "later."

This conversational gap isn't just bad for families. It's bad for business. Every missed LTC planning conversation is a missed opportunity to build trust, create loyalty, and provide meaningful risk management.

While many in our industry focus on performance, pricing, and product features, the most powerful differentiator may be something more human: emotional security.

Emotional security is what clients feel when they know they're protected, not just financially but personally. It's the trust that's built when a financial professional helps them face tough realities—and guides them through.

In today's commoditized landscape, emotional security has become the key to unlocking client loyalty, intergenerational planning continuity, and resilience in advisor-client relationships. It's what drives referrals, repeat business, and retention during volatile markets.

Yet most financial professionals aren't trained to offer it.

This is where insurance executives have an urgent and valuable role to play.

When we talk about innovation, we often default to digital tools, AI, or frictionless platforms. These are essential, of course. But we can't innovate our way around human fear, aging parents, or adult children caught off guard by caregiving.

We need to rethink our product development priorities.

Innovation must also mean designing products that make it easier for professionals to have difficult conversations, and easier for clients to say "yes" to planning. That's not just about simplicity. It's about psychological accessibility. It's about creating solutions that align with how people actually think, feel, and make decisions.

This kind of emotionally intelligent product design bridges the gap between protection and peace of mind. It's not just solving a financial problem—it's solving a behavioral one.

If emotional security is the goal, then LTC planning is its crucible. It's where we as an industry prove whether we're willing to lead people through life's most difficult transitions or let them face the issues alone.

This isn't just a distribution problem. It's a leadership opportunity.

• Are we equipping financial professionals with the tools and training to handle emotional resistance?
• Are we creating incentives that reward meaningful planning over quick wins?
• Are our products and messaging designed with emotional behavior in mind—or just actuarial logic?

LTC Talk Avoidance Syndrome doesn't just cost consumers. It costs us trust. It limits our growth. And it undermines the promise that our industry makes: to help people live with security, dignity, and confidence—no matter what life throws at them.

For those leading the insurance and annuity space, this is a moment to ask: How do we define innovation?

Yes, it's about technology. Yes, it's about efficiency. But it's also about empathy.

The future belongs to firms that recognize emotional fluency as a strategic asset, and emotional security as a deliverable, not just a byproduct.

This means:

• Creating solutions that address behavioral obstacles, not just financial gaps.
• Supporting financial professionals in building trust through emotionally intelligent planning.
• Embracing products that offer clients flexibility, security, and peace of mind in one package.

The LTC crisis is growing. The need for solutions is clear. What's missing isn't capability—it's courage.

Let's lead with both.

Nearly every article addressing medical inflation and its effect on property and casualty (P&C) insurance claims begins with a reference to the broader trend of lower overall inflation. While the cooling effect of inflation has notably benefited the prices of goods and commodities, healthcare services remain significantly affected. According to Peterson-KFF, in June 2024, the Consumer Price Index (CPI) for all urban consumers rose by 3.0% compared with the previous year, while medical care costs increased by 3.3%. When excluding healthcare services, the overall CPI growth was limited to 2.9%. This marked June 2024 as the first month since early 2021 where medical care prices had risen faster than the general inflation rate.

Additionally, over the span of the past two decades, the price of medical care and its subcomponents has escalated by 121%, compared with an 86% increase in the prices of all consumer goods and services. This disparity amounts to 35 percentage points. Notably, healthcare expenditures accounted for 18% of U.S. GDP in 2023, underscoring the growing significance of healthcare costs within the broader economic landscape. As such, the acceleration of healthcare inflation presents significant implications for workers' compensation and casualty bodily injury claims.

Here is a view of national health expenditures by year through 2023 as prepared by Peterson-KFF:

Factors Contributing to Medical Inflation

Several key factors contribute to the persistent rise in medical costs, including:

1. Aging Healthcare Workforce: The Association of American Medical Colleges projects that within the next decade, 40% of the U.S. physician workforce will be aged 65 or older. Simultaneously, a shortage of up to 3.2 million healthcare workers is expected by 2026. The reduced availability of healthcare professionals drives up wages for medical staff, in accordance with the principles of supply and demand. These increased provider costs inevitably flow through to patients, including those involved in P&C claims.

2. Increased Costs for Medical Equipment: The prices of medical equipment, parts, repairs and services are on the rise. Hospitals and medical facilities that rely on critical equipment face growing expenses. As with other cost increases, these higher expenses are ultimately passed down the line to payers, including insurance carriers.

3. Hospital Care Price Fluctuations: According to a report published by the National Council on Compensation Insurance (NCCI) in April 2025, although medical prices softened meaningfully in the first quarter on the combination of several trends, with physician care inflation price changes smaller than in 2024, over time, higher supply costs for equipment and supplies may also lead to higher prices in physician services, facilities, and long-term care. Hospital outpatient care prices saw a moderate growth of about 4% in the last quarter of 2024, followed by an even more moderate 3% increase in the first quarter of 2025. Inpatient care prices rose by approximately 3% in 2024.

4. Third-Party Bodily Injury Claims and Billing Irregularities: Third-party bodily injury claims are often reported late, with the demand package sometimes serving as the initial notice of a claim. These claims are frequently submitted using non-standardized forms, such as UB-04 or UB-92, which may lack necessary billing codes. This raises concerns about whether the charges submitted are inflated or exceed what is considered usual and customary for services rendered in a specific geographic area. In some cases, the answer to this question is affirmative.

5. Increase in Medical Providers and Services per Visit: According to the Workers’ Compensation Research Institute, the number of workers' compensation claims involving multiple healthcare providers has increased by 19% over the past five years. Additionally, the average number of services provided per medical visit has risen by 13% since 2017. The increased number of providers per claim, coupled with more services rendered per visit, results in higher costs per claim.

Implications for Workers' Compensation and Casualty Claims

The rise in medical inflation presents significant challenges for P&C carriers. To manage these challenges effectively, insurance providers must leverage insights from claims data. By using data-driven strategies, claims organizations can identify the most effective medical providers for each case, reduce medical costs, and improve claim outcomes for injured parties.

The adoption of advanced analytics tools will enable P&C carriers to navigate the complexities of rising healthcare costs. As healthcare inflation continues to outpace general inflation, carriers that use data-driven solutions will be better equipped to manage the financial pressures associated with rising medical expenses while ensuring that quality care is maintained for claimants.

By taking a data-informed approach, P&C insurance carriers can better position themselves to mitigate the financial impact of medical inflation, improve operational efficiency, and enhance overall claim outcomes.

As first published in WorkCompWire.

Renovation remains a defining trend in the U.S. housing market. In fact, nearly half of homeowners (48%) plan to renovate in 2025. Median budgets are climbing to around $24,000, while high-end projects often top $150,000. For high-net-worth homeowners, those numbers multiply — expansions, specialty rooms and luxury finishes are increasingly common.

Yet amid design plans and contractor negotiations, insurance is often overlooked. Homeowners should always notify their insurer before any renovation project begins. Failing to do so can result in higher deductibles, denied claims or policies that no longer fit the new risk profile. For affluent households, the stakes are especially high: The wrong coverage approach could mean hundreds of thousands in uncovered loss.

1. Unreported Exposure

Risk: Projects that cost more than 10% of a home's insured value, extend beyond a year or require moving out temporarily alter the home's risk. If insurers aren't informed, claims could be contested.

Best Practice: Notify your broker early. A simple litmus test: If you're moving out, disabling security systems or investing more than 10% of insured value, call your advisor. This allows for adjustments before the risk materializes.

2. Policy Reclassification and Deductible Shifts

Risk: Large-scale renovations can require a shift from a standard homeowner's policy to a builder's risk or course of construction policy. If overlooked, deductible surprises can surface. Some carriers apply a construction-related deductible many times larger than a typical homeowner's deductible.

Best Practice: Confirm with the insurer whether builder's risk coverage is required. These policies are designed for homes "in transition." Establishing them early prevents costly disputes if a fire, water loss or theft occurs mid-project.

3. Contractor and Subcontractor Liability

Risk: Renovations introduce third-party exposures. Hiring a contractor with inadequate general liability (GL) or workers' compensation (WC) coverage creates liability exposure. If a subcontractor is injured or damages property without proper insurance, a carrier may be left without recourse.

Best Practice: Require certificates of insurance from all contractors and subcontractors. For high-value properties, ensure GL limits are consistent with the replacement value of the home. Carriers frequently request this documentation and can help validate that coverage is adequate.

4. Underinsurance During and After Renovation

Risk: Renovations increase replacement costs. Without a coverage adjustment, reimbursement may only be for the pre-renovation value. Replacement costs surged more than 55% between 2020 and 2022, driven by inflation and supply chain challenges. If the homeowner's coverage hasn't kept pace, a catastrophic loss could leave the homeowner significantly underinsured.

Best Practice: Request periodic revaluation during and after construction. Policies with extended replacement-cost features or inflation guards can help, but they aren't substitutes for accurate dwelling limits. Insuring your home to value is critical after a renovation project.

5. Vacancy, Theft, and Fire Hazards

Risk: Many renovations involve temporary vacancy or disabled security systems, which dramatically change exposure. Standard homeowner's insurance often excludes theft or vandalism after 30 or 60 days of vacancy. Fire hazards from activities like sanding floors or rewiring electrical systems elevate risk.

Best Practice: Inform the carrier if living elsewhere during a project. Confirm that belongings in storage remain covered and that valuables such as artworks, if moved off premises, are stored in approved environments. Ask whether endorsements for theft of building materials, or a course of construction policy should be added while work is underway.

Closing Perspective

The numbers are clear: 98% of homeowner's insurance claims involve property damage, with average claim severity approaching $24,000 in higher-risk areas. For wealthy homeowners undertaking renovations, those costs can climb into six figures, so you need to make sure the proper coverages are in place prior to starting your project.

Renovation is a fundamental change to a home's risk profile. Treat it accordingly. By contacting the broker early, validating contractor coverage, adjusting limits during construction, and re-evaluating after completion, the insured is protecting both their property and their investment.

After weathering the initial shockwaves of the pandemic, employers thought they had seen the worst of healthcare cost volatility. They were wrong. What started as delayed screenings and deferred care in 2020 has morphed into a sustained surge in catastrophic claims that's pushing stop-loss insurance premiums to breaking points.

According to the Segal Group, medical stop-loss premiums increased an average of 9.7% for plans that maintained their deductibles – a figure that understates the pain many employers actually experienced.

The scale of these increases is a perfect storm of cost pressures that have been building since COVID-19. The delayed impact of missed cancer screenings during the pandemic is now showing up as advanced-stage diagnoses requiring expensive treatments. Meanwhile, specialty drug spending continues its relentless climb and will account for more than half of all drug spending this year, according to Mercer.

The industry is also seeing significant increases in costs associated with premature birth and neonatal care as medical advances allow healthcare providers to save babies who wouldn't have survived in previous decades. While these outcomes represent medical miracles, they come with substantial financial implications for employers and their stop-loss carriers.

Managing the unmanageable

This cost crisis is accelerating a shift toward self-funded arrangements that provide something fully insured plans cannot: visibility into where healthcare dollars are actually going. While employers can't stop specialty drug prices from rising or prevent the continuing impact of delayed screenings, claims data transparency has become a strategic necessity for managing these unavoidable pressures.

The difference comes down to who controls the data. In fully insured arrangements, carriers essentially own the claims information. When employers receive renewal quotes, they get limited visibility into what's driving their costs.

Self-funded arrangements with third-party administrators (TPAs) break open this black box. TPAs work for the employer, not the insurance carrier, and provide accurate, meaningful claims data on a regular basis. This transparency creates opportunities that simply don't exist in fully insured plans.

The symbiotic relationship between TPAs and stop-loss carriers amplifies this advantage. Stop-loss insurers require detailed claims data to assess risk and process payments, which means employers gain access to comprehensive information about their healthcare spending patterns. This visibility enables strategic decision-making about how to navigate an increasingly expensive environment.

Strategic cost management

Armed with detailed claims data, employers can move beyond simply absorbing premium increases to actively managing their healthcare costs. The transparency provides insights that enable targeted interventions and strategic adjustments to plan design.

Given the overall higher costs associated with providing health coverage to employees, employers must analyze their deductible levels and associated claims activity on an annual basis. The data helps employers evaluate critical questions: What impact would a high-dollar claim have on cash flow at a specific deductible amount? What is the risk tolerance for higher deductibles versus the cost savings from lower premiums?

Many employers are increasing their risk tolerance to manage stop-loss costs. A common approach involves raising deductibles, which increases the employer's financial exposure but significantly reduces stop-loss premiums. This strategy requires careful analysis of cash flow capacity and risk tolerance, but the premium savings can be substantial. The key is using claims data to make these decisions strategically rather than just reacting to price increases.

Claims transparency also enables employers to identify trends before they become expensive problems. For example, if data shows a high propensity for diabetes among employees, employers can implement targeted interventions like nutritional counseling or fitness programs. Early intervention costs far less than treating advanced diabetes complications.

Best practices for the new reality

Several strategies can help employers manage rising stop-loss costs while maintaining quality coverage. The foundation is comprehensive data analysis combined with plan management.

Wellness programs are one of the most effective cost-containment strategies. Simple initiatives like offering $100 incentives for cancer screenings or annual physicals can prevent much more expensive treatments down the road. Disease management programs can be particularly effective for common conditions like diabetes, where lifestyle interventions can dramatically reduce complications and costs.

Employers should also consider comprehensive preventive care programs that extend beyond basic screenings. On-site health screenings, flu shot clinics, and partnerships with local healthcare providers can catch health issues early when they're less expensive to treat.

Finally, employers should regularly benchmark their stop-loss coverage against market alternatives. The current environment of rapidly changing costs means that yesterday's optimal coverage structure may no longer be appropriate.

The transparency imperative

The combination of rising stop-loss costs and the transparency advantages of self-funded arrangements is creating a fundamental shift in how smart employers approach healthcare benefits. The tail from COVID is still there, and it remains very prominent. The delayed impact of missed preventive care will continue driving costs for years to come.

Employers that gain access to their claims data and use it strategically will have significant advantages over those operating in the dark. The transparency enabled by self-funded arrangements with TPAs and stop-loss coverage allows employers to take an active role in managing one of the largest expenses on their balance sheets.

Healthcare costs will continue rising, but employers can choose how they respond. For many, that path leads directly to self-funded arrangements that put claims data back where it belongs: in the hands of the employers who ultimately pay the bills.

1.1 million. That's how many people were affected in the Farmers Insurance breach carried out by the ShinyHunters group. It should be a wake-up call across the insurance industry because it shows just how much the ground has shifted under us.

For decades, security strategies focused on keeping attackers out with firewalls, endpoint agents, and endless patching. But that model no longer matches reality. Today, attackers don't need to break in. They simply log in.

The End of the Perimeter

What makes the Farmers breach so striking is how ordinary it was. Attackers did not need to develop novel zero-day exploits or brute-force their way through hardened defenses. Instead, they exploited valid credentials, likely stolen or phished from employees, and used them to move through SaaS and cloud as if they belonged there.

Once an attacker holds the right username and password, or tricks a user into granting a malicious authentication token, the perimeter collapses. To the system, the hackers are "trusted" users. And that's exactly how attackers prefer it. This isn't the first time we've seen these tactics, and it won't be the last.

This shift changes everything for insurers. If your threat model is still dominated by malware signatures and intrusion prevention systems, you're preparing for yesterday's war. The front line has moved to identity, SaaS, AI, and cloud.

Why Prevention Is Doomed to Fail

Insurers understand risk better than anyone. You don't build an underwriting model on the assumption that every accident can be prevented. You assume loss will happen, and you plan for how to mitigate and recover. Cybersecurity requires the same realism.

Preventive measures are not useless. They remain essential for hygiene. But they can't be the centerpiece of strategy. Credential compromise, phishing, malicious third-party apps, and insider threats will always get through. Attacks are inevitable. What matters is not whether attackers get in but how quickly you detect them once they do.

Why Speed Is the Differentiator

There's a world of difference between an attacker inside for five minutes and one inside for five days. In the first scenario, the blast radius is limited. In the second, the attacker blends in, leverages cloud and SaaS nature to siphon data, escalates privileges, moves laterally, and exfiltrates terabytes of sensitive information.

This is where many organizations, including those in the insurance industry, struggle. Security operations centers routinely get flooded with alerts, many of them false positives. Distinguishing signal from noise is slow, manual, and heavily reliant on already-stretched analysts. That delay turns intrusions into breaches.

Speed, therefore, is the true differentiator. Not perfect prevention. Not larger firewalls. Speed of detection, speed of triage, and speed of response. It's survival of the fastest.

What to Watch For

The practical question is, what exactly should we be monitoring? Attackers using stolen credentials don't raise obvious alarms. But their behavior does.

• Unusual account activity: A claims processor suddenly accessing systems at 3 a.m. from a foreign location.
• Data access at scale: A single account downloading thousands of policyholder files in a short window.
• Privilege abuse: An ordinary user suddenly creating admin accounts or changing access rules.
• Cross-platform anomalies: A login from one identity provider (Okta, Entra, Ping) that doesn't line up with activity in SaaS platforms like Salesforce or Microsoft 365.

These signals don't always mean compromise. But they are the kinds of weak indicators that, if correlated and investigated quickly, allow defenders to spot intrusions while they're still containable.

Lessons for Insurers

The Farmers breach is one more reminder that the insurance industry, by virtue of the sensitive data it holds and the trust it represents, is a high-value target. Attackers are chasing scale, not some esoteric technical exploits. And there's no richer dataset than millions of customer policies, claims histories, and personal identifiers.

For insurers, the lessons are clear:

1. Assume breach. Just as you assume loss when underwriting, assume intrusions will occur. Build security models around resilience, not perfection.
2. Invest in visibility. You can't respond to what you can't see. Make sure you have comprehensive logs, correlated across cloud, SaaS, AI infrastructure, and identity systems.
3. Focus on speed. Measure detection and response not in days or weeks but in minutes. The faster unusual activity is flagged and investigated, the less costly the breach.
4. Prioritize identity. User credentials are the new perimeter. Multifactor authentication, least-privilege access, and continuous monitoring of account behavior are now the basics.
5. Test your response. Tabletop exercises, red-team simulations, and cross-team drills aren't luxuries. They are the only way to ensure your organization is ready to act when (not if) an intrusion happens.

A New Mindset

After a breach like Farmers, the instinct is often to add more prevention tools. But history has shown that attackers will simply find another door, often one left ajar by human error.

The real differentiator is preparing for the moment someone inevitably gets inside. Not building a taller fence. Insurers that embrace this mindset, assuming breach, prioritizing visibility, and investing in speed, will be the ones best positioned to protect their customers, their reputations, and their bottom line.

Farmers' experience should be a turning point. Prevention is no longer enough. Detection and rapid response separate a minor incident from a front-page disaster.

As a wholesale insurance provider, our mission is to mitigate risk for our transportation clients and provide the best service possible, and this includes paying timely claims where warranted. Where warranted is the important qualifier. There is nothing more distressing in insurance than facing a nuclear verdict where the facts are on the side of the insurer but the sentiment is not. 

Recently, we had this experience. In the case at issue, public sentiment was not favorable to us as an insurer, but the claims adjusters believed in their files, knew their facts and were confident they could win. And they did, helping to deliver a unanimous full defense verdict against a plaintiff in North Carolina who was seeking $10 million in bad faith.

The pressure to settle lawsuits at all costs is building, and trial attorneys know it. Nuclear verdicts, those higher than $10 million, increased by 116% in the past year, according to Marathon Strategies' 2024 report. Carriers representing industries like commercial trucking, which had the third-highest number of nuclear verdicts in 2024 (carrying a $790 million total price tag), feel the squeeze more than others.

As nuclear verdicts become more commonplace, the insurance industry will need to adapt. While it is important for insurers to settle when necessary, there are times when going to trial is your best move. Sometimes the confidence you demonstrate in taking a case to trial can help bring about a more reasonable settlement than if proposing a settlement was your first step. If a plaintiff's attorney does not see a pre-existing pattern of settlements, they are less likely to push for more costly payments.

Unpacking the fear factor

Many carriers settle because they feel like the deck is stacked against them in court, and for good reason. Today's juries are sharper and more informed than ever. The belief that jurors don't grasp the financial stakes of an insurance case no longer holds water. Juries understand that insurance companies with deep pockets stand behind large trucking companies in court, and they are willing to make them pay.

The commercial trucking industry also suffers from negative public perception, spurred by poor over-the-road driving habits and a spate of recently proposed restrictive trucking legislation. Prosecutors are eager to play into the frustration of any plaintiff or juror who has ever been stuck following a slow-moving tractor-trailer on the interstate.

Then there's the very term "nuclear verdict," which trial attorneys use to scare off insurance companies. While the risk for a high-dollar verdict is always possible, there's a difference between what's right, what's wrong and what's unreasonable. And nuclear verdicts are almost always unreasonable.

Why settle-at-all-costs doesn't work

Nobody wants to go to trial. Not the defense counsel. Not the carrier. And sometimes, not even the client. Yet while a settle-at-all-costs mindset may prevent a nuclear verdict, it is not a wise long-term solution.

Like close-knit family members, plaintiffs' attorneys talk with one another regularly. They know a carrier's risk tolerance well, sometimes even better than the carrier itself. If they perceive you will always settle to avoid a costly verdict, they will use that to their advantage in negotiation, potentially costing your organization large sums of money.

Even worse, carriers with a settle-first mentality inevitably submit offers too quickly, without having all the facts. This happens because of a disconnect among carriers, adjusters and defense attorneys. A talented adjuster is worth their weight in gold, but when carriers don't get their staff involved in pending litigation until the trial deadline approaches, they don't give adjusters time to do their job properly. As a result, carriers settle, only to find a key piece of evidence later that would have exonerated their client. The key is to loop in a claims adjuster as soon as a claim is filed so they can use these strategies early on and avoid missing key pieces of evidence.

Finding the right balance

Instead of settling everything, carriers should weigh each case on its merits and choose which ones to pursue. Claims that carry large policy limits and inherently higher reputational risks, like those involving fatalities, should be settled quickly. Juries tend to react emotionally to these cases, increasing the odds of a nuclear verdict.

Other cases require more discernment. To make the best decision, carriers should investigate claims as quickly as possible and trust their adjusters' opinions. You should pursue litigation, build your case on facts and not hypotheticals, and commit to knowing your case better than the plaintiff.

Preparing to win

A well-defended case will protect your organization from financial loss and strengthen your reputation as a carrier that won't fold under pressure. These five strategies can help you gain confidence, even in the face of a potential nuclear verdict.

1. Partner with the right legal team. Seek lawyers who will stand by you and focus solely on the claim, without getting caught up in petty details or behind-the-scenes politics. If a firm isn't the right fit, don't be afraid to make a change. In our recent win in North Carolina, there was the potential for a nuclear verdict. Prior counsel wanted us to settle, but we knew we had a strong case. We brought in a firm that helped us score a unanimous jury verdict in our favor.
2. Trust your attorneys. Once you find the right firm, give them the confidence to succeed. Don't expect them to win at all costs. Trust their judgment, give them the latitude to be aggressive and strong, and maintain open, honest communication throughout the litigation process.
3. Stay connected with your insured. Don't go to court if your client doesn't believe in the fight. A client with wavering beliefs can derail the defense, and the jury will be able to read their lack of conviction. Ensure your client is on board and prepared to support the case from deposition all the way through verdict.
4. Be brutally honest in court. Nuclear verdicts happen most often when jurors perceive lawyers or carriers aren't genuine. Juries are smart. Show respect by being honest and admitting when you're wrong. We recently did this in a case where we knew our client was at fault. Instead of arguing about fault, we apologized, admitted the error, then presented the facts about why we should pay less than what was being asked. Our honesty paid off. We achieved a $116,000 verdict in a case where the plaintiff asked for $1.6 million from the jury on medicals that were valued at $250,000.
5. Accept the results. Going to trial is always a risk. There will be both wins and losses. But if your organization establishes a track record of winning often, you will offset the losses and set yourself up for future success.

Don't be a pushover

Settling may feel like the safest route, but giving in too easily can hurt your organization's reputation and its bottom line. Carriers that choose their battles wisely, trust their adjusters and choose the right attorneys won't be pressured into quick payouts or fear-driven decisions. With the right preparation and mindset, you can go to trial confidently and win.