The U.S. has been facing an affordable housing crisis, with millions of low- and middle-income families struggling to find stable housing.

The National Association of Realtors' Housing Affordability Index (HAI) shows that for most of 2023 and 2024, the typical U.S. family earned less than the required income to qualify for a mortgage on a median-priced single-family home. Although recent data shows easing in both the HAI and the national rent-to-income ratio, affordability challenges persist. A recent Pew Research Center survey found that 69% of Americans said they were "very concerned" about the cost of housing.

While policymakers, community groups and private developers work to expand affordable housing options, an invisible but significant barrier threatens to derail these efforts: the escalating home insurance crisis.

Impacts of Rising Home Insurance Costs

Losses from natural disasters and consequent insurer withdrawals from high-risk markets have driven the sharp increase in property insurance rates. Additional factors, including elevated home prices, inflation, worsening climate issues, and increased rebuilding costs, have contributed to skyrocketing premiums, making securing coverage more difficult and expensive for both individuals and developers.

In states prone to hurricanes, wildfires and flooding, consumers have seen insurance costs surge. Between 2017 and 2022, homeowners insurance premiums rose 40% faster than inflation.

In high-risk states like California, Florida and Texas, gaps in coverage are forcing homeowners to rely on expensive state-backed programs (often with reduced coverage) or to forgo insurance altogether. Regulatory efforts to stabilize the market have struggled to balance affordability with insurer sustainability, leading to further uncertainty.

How the Insurance Crisis Affects Housing Development

For affordable housing developers and providers, challenges in the property insurance market pose multiple barriers.

Higher Development Costs

Rising insurance premiums increase overall construction and operational expenses for affordable housing projects. Developers must secure insurance for both the construction phase and for property management, and with costs surging in high-risk areas, many projects become financially nonviable — especially for affordable housing providers who cannot (or choose not to) pass on the higher costs to tenants. From 2020 to 2023, multifamily insurance rates increased by an average of 13% annually — and some developers struggle to find insurers willing to provide coverage at all, leading to costly delays or project cancellations.

Reduced Investment Appeal

Lenders and investors assess risk when funding housing projects, and skyrocketing insurance costs add another layer of uncertainty. When premiums eat into projected profits, financial institutions may hesitate to approve loans for developments in disaster-prone areas. For developers, lower returns on investments make affordable housing projects less attractive, pushing them toward more profitable, higher-income developments. Even for those prioritizing mission over profits, funding and managing projects at a loss is not sustainable.

Limited Availability for Homeowners and Renters

Higher insurance costs are ultimately passed down to homeowners and renters in most cases. Low-income families may find homeownership unattainable as rising premiums inflate total housing costs. Renters, too, face increasing expenses as landlords adjust rental prices to cover surging insurance rates, further limiting affordable housing options.

In instances where raising rents is not an option, capped or against the developer's mission, many affordable housing providers face difficult choices like offloading properties that will likely become market-rate units, potentially displacing renters and eliminating existing affordable housing.

How Affordable Housing Providers Are Navigating Insurance Challenges

The impact of rising insurance costs on affordable housing is being felt across the country, with projects stalled, canceled or scaled back.

According to a 2023 survey from the National Leased Housing Association, 93% of affordable housing providers indicated they would need to adjust operations to manage increased insurance costs. More than half said they would decrease or delay investments in both existing housing stock and new projects.

Finding Effective Solutions

Developers warn that insurance costs are making affordable housing projects less viable, while insurers argue that increasing climate risks necessitate higher rates. Housing advocates stress the need for policy interventions to ensure that skyrocketing insurance costs do not exacerbate the nation's housing crisis. Consequently, addressing the home insurance crisis requires innovative industry solutions, targeted policy changes, and risk mitigation strategies that meet the needs of all stakeholders.

Some affordable housing providers suggest federal-backed statewide insurance pools, while others promote expanding state-run insurance programs. Others argue that doing so would ultimately drive up rates. Additional solutions include moving to a lower premium, higher deductible model, creating lower-cost policies for properties less vulnerable to extreme weather effects, subsidizing insurance costs, and creating a public reinsurance fund for insurers.

Measures developers could take include embracing resilient building techniques, such as fire-resistant materials and flood-resistant infrastructure, to reduce insurance risks and lower premiums. However, they call for guarantees from insurers that taking such measures would reduce rates; each potential solution naturally carries risk, costs and consequences.

A Complex but Urgent Matter

Policy reform and industry overhaul rarely happen quickly, but time is of the essence. The U.S. housing market is estimated to need up to six million more affordable units; losing more of these units to market-rate housing could intensify the crisis.

Addressing the impacts of elevated home insurance costs on affordable housing is not just about stabilizing the insurance market — it's essential for ensuring long-term housing equity, economic stability, and the ability to meet the nation's growing housing needs.

Historically, the insurance industry has focused on long-term strategies for climate risk mitigation and recovery planning. But that alone no longer works.

The situation is grim. In 2024, the U.S. experienced 27 weather and climate disasters that incurred over $1 billion in losses each, and economic losses reached nearly $218 billion – an 85% increase compared with 2023. Globally, economic losses totaled $368 billion. Extreme weather is also becoming more frequent. From 2000 to 2019, there were 6,681 climate-related disaster events, while the previous 20 years only recorded 3,656. With losses this devastating and disasters becoming more common, consumers and policyholders cannot wait weeks, or even months, for insurance payouts.

This is a challenge for homeowners and business owners alike. According to FEMA, 43% of small businesses affected by a disaster never reopen, and a further 29% go out of business within two years of the disaster. Consumers may also not be able to pay for the work that needs to be done to repair their properties if an insurance check is being held by a bank or mortgage servicer. Electrical blackouts could also lead to overdrawn accounts, and the stress of rebuilding and returning to normalcy could result in missed bills and ballooning credit card debt.

These challenges clearly illustrate the need to pivot. A comprehensive resilience and recovery plan must reflect the current risk environment and should include a healthy mix of both long- and short-term insurance solutions to effectively support consumers, fill in the insurance protection gap, and create a financial safety net that is broad and inclusive.

Before creating the solutions, we need to acknowledge the issues preventing the industry from resolving key policyholder pain points.

Despite the clear evidence demonstrating how climate perils are related, long-term insurance pricing and solutions don't reflect that correlation. While the wildfires in Los Angeles have been extinguished, Angelenos aren't in the clear yet. Following the fires, they were inundated with rain, causing mudslides and debris flows that shut down one of their major highways and swept cars into the ocean. This was not a coincidence. Extreme heat can serve as a catalyst for wildfire by creating drier conditions, making vegetation more flammable and accelerating the spread of fire. But it can also alter rainfall patterns, often leading to more intense rainstorms following a wildfire.

Extreme heat's ability to act as a driver for both wildfire severity and increased precipitation is a prime example of the ways climate risks are innately connected, illustrating the need for insurance to factor the relationship into modeling and insurance products. While accurately forecasting these related climate risks is difficult, it is possible. Farmers have long paid attention to these longer-term cycles. Insurance should look to do so, as well. The industry must create a solution that supports policyholders and provides proper protection from natural disasters and climate perils.

Long-term insurance policies have been the industry standard for centuries, but too often the claims and payout processes can feel never-ending. It can take four to eight weeks before a standard flood claim is finalized and paid. Without any complications (although there typically are many), home insurance claims could take anywhere from a few weeks to several months to settle. Both situations force policyholders to rely on their savings to rebuild after the devastation.

Just one inch of water in a home can cost up to $25,000 in damages. Meanwhile, the average American family only has $62,410 in liquid savings, and insurance rarely accounts for the other economic damages that can be rendered post-disaster. Policyholders don't just have to replace their physical assets, they also need to allocate funding for short-term accommodations, emergency childcare, and potential medical expenses not covered by health insurance. Rebuilding may also require policyholders to miss work, increasing the financial burden. Others may not even have a workplace to return to if it was destroyed.

Insurance coverage also isn't available in the markets that need it the most. States like California, Louisiana, and Florida have borne the brunt of recent natural catastrophes, while simultaneously experiencing the departure of multiple carriers from their markets. This combination of factors has exposed millions to economic losses and potential financial devastation.

This is where parametric insurance can help.

Incorporating parametric products as a complement to traditional insurance is an effective way to rapidly infuse capital into communities after disasters. This helps to ensure that policyholders' immediate needs are met while providing space for long-term capital to deploy. The two products working in tandem provide a comprehensive resilience solution.

Parametric insurance products have already been successfully deployed in the Pacific, Colombia, and India, among other markets, and in other branches of the insurance industry, such as travel insurance and event delay insurance. However, the U.S. hasn't seen a deep proliferation of the model in catastrophe or property insurance yet. To date, there have only been a handful of pilot programs, as seen in Mississippi and California.

This is partially because insurance is regulated at the state level. If carriers wanted to add parametric coverage to existing insurance products, it would require teams of people to do so and a drawn-out regulatory process. The natural solution, then, is for carriers to turn to managing general agents (MGAs) to help address the market's parametric needs.

MGAs have flexibility that enables carriers to reach new markets and customer bases without having to add additional personnel or execute complicated paperwork. The technology-focused aspect of many MGAs can also help carriers streamline the claims and product creation process, thus constructing insurance products that meet policyholder needs.

A multi-faceted resilience strategy is the key to short- and long-term recovery.

The insurance industry has the technology and models to provide capital faster than traditional catastrophe and property insurance policies. What it hasn't been able to figure out is the human element of decreasing the timeline for claims processing after an event, even for some of the larger policyholders. But parametric insurance helps fix that problem.

The parametric model's ability to pay out a claim as soon as a specific criterion is met helps eliminate some of the embedded bureaucracy that causes frustration for the policyholder and for the carriers themselves. This is especially important during a time when public perception of the insurance industry is at an all-time low.

To provide true resilience and recovery in the face of mounting climate risks and worsening perils, the insurance industry needs to provide both short- and long-term insurance solutions that work in tandem to support consumers after a disaster. Neither strategy will work in isolation.

Historically, insurance carriers have often considered captive or career agents as the backbone of their sales and distribution model. In recent years, however, the market share of insurance sold through independent channels has grown, eroding the strength of the career agency model.

Consider that in 2024, 53% of all life premium, 41% of annuities, and 39% of personal lines P&C premium all were placed through independent channels – continuing a trend seen over the last several years.

But the issue for carriers is not just that increased premium is coming through independent channels – it's that captive agents are leaving carriers for independent distributors. That matters – captive agents have incentives to push both the carrier's brand and products to customers. A reduction or reliance on captive agents would fundamentally change the entire value chain for a carrier (e.g., product pricing, sales and marketing, customer service models).

The Case for Change

Captive agency models have always battled for talent with independent distributors. A perfect storm has formed to force distribution leaders to rethink their overall strategy:

• Reliance on Third-Party Distribution – The increasing shift in premium sales toward third-party distribution is providing greater leverage to independent channel distributors. This creates stronger negotiation power for advisor commissions and makes carriers much more dependent on those distributors for sales. For instance, while 53% of all life premium came from third-party sales, nearly 90% of indexed universal life (IUL) premium came from independent channels. This reliance puts carriers at potential distribution risk.
• Advisor Shortage – A recent report estimates that in 10 years, there will be a shortage of approximately 100,000 financial advisors. This means that not only is there a competition for assets and customers, but there will also be increased competition for advisors. For carriers leveraging a captive agency model, the advisor deficit further complicates recruitment and retention challenges.
• Owning the Customer – An aging advisor field force and concerns surrounding succession planning have placed a premium on carriers developing relationships directly with the end client. As advisors retire, carriers with stronger client relationships will be better positioned to retain those clients, particularly as clients ask advisors to go beyond simple product sales and focus on more holistic solutions. Captive agent models are uniquely positioned to win this, as their agents are often aligned with the overall corporate brand and marketing that help customers associate their advisors with particular products and services.

The combination of these factors paints a clear picture for distribution leaders – there is significant competition for customers and talent. This forces distribution leaders to develop a robust strategy to either innovate their captive agent model or embrace alternative sales channels and the changes that go along with that.

For some carriers, the decision has been or will be to embrace alternative distribution channels. This is not necessarily a bad strategy, particularly for P&C personal lines carriers, leveraging a combination of direct-to-consumer (DTC) efforts with third-party distribution models to de-emphasize captive agents (e.g., Allstate).

Redefine the Captive Agent Model

But not every carrier has the luxury (or desire) to de-emphasize its career agency channel. Career agent models have innovated before to remain competitive against independent models, but part of the challenge will be to rethink the captive agent value proposition. Specifically, carriers need to embrace four opportunities to win the battle for advisor talent:

1. Win the IXP Battle – Inexperienced producers (IXPs) will likely be the future of the advisor field force – retiring experienced advisors and overall deficit in advisor talent force carriers to rethink the recruitment and development pipeline. Winning recruits on college campuses and those changing careers will be critical to captive agent growth. This means comes down to selection, training, and retention. Leveraging AI will be a key tool – AI models may be more effective methods of pushing enterprise recruitment efforts in identifying candidates who are likely to be successful. To do this, carriers need to think about their existing recruitment strategies, advisor outcome data, and how to leverage them to both market and select the right talent.

2. Redefine the Ease of Doing Business – The ease of doing business is consistently ranked as one of the most important factors when an advisor is choosing which carriers to work with. Captive agent models will need to embrace agent experience as a core strategic goal in their long-term efforts to recruit and retain talent, consistently measuring and tracking efforts to improve agent Net Promoter Score (NPS). But carriers should also redefine the ease of doing business as something beyond whether they accept paper applications. Specifically, carriers should evaluate the ease of developing and growing a business. For example, leveraging carrier data to develop improved leads is a good first step, but matching client persona with agent selling personas in the sales process would increase the likelihood of agent success.

3. Leverage Data to Compete With Technology – Carriers have one significant advantage over independent distributors – they tend to have much more complete views of the customer. This includes not only knowing which policies they have in-force, but the ability to leverage multiple interaction points across the customer journey to create more holistic views of the customer. For example, an independent agent knows that a policy was purchased, but the carrier is in the best position to synchronize a customer's interactions with the agent, contact center, and claims process to understand opportunities to improve cross-sell and next-to-purchase opportunities. Carriers that harness this data can convert it into a strong technological advantage – enhanced data science capabilities, greater insights for potential automation, and stronger AI models to differentiate against the market.

4. Understand Your Advisor – Carriers have devoted countless resources to better understanding their customers, and for good reason. But to win the competition for talent, carriers also have to view their captive agents as another customer they must understand. This means first knowing the value proposition for an individual to become an agent with you. Second, it means knowing who is – and is not – the right fit for your field force. Third, carriers must rethink the role of an agent in a shifting distribution operating model. The value for carriers is in owning and servicing the client. This means that not every agent can or should be performing the same function. For example, leading carriers will evaluate incoming agents and determine whether they should focus on selling or servicing, or if they should be customer-facing or working in a contact center model. Redefining who is an agent and what an agent does in your firm is critical to achieving success.

Carriers must embrace these opportunities to transform their career agency models now as a part of how they assess their broader distribution strategy. A failure to do so now will make carriers reactive to the market. A carrier could find itself where it is overly reliant on a distribution strategy that no longer works – over-reliant on the career agency model with no investment to win the talent necessary to continue to compete in the future.

Fraudsters are getting smarter — and faster. With generative AI and deepfake technology at their fingertips, they're flooding insurers with fake claims and exposing cracks in traditional fraud detection methods. Insurers are in a high-stakes race against AI-powered deception, and the cost of falling behind is steep: billions in losses and eroded customer trust.

Outdated systems can't keep up with AI-driven scams. It's no longer a question of if insurers should adopt AI-powered fraud detection but how fast they can do it. The good news is the same technology that fuels fraudulent claims can also be used to fight them.

Generative AI offers insurers a way to not only detect and combat fraud but also streamline case management, accelerating claims processing and improving efficiency.

The Game Changer in Claims Management

Insurance fraud isn't a new problem, but it's never been this sophisticated. Gone are the days when fraudulent claims were limited to exaggerated injuries and staged accidents. Today's fraudsters have access to AI-generated medical records, synthetic identities, and eerily convincing deepfake videos, allowing them to construct entirely fabricated incidents with alarming precision.

Traditional fraud detection methods — document reviews, phone interviews, and outdated rule-based systems — are no match for the scale and speed at which AI-powered fraud is evolving. But with the ability to process billions of data points in real time, AI-powered fraud detection systems can do what human analysts cannot: instantly cross-reference claims against vast datasets, identify inconsistencies, and flag suspicious activity before payouts occur. This technology enables insurers to detect deepfake-generated documents and videos, analyze behavioral patterns that suggest fraudulent intent, and shut down scams before they drain company resources.

Unlike legacy systems that react to fraud only after it has occurred, AI-driven fraud detection is predictive and preventative. By leveraging machine learning models trained on historical fraud cases, insurers can anticipate emerging fraud tactics, staying one step ahead of the criminals. This shift from reactive to proactive fraud prevention is a game-changer, saving insurers billions while safeguarding legitimate policyholders.

How AI Automates and Accelerates Claims Processing

Fraud detection is only half the battle. Insurers are also under pressure to process legitimate claims quickly and accurately. Customers expect seamless, hassle-free settlements, and insurers that fail to deliver risk damaging their reputation. Generative AI not only combats fraud but also revolutionizes claims processing, allowing insurers to operate with unprecedented speed and efficiency.

One of the most significant advantages of AI is automation in the records retrieval process. Traditionally, insurers relied on manual verification processes, which involved requesting medical records, police reports, and other supporting documents. AI-powered claims processing can help limit the need for time-consuming manual labor by instantly verifying, retrieving, and analyzing records from multiple sources.

Natural language processing (NLP) further enhances claims processing by extracting key insights from medical records, adjuster notes, and even policyholder communications. This allows insurers to assess the legitimacy of claims with remarkable accuracy, ensuring that genuine cases are settled swiftly while fraudulent ones are flagged for further investigation. Moreover, AI-generated summaries provide claims adjusters with clear, concise insights, minimizing the need for extensive document review. By scanning vast amounts of structured and unstructured data, including text, images, and videos, AI can quickly identify critical information, reducing claim review times from weeks to mere hours and improving overall efficiency.

Another emerging trend is leveraging agentic AI systems that autonomously analyze, plan, and execute tasks within structured workflows. Unlike traditional automation, which follows fixed, rule-based processes, agentic AI adapts dynamically, makes context-aware decisions, and operates with a level of self-governance. Powered by advanced machine learning, it enhances efficiency, flexibility, and decision-making in complex environments. These systems handle domain-specific tasks like data extraction, fraud detection, anomaly identification, and decision support. Serving as the intelligence layer of the workflow, they enhance efficiency and decision-making through advanced automation.

The result is faster settlements for legitimate claims, reduced administrative costs, and an enhanced customer experience. In an industry where trust is paramount, the ability to process claims quickly without sacrificing accuracy gives insurers a significant competitive advantage.

Overcoming Implementation Challenges

While AI is a powerful tool, it isn't perfect. Despite its transformative potential, implementing AI in fraud detection and claims management comes with challenges. One of the biggest challenges in AI-driven fraud detection is the risk of false positives — legitimate claims being incorrectly flagged as fraudulent. Over-reliance on AI without human oversight can lead to frustrated policyholders, increased dispute resolution costs, and potential reputational damage.

The solution is establishing a hybrid model that blends AI automation with human expertise. AI should act as an intelligent assistant, identifying patterns, flagging anomalies, and presenting data-driven insights. However, final decisions should still involve experienced and trustworthy claims adjusters who can apply contextual judgment and verify AI-generated findings.

A hybrid approach consists of three key elements:

• AI-driven fraud detection: AI scans claims for anomalies, inconsistencies, and suspicious behavior, flagging high-risk cases for review.
• Human validation: Trained fraud investigators assess flagged claims, ensuring that legitimate cases are not wrongly denied.
• Continuous AI training: Machine learning models are regularly updated with new privacy-compliant data, allowing AI to adapt to evolving fraud tactics and reduce false positives over time.

This collaborative human-in-the-loop approach ensures insurers reap the benefits of AI's speed and scalability while maintaining fairness and accuracy in claim resolutions. It's about striking the right balance — using AI to enhance human decision-making rather than replace it entirely.

Data security is also a common concern with increased AI integration. AI-driven systems process vast amounts of sensitive information, from medical records to financial transactions. These systems are vulnerable to cyberattacks and data breaches without stringent security measures. Insurers must adopt robust encryption protocols, strict access controls, and de-identification techniques to protect customer data.

Another challenge is the risk of model drift and bias. AI models must be continuously monitored to ensure they remain accurate and fair. Bias in training data can lead to skewed decision-making, disproportionately flagging certain demographics for fraud investigation. To mitigate this risk, insurers should implement transparency measures, regularly audit AI algorithms, and use diverse datasets to train machine learning models.

Regulatory compliance is another critical consideration. As AI becomes more deeply integrated into claims processing, insurers must navigate a complex legal landscape. Compliance with industry regulations and ethical guidelines is essential to avoid potential lawsuits and maintain consumer trust. A structured AI governance framework — incorporating transparency, accountability, and ethical considerations — ensures AI adoption aligns with regulatory standards.

The Race to Automation: Why Insurers Must Act Now

Fraudsters aren't waiting. Every day, they refine their tactics, using AI to create more convincing fake claims. Insurers must move just as quickly — if not faster. The race to automation is not just about keeping up with fraud; it's about securing a future where AI-powered claims management is the norm, not the exception.

The insurance industry is at a crossroads. Companies that embrace generative AI will lead the way, while those that hesitate will struggle to keep up. The future of fraud detection and claims management isn't coming — it's already here. Insurers must decide whether they want to be proactive innovators or reactive bystanders.

Despite billions poured into insurtech over the past decade, commercial insurance agents and account managers still spend over 50% of their time toggling between fragmented systems instead of serving clients. 

The commercial insurance industry has reached an inflection point. Faced with rising customer expectations, evolving risks, and growing competitive pressures, agents and carriers are increasingly turning to technology for answers. However, the proliferation of single-purpose tools and point solutions has created a new set of challenges, hindering true transformation.

Quote comparison tools, policy review software, appetite search engines – while valuable in isolation, these point solutions have inadvertently reinforced existing data silos and workflow inefficiencies. The result is a disjointed ecosystem where agents toggle between multiple systems, manually reconcile data, and struggle to gain a holistic view of their clients and business. This fragmented ecosystem undermines productivity, causes errors, and frustrates clients seeking seamless interactions.

As the co-founder and CEO of an AI-powered platform for commercial insurance, I've seen how this fragmentation impedes growth. Agents spend countless hours on low-value tasks, carriers miss opportunities to streamline underwriting, and clients experience disjointed interactions. The future of insurance demands a different approach – one that brings together data, workflows, and intelligence into cohesive platforms designed for the industry's unique needs.

The Limitations of Point Solutions

To understand why point solutions ultimately fail commercial insurance, we must recognize the industry's inherent complexity. Insurance data spans structured and unstructured sources, from policy forms and loss runs to emails and PDFs. Workflows are deeply interdependent, with each process relying on data and decisions from multiple upstream and downstream systems.

In this environment, standalone tools create more problems than they solve. Integrations become a constant struggle, with IT teams devoting countless hours to building and maintaining brittle connections between disparate systems. Data definitions vary across solutions, leading to inconsistencies that undermine analytics and decision-making. And with each new tool, users face increased cognitive overload, navigating multiple interfaces to complete routine tasks.

Imagine an agent assessing a client's loss history, forced to toggle between emails, PDFs, and quote engines—wasting valuable hours and missing critical insights. Compounding these challenges are the industry's stringent regulatory requirements. From data privacy to audit trails, insurance demands comprehensive governance that point solutions simply can't provide on their own. This creates an illusion of digitization, masking underlying inefficiencies and compliance risks.

The Power of Platforms

The path forward lies in holistic insurance platforms that unify data, orchestrate workflows, and embed intelligence at every step. Unlike point solutions, platforms take a fundamentally different approach to value creation.

At their core, insurance platforms serve as a unified data layer, bringing together information from across the policy lifecycle into a single source of truth. By standardizing data definitions and providing comprehensive governance, platforms eliminate silos and enable seamless information sharing among brokers, carriers, and clients.

But data connectivity is just the beginning. True platforms also orchestrate workflows end-to-end, guiding users through complex processes while automating repetitive tasks behind the scenes. By embedding best practices and intelligent recommendations directly into workflows, platforms turn data into action, helping teams work smarter and faster.

Perhaps most importantly, insurance platforms leverage this unified data and workflow foundation to deploy advanced analytics and AI at scale. Rather than isolated pockets of intelligence, platforms infuse every decision with contextual insights – from identifying at-risk accounts to optimizing carrier selection. As more data flows through the platform, these insights become sharper, creating a powerful flywheel effect.

The AI Catalyst

The rise of AI simultaneously necessitates and amplifies platform adoption. Powerful generative AI tools have lowered barriers to building specialized capabilities, commoditizing point solutions. Consequently, competitive advantage shifts to platforms that integrate AI comprehensively across the insurance lifecycle.

For instance, AI-powered platforms instantly identify hidden risks by scanning emails, prior policies, and loss runs—tasks that fragmented solutions cannot accomplish efficiently. Insurers must embed AI seamlessly into their operations, leveraging unified data architectures and workflow integrations to unlock AI's full potential while mitigating associated risks.

The Path Forward

Insurance leaders must prioritize platforms over fragmented point solutions. Embracing this shift requires adopting a new mindset—valuing holistic transformation over incremental quick fixes. Brokers, carriers, and managing general agents (MGAs) who embrace a platform-first approach position themselves strategically for success in the evolving, AI-driven marketplace.

This transition requires deliberate actions:

• Begin with a comprehensive audit of existing systems to identify redundancies.
• Develop a strategic road map prioritizing early wins and long-term integration.
• Partner with technology providers experienced in insurance complexities, proven in deploying holistic platforms.
• Leverage this opportunity to significantly reduce outsourcing expenses—often by 80% or more—by automating processes traditionally handled externally.

Legacy systems must evolve, data models must be standardized, and workflows must be reimagined. Yet the rewards—significant efficiency gains, accelerated growth, and vastly improved customer experiences—will far outweigh the effort.

The insurers that will lead the next decade are those that build their businesses on robust, integrated platforms. By uniting data, workflows, and intelligence, these platforms will become the foundation for innovation and a definitive source of competitive advantage.

Your AI and automation initiatives will fail.

Not because of bad code. Not because your data scientists aren't smart enough. But because you'll lack the one thing that determines whether any AI initiative succeeds: observability.

If you can't see what your automation is doing — how it's affecting business processes, where it's breaking down, and what value it's delivering — you're flying blind. And in high-stakes domains such as distribution, new business underwriting, claims, and retention, that's a recipe for expensive failure.

The insurance industry is doubling down on AI, machine learning, and process automation. But here's the truth most don't want to hear: Implementing AI is the easy part. Proving it works — and improving it over time — is where the real challenge lies.

Automation Without Visibility Is Just Faster Failure

At Neutrinos, we work with insurers that are pushing the boundaries of intelligent automation. And we're seeing, again and again, that after the initial excitement of go-live, leaders are left asking:

• Is it actually working?
• Are we saving time, or just doing things faster without better outcomes?
• Where is human intervention still needed - and why?

These questions aren't technical — they're strategic. And they're impossible to answer without observability baked into the entire automation lifecycle.

This isn't about tracking CPU usage or memory spikes. Observability in the context of AI and process automation means real-time, contextual insight into your business metrics:

• How is the policy issuance cycle trending post-automation?
• Are underwriters accepting or overriding AI-generated decisions?
• Which customer segments are seeing improved experiences—and which aren't?

Without this visibility, AI becomes a black box. And black boxes don't earn trust — or ROI.

The Observability Trinity: Leading, Lagging, and Real-Time Indicators

To extract value from AI initiatives, insurers need to shift from retrospective reporting to proactive insight. That means tracking three types of indicators:

1. Leading Indicators – Metrics that forecast success or failure early, such as time-to-decision, document intake accuracy, or triage confidence scores.
2. Real-Time Signals – Operational insights that allow for immediate course correction, like exception frequency, process fallbacks, or system latencies.
3. Lagging Indicators – Traditional business outcomes like cost reduction, improved persistency rates, or faster policy issuance cycles.

The magic lies in correlating them. If you see triage decisions being overridden frequently (real-time), it could signal that your risk model needs retraining (leading), which if left unaddressed could result in increased underwriting time and reduced efficiency (lagging).

Observability makes this feedback loop visible — and provides automated, actionable insight.

When this visibility is fully embedded into the automation lifecycle — from initial ideation and design to deployment and continuous improvement — insurers can make intelligent, timely adjustments to improve performance by shifting observability left.

Use Case: New Business Underwriting in Life & Annuities

Life & annuities underwriting is ripe for transformation — and risk. The process involves vast amounts of unstructured data, human judgment, and regulatory complexity. That's why insurers are increasingly applying AI to:

• Automate document extraction and data enrichment
• Use natural language processing (NLP) to analyze medical records and lifestyle disclosures
• Triage applications for fast-track vs. full manual review

Sounds great. But after deployment, reality sets in: Are the right cases being fast-tracked? Are policy decisions aligned with actual risk? Are underwriters trusting the AI or working around it?

This is where observability must step in. A well-designed observability framework will monitor metrics like:

• Fast-track case approval vs. post-issue adjustment rates
• Frequency of manual intervention by underwriters
• Average time to underwrite per segment, before and after automation
• Confidence vs. override correlation for AI-generated recommendations

These aren't just performance metrics — they're trust metrics. And they directly inform whether your AI is doing what it was intended to do.

From Insight to Action: Why Observability Isn't Passive

Observability isn't just about dashboards and data. It's about decisions.

Once you have visibility into how your automation is performing, you can begin to optimize. You might adjust your triage rules. Retrain your NLP models. Refine your underwriting workflows. Or even re-segment your customer cohorts.

The point is: AI isn't static. Your observability layer shouldn't be either.

In fact, the next evolution of observability is prescriptive: platforms that not only show you what's happening but recommend what to do next. This is where proactive optimization begins — not with human guesswork but data-backed decision support.

Why to Build Observability In, Not On

Most platforms treat observability as a bolt-on — something you figure out after launch. At Neutrinos, we believe it should be core to your automation architecture.

So our automation platform includes observability capabilities that track the entire lifecycle of a process:

• From intake to triage to decision
• From AI model inference to human review
• From business rules to real-world outcomes

It's not just visibility for IT — it's insight for business leaders, compliance teams, underwriters, and customer experience (CX) strategists.

Whether it's surfacing drops in the policy journey, highlighting model drift, or comparing AI-generated recommendations to human decisions — effective observability helps insurers optimize not just automation, but outcomes.

Observability: The Real AI Differentiator

In a market where most insurers are deploying similar tools and technologies, the competitive edge won't come from your AI engine. It'll come from how well you can see, understand, and improve what it's doing.

Observability is what separates the pilot projects from the enterprise-grade transformations.

Your AI investments don't have to fail. But if you're not watching the right metrics in the right way, you'll never know if they're working — and you won't know how to fix them if they're not.

Visibility isn't optional. It's strategic. And it's the key to unlocking return on investment (ROI) from your AI initiatives.

The private credit market is witnessing a wave of strategic partnerships, and one of the most significant developments comes from TCW Group and Nippon Life Insurance. In a major move to anchor TCW's alternative credit business, Nippon Life has committed $3.25 billion in capital — marking another milestone in the convergence of insurance capital and private credit.

This deal not only reflects the growing appetite for private credit but also highlights the increasingly vital role that insurance companies are playing as strategic investors in illiquid assets. For TCW, this partnership solidifies its position as a key player in alternative credit, while Nippon Life gains access to robust returns from one of the fastest-growing asset classes.

Let's break down this deal, its significance for the broader market, and why partnerships like TCW-Nippon Life are shaping the future of private credit.

The Deal: $3.25 Billion in Anchor Capital

At the heart of this partnership lies Nippon Life's $3.25 billion capital commitment to TCW Group. The capital will serve as anchor funding for TCW's alternative credit business, allowing the asset manager to scale its private credit offerings and attract additional investors to its platform.

This isn't Nippon Life's first foray into private credit with TCW. Earlier this year, TCW joined forces with PNC Financial to launch a $2.5 billion private credit platform — a deal in which Nippon Life also participated. Nippon Life's expanded commitment underscores its confidence in TCW's ability to deploy capital effectively and generate strong risk-adjusted returns.

For TCW, Nippon Life's anchor capital provides a springboard for growth, ensuring the firm can compete with other alternative credit managers while leveraging its expertise to capitalize on opportunities in the private credit space.

Why Insurance Companies Are Betting Big on Private Credit

The TCW-Nippon Life deal is part of a broader trend: insurance companies increasingly turning to private credit as a preferred destination for their long-term capital. With traditional fixed-income investments offering diminishing yields, insurers are seeking higher returns without compromising stability. Private credit fits this profile perfectly.

Here's why insurance capital and private credit make for a winning combination:

1. Attractive Risk-Adjusted Returns: Private credit offers yields that far outstrip traditional bonds, particularly in an environment of rising interest rates. For insurance companies with long investment horizons, these returns are especially appealing.
2. Illiquidity Premium: Insurance companies are well-positioned to take advantage of illiquid investments, as their liability structures allow for long-term capital commitments. This makes private credit a natural fit.
3. Diversification Benefits: Private credit provides insurers with exposure to a diverse range of assets and industries, helping them spread risk while enhancing overall portfolio returns.
4. Strategic Partnerships: Deals like the one between TCW and Nippon Life demonstrate how insurers can partner with established asset managers to gain direct access to private credit opportunities, ensuring their capital is deployed efficiently.

TCW Group: Expanding Its Private Credit Platform

For TCW, Nippon Life's commitment represents more than just capital — it's a validation of TCW's alternative credit strategy and its ability to deliver results. As private credit continues to attract institutional interest, asset managers like TCW are scaling their platforms to meet growing demand.

The partnership with Nippon Life, alongside TCW's earlier collaboration with PNC Financial, reflects a clear strategy: leverage anchor capital to build scale and attract additional investors. By securing significant commitments from trusted partners, TCW is well-positioned to:

• Expand its deal pipeline: With $3.25 billion in anchor capital, TCW can pursue larger and more complex transactions.
• Attract additional investors: Anchor commitments provide a foundation that other institutional investors find attractive, helping TCW grow its platform further.
• Compete with larger players: As competition in the private credit space intensifies, TCW's ability to secure long-term capital commitments gives it an edge.

Private Credit: The Growing Asset Class

The TCW-Nippon Life deal is a testament to the growing importance of private credit as an asset class. What was once a niche market has evolved into a multitrillion-dollar industry, attracting capital from a diverse range of investors, including insurers, pension funds, and endowments.

Several factors are driving this growth:

• Bank Retrenchment: As traditional banks pull back from middle-market lending, private credit funds have stepped in to fill the gap.
• Higher Yields: Private credit offers higher yields compared with public fixed-income markets, making it an attractive option for yield-hungry investors.
• Flexibility and Customization: Unlike syndicated loans, private credit transactions are often tailored to meet the unique needs of borrowers, creating wins for both lenders and companies.
• Resilient Performance: Even during periods of economic uncertainty, private credit has demonstrated resilience, further solidifying its appeal.

For insurance companies like Nippon Life, this asset class represents a strategic opportunity to deploy capital in a way that aligns with their long-term investment goals while enhancing returns.

What This Means for the Market

The TCW-Nippon Life partnership highlights a broader trend: the deepening relationship between private credit managers and insurance companies. As private credit platforms scale, partnerships with insurers provide a critical source of anchor capital, allowing managers to pursue larger opportunities and compete on a global stage.

For the market, this deal signals two key shifts:

1. Private Credit's Institutionalization: The involvement of insurance giants like Nippon Life underscores private credit's evolution into a mainstream asset class.
2. The Power of Partnerships: Strategic collaborations — like TCW's partnerships with Nippon Life and PNC Financial — are becoming a hallmark of success in the private credit industry.

Final Thoughts

TCW Group's $3.25 billion capital commitment from Nippon Life is more than just another deal — it's a sign of where the private credit market is heading. As insurers seek higher returns and private credit managers look to scale, partnerships like this one are setting the stage for the next chapter in alternative credit.

For TCW, Nippon Life's commitment reinforces its growing leadership in the space. For Nippon Life, the deal represents a strategic investment in one of the most attractive asset classes available today. And for the broader market, this partnership highlights the continued evolution of private credit as a key pillar of institutional finance.

Positive outlook for life science sector

The life science sector in Latin America is experiencing significant growth, particularly in pharmaceuticals and clinical trials. With a projected compound annual growth rate of 10% in the pharmaceutical sector since 2021 and a diverse population with improving healthcare infrastructure, Latin America is a hub for clinical trials for international trial sponsors.

This growth has been driven by an aging population that requires advanced healthcare. The Latin American life science market has expanded due to increased healthcare investment, regulatory improvements, a focus on local production, and advancements in technology that have helped to broaden treatment options.

From a regulatory standpoint, Latin American countries are progressively aligning their practices with international standards, including good clinical practice (GCP) and International Council for Harmonization (ICH) guidelines. This harmonization contributes to more efficient and expedited approval processes for new pharmaceuticals and medical devices, enhancing growth opportunities for their products domestically and internationally.

Despite challenges posed by the current geopolitical environment, strong global demand remains for pharmaceutical products, providing significant opportunities for the Latin American market. As life science companies begin to export outside of Latin America, their liabilities and potential exposures change, making insurance an essential part of risk management. Not having adequate insurance in place for these businesses can mean they could be financially responsible for any injuries or damage caused by their products, which can lead to substantial legal and medical expenses.

With the rising costs of litigation and settlements globally, it's crucial for these businesses to be aware of these exposures when entering the global market. This is why working with specialist life science insurance providers is critical to ensure companies in the sector have adequate protection for their exposures, globally.

The need for environment liability cover

This section was written by Olivia Hogan, senior underwriter – international casualty, at Markel.

The financial implications of an environmental incident can be devastating, and with evolving environmental regulations, stricter laws are being implemented to improve compliance across the board.

One of the immediate impacts of more stringent environmental regulations on businesses is the necessity for compliance and a reinforced commitment to environmental responsibilities. Consequently, insurance companies are prompted to adapt their risk assessment models to address the increased environmental risks associated with these regulations, such as the probability of non-compliance or accidental breaches. The evolving landscape of environmental laws has driven innovation within the insurance sector, where insurers are now creating products designed to cover these risks on behalf of policyholders.

While numerous environmental laws and statutes exist across Latin America, they're governed by the "polluter pays" principle: "Those who produce pollution should pay for the costs associated with damage caused." Brazil, for example, is globally recognized for its vast and rich biodiversity, and protecting these natural resources is at the forefront of the country's environmental policies. The polluter pays principle is embedded in various laws and regulations in Brazil aimed at preventing and mitigating environmental damage.

Companies operating in industries where significant environmental impact could occur (e.g., mining, oil and gas) are required to take out environmental liability insurance in certain countries across the region to mitigate risk associated with their activities.

In Mexico, for example, transporters of hazardous materials are required to have environmental insurance coverage that meets the standards set by the Mexican government. These should specifically cover the costs of cleanup and remediation of environmental contamination resulting from spills or leaks. Transporters must ensure their insurance policies comply with the requirements set, which involves working with insurance providers that are familiar with the specific needs and regulations related to the transport of hazardous materials. Non-compliance with these insurance requirements can result in fines and legal penalties.

Environmental liability insurance will provide financial protection against environmental damage, statutory liability, and onsite first-party clean-up costs, as well as off-site clean-up costs and third-party bodily injury and property damage.

The demand for innovative and comprehensive coverage solutions will continue to grow as regulations tighten on an international level. Therefore, having an insurance partner that can provide comprehensive and adaptive coverage that evolves in line with legislation is paramount, ensuring businesses and individuals are fully protected if an incident occurs.

Long-term care (LTC) planning has long been one of the most complex and emotionally charged areas of financial advisory services. As the aging population grows and care costs continue to escalate, advisors and clients alike face a daunting set of challenges. Traditional planning tools often rely on broad averages and generic simulations such as Monte Carlo that fail to capture the nuances of an individual's future needs and don't motivate families to plan for LTC. However, advances in artificial intelligence (AI) are beginning to transform this landscape, offering more precise and personalized approaches to LTC planning.

The Complexity of Long-Term Care Planning

Conventional tools that tend to use national averages and basic models can lead to several recurring issues:

• Delayed Engagement: Many clients postpone LTC discussions until a crisis occurs, leaving little time to develop a thoughtful strategy.
• Impersonal Data: Generic statistics and broad-based simulations do little to illustrate the true financial impact of LTC on an individual family.
• Lost Opportunities: Without a tailored planning tool, advisors often struggle to convert early LTC discussions into concrete strategies, whether that means guiding a family toward an appropriate insurance policy or structuring a comprehensive financial plan.

These challenges highlight why LTC remains one of the few unsolved wildcard scenarios in retirement planning. Advisors and clients must contend with significant uncertainty. 

Yet, it is precisely this uncertainty that offers a last-mile opportunity for advisors to differentiate themselves by providing uniquely tailored, high-value solutions.

The AI Advantage in LTC Planning

Unlike traditional methods, AI-driven platforms can analyze a vast array of data, from regional cost variations and healthcare inflation to individual health status and family dynamics, to generate a personalized projection of a client's LTC journey. New technology solutions such as those we've developed at Waterlily are leveraging AI to personalize LTC planning, starting with streamlined intake processes.

These platforms create a tailored set of predictions to tell an insightful story of a client's future LTC needs. This narrative includes detailed projections on the timing and duration of care, anticipated costs, and even the care hours that will be taken on by family caregivers. Such personalized insights allow advisors to move beyond vague "what if" scenarios, initiating rich conversations that address the specific realities of each client's situation.

Enhancing Advisor-Client Interactions

The precision of AI-generated projections fundamentally changes how advisors engage with clients on the topic of long-term care. With clear, individualized data at hand, advisors are better positioned to:

• Initiate Rich Conversations: Instead of relying on broad averages, advisors can discuss specific care projections tailored to the client's circumstances. This not only demystifies the planning process but also helps clients understand the real implications of their choices.
• Accelerate Decision-Making: When clients are presented with a clear plan that outlines expected timelines and costs, this shortens the time from initial inquiry to concrete decisions, such as purchasing an appropriate policy or annuity.
• Unlock Premium Growth: Personalized planning helps overcome the emotional barriers that often hinder LTC discussions. By converting these conversations into high-value, concrete plans, advisors can capture opportunities that might otherwise be lost.

These capabilities tackle key challenges in traditional LTC planning by promoting early client engagement and fostering stronger, data-driven advisor relationships. Further, LTC planning isn't just about traditional LTC insurance. Innovative options like life with rider policies, hybrid solutions, annuities, and even short-term care are energizing the market and offering clients potentially more competitive choices than ever before. When used effectively, AI makes it easier to build a strategy that educates, motivates, and covers every aspect of a client's long-term care needs and wants.

Balancing Technology With the Human Touch

While AI is undeniably powerful, its greatest strength lies in complementing, not replacing, the human expertise that financial advisors bring to the table. The nuanced and emotionally charged nature of LTC planning demands empathy, active listening, and the ability to navigate complex family dynamics. AI provides the detailed, data-driven insights that can inform these discussions, but it is the advisor who translates this information into a personalized plan that aligns with the client's overall financial goals and emotional needs.

In this evolving landscape, the role of the advisor remains as crucial as ever. By integrating AI-driven insights into their practice, advisors can offer a service that not only anticipates future expenses but also supports clients through one of the most challenging aspects of retirement planning.

The Future of LTC Planning for Advisors

As we move further into the era of digital transformation, the integration of AI into LTC planning is likely to become a standard practice in the insurance brokerage community. The ability to provide detailed, personalized care projections will not only help families prepare more effectively but will also drive opportunities for advisors to convert early, meaningful discussions into robust financial strategies.

At least for our rapidly aging society on the cusp of navigating long-term care with limited funds and family support, the potential impact of AI is significant. With more accurate projections and a personalized approach, advisors can help families navigate the uncertainties of aging with confidence. By combining technological innovation with the irreplaceable human touch, the insurance brokerage community is poised to turn one of the most challenging aspects of financial planning into an engaging and ultimately more secure experience for everyone involved.

In a field where the stakes are incredibly high, leveraging AI to craft clear, personalized LTC plans can be transformative. Advisors have the opportunity to remain enduring pillars in the insurance and financial services landscape by ensuring that families are not only financially secure but also emotionally supported as they navigate the future.

Insurtech startups have sprung up like mushrooms since the Great Recession — a period when public confidence in the traditional financial sector hit rock bottom. Full-stack upstarts were seen as existential threats to their established insurance player counterparts struggling to adapt to the digital age.

Nearly a decade after the insurtech rush in the first half of the 2010s, investor interest in these challenger brands has waned. Many of these startups have had their fair share of legal troubles, revealing the cracks in their business models. Given the growth and decline of insurtechs, should they still keep traditional insurance companies up at night?

The Strengths of Traditional Insurers Are the Weaknesses of Unicorns

Rapid innovation is the calling card of insurtech startups. They exist to disrupt the status quo, identify problems and use advanced technologies to solve them.

Technologically agile competitors strike fear into the hearts of decision-makers at established insurance companies. Startups have prompted old-school senior executives to reconsider legacy thinking and move out of their comfort zones.

What insurtechs don't have going for them is operational stability. Their leaders can be serial entrepreneurs with no previous insurance background. Lemonade's Shai Wininger and Hippo's Assaf Wand are excellent examples.

Wininger founded and co-founded several tech ventures — including Trimus, Handsmart Software, Mobideo, Fiverr and Santa — before starting his crusade to revolutionize renters and homeowners insurance. Wand was the head honcho of Foris Telecom and Sabi before developing one of the first smart home insurance products.

These newcomers to the industry excel at innovation. However, they lack expertise in risk management and regulatory compliance. In contrast, incumbents shine in these areas because of their centuries of head start on their tech-driven competition.

The genesis of the American insurance industry dates back to the 18th century, and many of today's largest home insurance companies — such as State Farm, Allstate, Liberty Mutual, USAA and Farmers — are decades older than Lemonade and Hippo. Full-stack insurtech firms haven't been around the block enough times to recognize the fundamental flaws in their business models and iron out the kinks of their operational frameworks.

Poor Stock Performance — Investors Give Insurtech Enterprises a Reality Check

The turn of the 2020s was a watershed moment in the history of insurtech startups. Numerous full-stack unicorns went public between 2020 and 2021 to raise much-needed capital as they targeted profitability. Unfortunately for these newly minted publicly traded entities, the euphoria was short-lived.

Charles River Associates (CRA) compared the stock prices of 13 insurtechs against 18 traditional insurance companies that went public between 2015 and 2024. The consulting firm's two sets of findings were as different as night and day.

Most insurtech enterprises recorded negative returns against the S&P 500 (SPX) and the S&P 500 Insurance Industry Group indices three months and one year after their initial trading date. This trend persisted after examining these enterprises' historical stock prices up to April 30, 2024 — the date on which CRA compiled the data.

On average, insurtech stock prices plummeted 24% three months after their first trading date and 19% one year following their initial public offering (IPO) with or without a special purchase acquisition company (SPAC). The more time passed, the worse the drop was. From going public to April 30, 2024, 61% of the value of insurtech stocks vanished.

This phenomenon doesn't extend to the greater insurance industry. The noninsurtech stocks yielded impressive medium- and long-term returns. Their value jumped 33% one year after their initial trading date and 318% by April 30, 2024.

Many factors come into play when a stock chronically underperforms. However, no factors were as significant as getting involved in high-profile legal scandals.

Hippo Fuels Legal Arguments Against SPACs

Some insurtech unicorns used SPACs to go public for practical reasons. These blank-check companies promise fast execution, upfront price discovery, low marketing costs and quick access to operational expertise.

The problem is that SPAC mergers are subject to less scrutiny. The process requires less due diligence and can result in exaggerated valuations, which is what happened to Hippo after its ticker symbol floated on the New York Stock Exchange.

Hippo’s market capitalization was $5 billion when it went public. By September 2023, its valuation plunged by 96%, reducing its valuation to about $222 million. Mammoth withdrawals by the insurtech's SPAC investors triggered the decline.

Hippo's lackluster stock performance compelled the board to oust Wand as CEO in June 2022. The company’s stock launch also helped galvanize the SEC into imposing additional IPO-by-SPAC procedural and disclosure requirements to strengthen investor protections.

Increased oversight over SPACs should prevent future public companies from suffering the same fate as Hippo. However, the stigma of entering public markets through a SPAC has followed tech-first insurers — including those that chose the traditional IPO route.

Insurtech Firms Are Prone to Securities Class Action Litigation

The insurance industry is no stranger to lawsuits. All players — big and small — get in legal trouble on occasion. However, insurtechs account for a significant portion of securities class action litigation relative to their quantity.

Tech-first insurers are in the minority. There were 1,500 of them in 2024 — a tiny fraction of all regulated insurance companies in the U.S. This figure is only slightly higher than the average number of licensed foreign insurers per state at 1,403, according to the National Association of Insurance Commissioners.

According to CRA's insights, there were 39 Section 10(b) and 12 Section 11 filings in the insurance industry from 2015 to 2024. Nine insurtech firms that went public in the same period found themselves in hot water by getting involved in these cases.

One of them was Clover Health. Investors sued this Jersey City, N.J., insurtech for allegedly hiding the fact that it was under active investigation by the Department of Justice for undisclosed third-party deals, kickbacks and many other issues when it went public.

The company also allegedly misrepresented its revenue streams and overstated its software platform’s capabilities. The allegations ended in a settlement worth $22 million without Clover Health admitting wrongdoing.

Another widely discussed example was GoHealth. The complainant alleged that the Chicago-based health insurance marketplace's IPO registration statement failed to contain crucial information for investors — like the higher risk of customer churn due to its limited carrier base and unique business model.

GoHealth and the plaintiffs settled the case for $29.3 million after more than three years of litigation.

Most of these securities class action lawsuits involved accusations related to the fundamentals of insurance operations. They highlight insurtechs' lack of operational resilience when leveraging technological innovation.

Traditional Insurance Companies Are Not Out of the Woods Yet

After many years of poor stock performance and legal battles, tech-driven startups are once again showing signs of life. They completed 71 deals in 2024’s first half despite reduced funding, crowning the U.S. as the leading insurtech market globally.

Furthermore, insurtechs that went public from 2020 onward rebounded in 2023. Their stocks collectively went up by 22%, and many of them were able to shrink their net losses. Such performance indicates that public market investors are slowly regaining their faith in insurtechs.

It would be premature to describe recent developments as a resurgence of trust in these startups, as many of them are light years away from their original valuations. Still, there's no denying that more investors are giving insurtech stocks a second look. Stock market participants may have had a change of heart because they're now more familiar with how these businesses work.

Understanding the complexities of insurtechs is vital in assessing their value as enterprises. More investors appreciate the innovations they bring to the table — like the use of telematics to collect and analyze fleet vehicle data for risk assessment or the application of AI to empower customers to complete applications and file claim reports independently with chatbots.

Hippo CEO Rick McCathron can attest to this. He said that his organization missed out on adequate analyst coverage because of its SPAC history. McCathron and Co. moved mountains to get analysts to care and are now reaping the fruits of their labor.

Hippo gained momentum in 2023 and carried it into the following year. 2024 was its best year so far; it recorded net income of $44 million in Q4. Only time will tell if Hippo can sustain this upward trajectory and if other insurtechs will report similar net earnings.

Viewing Disruptors as Collaborators Instead of Competitors

Traditional insurers shouldn't feel threatened by the recovery of insurtech stocks. It's normal for legacy-minded professionals to feel insecure about losing market share to more tech-driven players. However, established insurance companies should accept that they're here to stay and use these innovative individuals to modernize their systems, offer personalized services to customers and more.

After all, not all insurtechs are competitors. The others are partners looking for mutually beneficial collaborations to improve the insurance industry.