The financial services sector currently accounts for about 10% of all deals and is experiencing positive momentum. Throughout 2023, the industry has maintained a consistent level of deal activity and has demonstrated year-over-year growth in both deal value and deal count. There is still a pressing need for organizations to improve their divestiture processes – in both selection and execution.

See also: 3 Key Workplace Challenges Reshaping Business

Complexities of Divesting Entangled Entities

When looking at a business through the lens of a divestiture, an asset can often be thought of in one of two ways: Either it is largely independent from the parent company, or it is dependent on infrastructure owned by the parent. The latter scenario, commonly referred to as "entangled," presents additional complexities regarding how to effectively separate during a divestiture.

"Entangled" is an umbrella term that can describe many relationships between the parent and the division being sold. These two parties might be connected by the labor they employ or by the infrastructure they use. The entanglements that are easiest to manage are relationships with third parties where the master agreement sits with the parent company but the purchase orders or statements of work specific to the entity being divested are straightforward. On the other end, time-intensive and difficult-to-manage entities are tethered to their parent companies by IT applications and infrastructure. In these cases, program management resources that can coordinate between different functions and subject matter experts within each function are crucial.

The degree of entanglement also affects compliance considerations that must be made when selling an asset that has previously been dependent on the parent company. These considerations will hinge on the size of the deal and the degree to which the industry in question is regulated. For insurance specifically, parent companies need to inform numerous regulatory organizations at both federal and state levels, while also completing an approval process for some aspects of the divestiture. Regardless of the industry of the seller, the parent company also must be compliant with employment laws when managing workforce reductions or as employees are moved to the new owner.

Practical Considerations

1. Planning for the known and the unknown

It is important to establish a structure through which the divestiture will be managed. This management structure can include things like a governance hierarchy, a suggested schedule for when different groups should meet, the responsibilities of different required roles and a framework for making critical decisions. It is also important to ensure this management structure is flexible. The proper governance and meeting cadence that exists six months from the close of the transaction may no longer be appropriate when launch is only one month away. Having this flexibility will allow for the divestiture to maintain momentum throughout the process while also being able to respond to unforeseen complexities.

An effective way to facilitate this flexibility is to employ a program management team. The team will serve as the glue that holds things together, connecting different stakeholders with each other at the appropriate times and planning ahead for critical milestones. This team works within parameters of the governance structure to ensure quality, timelines and efficient decision-making. As the needs of the divestiture change, the program management team will adapt accordingly and keep the plan current. It is important for this team to communicate clearly and to keep the broader team motivated during periods of intense work.

2. Establishing effective communication

A divestiture represents a time of uncertainty for employees of the company. When a deal is newly announced, employees will question the longevity of their jobs. How a company communicates with its employees during this stressful period will greatly affect employees' trust and engagement. As a successful divestiture is contingent on retaining key talent and continued engagement, communication to assuage employees' fears will go a long way to stabilize the situation and enable the success of the new organization.

There are different ways a company can effectively communicate with its employees. First, a central communications team should be established to own, develop and manage all communication activities and messaging. Key communication milestones such as deal announcements and employee town halls should be set and prepared in advance. Employee messaging should be as transparent and factual as possible and foresee questions that employees may have at the top of their minds. Less formal communication activities may also be deployed – such as smaller meetings hosted by department heads – however, it is important to ensure that the messaging delivered across all these meetings is consistent and vetted by the central communications team.

See also: How Business Rules Engines Can Slash Time to Market

3. Retaining critical talent to limit business disruptions

Successful separations are predicated on retaining critical talent and staffing key roles with the right personnel. Separations signal times of change and uncertainty for personnel for various reasons, such as cultural misalignment with the acquiring company, changes in leadership and disruption in ways of working (relocations, job function changes, etc.), which often result in a marked increase in attrition rates. High turnover at the outset can affect company operations directly and indirectly – by demoralizing and placing extra burden on remaining employees.

There are, however, ways to limit talent disruption and impact on business operations. One way is the creation of a talent retention program, in which critical personnel are identified in advance and offered incentives to stay with the company. Incentives can be monetary (stock options, bonuses) and non-monetary (developmental opportunities). Incentives can also be set up to align with transition timing as the impact of the divestitures may sometimes be felt for years down the line. Encouraging employee engagement during the transition is another effective way to improve employee satisfaction, which reduces turnover and loss of productivity. Employees want to feel valued and heard in company matters, and engaging employee feedback is one way to achieve that.

4. Mitigating Stranded Costs

"Stranded cost" is a term commonly used to describe a component of the parent company organizational structure that was previously supporting the divested entity but did not transfer as part of the transaction. Stranded costs can come in the form of people, third-party contracts, IT infrastructure or any other piece of the overall cost structure. These costs differ from other costs incurred by the parent company in that they no longer generate any value. Because of the entangled nature of many divested entities, planning for stranded costs, or even the recognition that they exist, can often be overlooked. This is a misstep that can be mitigated, but it requires the identification of potential problem areas upfront.

As an example, IT is a function that is often difficult to unwind and so creates stranded costs. This is in part driven by the contractual landscape that supports an IT function, as day-to-day activities are typically driven by a consortium of third-party agreements that may include outsourced resource support and hardware and software licenses. These agreements are often not in sync with the timeline of the divestiture, so the parent company may be responsible for paying for goods or services that it no longer uses once the transaction is complete. Timely planning and communication with the respective vendors can help to amend contracts and minimize any residual obligations. This process takes a considerable amount of time and effort, and the involvement required also scales in relation to how entangled the entity is and how many agreements it has.

In sum, companies in the process of divestiture can approach unraveling entangled assets thoughtfully by putting some guardrails in place. Establishing a structure with teams appointed to manage programs and talent retention, ensuring proper timing for all changes and putting existing employees' morale first are some ways companies can retain value and support their business through a transformation.

Have you noticed that all life insurance carriers ask the same basic questions on their applications?

"Who is the owner of the policy?"

"Who is the beneficiary of the policy?"

"Do you have a history of cancer?"

"Do you have a history of heart disease?" et cetera.

The problem is, while they all ask the same basic questions, none are identical, and all have enough differences that a producer can't simply ask the questions once and populate the forms. This causes a great deal of redundant keying and rework by the producer, and confusion with the customer. This is particularly true when a client wants multiple policies and must endure multiple instances of carriers' electronic applications.

With this frustration in mind, ACORD pulled together stakeholders from across the life insurance value chain to develop a first-of-its-kind standard life application that could be delivered in a digital format. This new application includes all reflexive questions, is pre-cleared for use in 48 jurisdictions, and will enable improved producer and customer experience.

Many have asked for one standard life application, and due to the various industry factors and trends below, the standardized life application has finally become a reality.

See also: A New Era in Life Insurance Underwriting

Consumer Frustration With Repetitive Online Applications

Historically, there has been a gap between the digital experience expectations of consumers and what the life and annuity (L&A) industry has provided during the life insurance application process.

Imagine a typical agent-assisted sale with today's digital application, requiring an investment of about 30 to 40 minutes of the client's time. The client completes the application online, but a meaningful percentage of cases today are "issued other than applied." The natural inclination is to apply for coverage with another carrier to try for a better risk classification and lower price.

The customer is expected to begin the application again, requiring another 30 to 40 minutes. In the customer's eyes, the questions are the same and have already been answered. Why couldn't the answers be saved and used by the next carrier? This is possible with a standard life application.

NIGO Delays for Producers

Now imagine an agent-assisted sale with today's paper application, which is frequently seen in the large case market, which is known for sophisticated policy ownership (e.g., trust-owned policies, business-owned policies, etc.) and often requires multiple policies.

The producer first typically completes a client intake form (abbreviated medical history) to perform field underwriting to determine the risk class to quote. When the carrier, product type, and amount are determined, the producer needs to complete each paper application, then proofread them before having the client sign them.

Even with rigorous proofreading, there is a significant chance a key question is missed, and the policy is NIGO (Not In Good Order), causing delays in underwriting. This translates into a delay for the carrier earning premium, a delay in coverage for the client, and a delay in payment of the agent's commission.

If carriers adopt the standard life application, both online and paper applications will be dramatically improved. Application/enrollment vendors can configure their platforms to ask the questions once, then populate the carrier's electronic applications when coverage is selected. The redundant field underwriting questions can be merged with the application's medical history questions so they only need to be asked once, and NIGO rates with paper applications will be reduced because the producers won't be forced to familiarize themselves with every detail of every carrier's forms.

Pre-Cleared by the Interstate Insurance Compact

The new standardized life application is pre-cleared for use in 48 jurisdictions by the Interstate Insurance Compact. The compact implemented electronic product filing in 2007 to review and approve carrier submission of product application forms for its member states, bringing uniformity to the industry, and keeping forms maintained and updated across jurisdictions. The compact has been involved with the creation of the ACORD Standard Life Insurance Application since the beginning and strongly supports adoption.

The standardized application was created with bracketed questions that carriers can decide whether to include or exclude. Reflexive questions were also included to reduce the number of supplemental forms. Carriers that choose to use the standard application will automatically be moved to the Compact's Expedited Review Process Queue. Upon compact approval, the carrier can personalize the form to fit their branding and documentation guidelines. This shortens the form's approval time for a carrier's application from weeks to days.

See also: Removing Pain Points for Life Insurance Actuaries

A Competitive Advantage for Carriers

Carriers recognized that the question structure of a standard life application can improve data quality. The standard life application's questions were designed to incorporate behavioral science principles and industry best practices to improve response accuracy and reduce bias. They were also designed to maximize the amount of structured data and minimize free text. This will ensure maximum automation in underwriting and reduce manual interpretation on some carriers' medical and exam forms.

The reflexive questions were designed to ask only information necessary to continue underwriting. The reflexive questions refrain from asking questions the client likely won't know (or may misstate), like tumor stage and grade.

In addition, the standard application forms packet contains a full litany of avocation questions rather than just scuba and aviation. It includes motor sports racing, powerboat racing, rock climbing, back country skiing, and many others, and asks reflexive questions relevant for many of the reinsurance underwriting manuals to determine the appropriate risk classification.

ACORD has already completed the mapping of the initial data structures from the standard life application and reflexive questions to the ACORD Next-Generation Digital Standards (NGDS) JSON formats for easy manipulation and traceability.

The Future of Applying for Life Insurance

The new standardized life application will change how consumers, distributors, and carriers work through the life insurance value chain. The application offers a solution to the convoluted, time-consuming, and frustrating process of applying for life insurance policies and makes it easy to match consumers' digital expectations in 2025.

The benefits of a standardized application are threefold: Consumers avoid confusion and misrepresentation on their applications; distributors reduce NIGO delays and improve efficiency when completing multiple applications; and carriers can reduce form approval times and implementation costs with their enrollment system vendors.

A new study reports that U.S. homes will lost 6% of their value in the next 30 years, or a collective $1.47 trillion (that's trillion, with a "t"), because of climate change and the staggering premiums that insurers will have to charge to cover the growing risks.

The study by First Street, a group that focuses on climate threats to housing, says the home insurance premium amounted to about 8% of the mortgage payment not long ago. Today, the average is closer to 20%. And First Street says premiums will rise an average of 29% by 2055, not counting inflation, to catch up with the risks that aren't currently priced into premiums (partly because of resistance from regulators) and to account for the growing threats from climate change. Some locales may see premiums double or quadruple, soaring so high they become unaffordable.

Unless....

... insurers find a way to work with homeowners, regulators and other government officials to reduce the risks. Saving homeowners some significant portion of $1.47 trillion would be a huge service to humanity, while being immensely profitable for insurers. 

And I'm not sure I've ever seen the media so sympathetic to insurers, on any subject, so now would be a great time to start. 

The report by First Street says insurance currently underprices climate risk for 39 million properties across the continental U.S. That's 27% of the total. 

And First Street projects that as premiums soar to match the growing risks, the decline in housing values will just be the beginning of the disruption. It talks about climate change migrants — people who move to escape its effects. First Street says there will be 5 million such climate migrants this year alone and 55 million by 2055. Among other things, First Street predicts that the migration will slow the growth of the Sun Belt. (It also singles out Sacramento, which I live near, as one of the cities that will be hit hardest by rising insurance premiums. Hmmm.) 

A lot will happen between here and 2055, so the effects are hardly set in stone. But the report lays out in stark detail the opportunities — and challenges — that homeowners insurance presents for aggressive, forward-thinking insurers.

The way the report has been covered, along with recent stories about insurance, also shows remarkable sympathy for insurers, caught between frightening climate scenarios and regulators wanting to protect consumers from too-rapid disruption. We're all used to seeing complaints about heartless insurers canceling policies and not paying claims, so the different tone has been refreshing. 

Here is an essay in the New York Times, described as a joint effort between ProPublica and the Times, that presents the First Street data as requiring price increases by insurers. The same with this piece in USA Today, which sneaks in a little brag about how long and extensively the publication has been writing about First Street, in particular, and climate's effect on home ownership, in general. Here is another piece in the Times, this one laying out the oh-so-very-long timeline for people trying to rebuild after the recent fires in the Los Angeles area, dramatizing the pain of restoration and, thus, the importance of prevention. Here is a piece sympathetic to insurers in the Washington Post. I could go on. 

I wrote just three weeks ago about what I think next steps for insurers should be, as they try to help policy holders harden their properties and prevent damage from future natural disasters, so I'll merely summarize here:

• Engage with regulators and government officials at all levels and use the shock from the LA fires as a way to get to the tough conversations that need to be had about pricing risk properly and about how to persuade policyholders to change risky behaviors. These conversations must go way beyond the 22% increase in homeowners premiums that State Farm just filed for in California.
• Educate those who have lost properties on how to build back stronger and encourage them to do so.
• Try to get information on climate risks to potential buyers or builders of homes long before they're about to sign on the dotted line. Zillow has taken steps in that direction. The First Street study is another example. There must be many more.
• Help communities develop and stress test plans to better protect themselves.

As much as we all hope the LA fires will mark a turning point in the thinking about climate risks for homeowners, we also know that we have so very far to go. But the First Street report provides some dire forecasts that can serve as sort of anti-targets, as outcomes to avoid. 

Let's keep building momentum.

Cheers,

Paul

Cancer is the leading cause of death among life insurance policyholders. In recent years, we have seen an explosion of groundbreaking advances in cancer research that are changing the way that cancers are defined, prevented, diagnosed, and treated. These advances are expected to drive significant improvements in cancer mortality, even beyond what we have seen in the past few decades. 

The profound and swift evolution of cancer knowledge will have far-reaching implications for various facets of life and living benefits insurance products, underscoring the need for insurers to remain vigilant and adapt to this shifting landscape.

Improving Cancer Outcomes is one of the five critical topics featured in Munich Re’s 2025 Life Science Report, a wide-ranging thought leadership project intended to help life insurers better understand and navigate prevalent emerging medical trends and risks.

Key Insights:

• Prevention efforts will leverage the power of AI to integrate and analyze vast amounts of biometric, genetic, and imaging data and improve cancer risk prediction. Insurers will need to monitor this to anticipate potential anti-selection behavior.
• Diagnostic advances will also be fueled by the power of AI and the acceleration of earlier cancer detection by molecular/genetic analysis of bodily fluids (‘liquid biopsy’). Potential changes in how cancers are classified will require the modification of insurance product definitions.
• Therapies will continue to progress into more and more personalized treatment, further enhanced by tumor genetic analysis with targeted drug development and immunotherapies, such as personalized cancer vaccines. Much of this, however, will come at a high financial price, which could significantly impact health insurance costs and limit access in some markets.

Visit our Life Science Report page for more information and to access additional chapters as they are published, including AI in Healthcare (available now), Prevention (February 18), Obesity (March 4), and Climate Change (March 18). 

What does it take today to stand out in today's crowded property and casualty insurance landscape? The property and casualty (P&C) insurance landscape is always changing, and rarely do you find a time such as now where changes are happening more rapidly than ever. Recent industry data suggests that global insurance premiums are expected to continue to increase over the next five years. This trend is driven by increasingly severe weather events, economic uncertainty and inflation, creating pressures that brokers must navigate, with clients looking for brokers not only to secure policies but also to provide consultative support in managing risk.

With these dynamics in play, brokers have an opportunity to stand out by taking on a more modern, strategic advisory role — offering solutions that extend beyond traditional carriers. 

Let's look at the challenges P&C brokers encounter, the broad solutions available and how they can meet client needs by building long-term, resilient partnerships.

Managing Volatile Premiums in Hard Markets

In hard markets, clients often face significant premium increases and limited capacity, making it challenging to maintain affordable coverage. In fact, in 2023, the average commercial property insurance premium rose by over 20%, and some sectors — like real estate and manufacturing — saw even sharper spikes. Rising premiums coupled with restricted options can strain clients' budgets, requiring brokers to find alternative ways to stabilize costs. Chasing rates, increasing deductibles and reducing total insured value should not be the only options.

One solution is structured and customized insurance programs, which can help level out premiums over time and smooth the impact of market cycles. Brokers might also suggest exploring alternative risk retention strategies that allow clients to focus on specific, essential coverages tailored to their unique needs. These targeted approaches allow clients to stabilize costs without sacrificing coverage, fostering trust and demonstrating the broker's commitment to client needs and reducing attrition.

See also: Does the P&C Insurance Cycle No Longer Exist?

Meeting Demand for Specialized or Hard-to-Find Coverage

With emerging risks and niche markets on the rise, brokers are increasingly tasked with finding customized coverage solutions. According to a recent survey, 70% of executives report that they need more specialized insurance to address the unique risks of their industry, particularly in areas like cybersecurity, construction and health care.

To meet this growing need, brokers can help clients implement self-insured retention (SIR) programs, where businesses set aside funds for certain types of predictable losses while insuring more catastrophic risks in the traditional market. For industries facing complex or niche risks, bundling multiple specialized coverages into one policy can simplify protection while addressing specific exposures. These solutions allow clients to manage unique risks, helping brokers address specialized demands and enhance client satisfaction.

Improving Client Control Over Claims Management

Claims management can significantly affect the client experience, and a lack of transparency or delayed handling can cause friction. A report from Accenture highlights that dissatisfaction with claims handling can drive policyholders to switch providers, with around 74% of dissatisfied customers indicating they either changed providers or are considering it. For brokers, guiding clients toward more transparent and efficient claims management is essential in maintaining strong relationships.

Brokers can advocate for using third-party administrators (TPAs) that offer more tailored, efficient claims management services. TPAs give clients greater visibility and control over the claims process, creating a more proactive and aligned experience. Furthermore, brokers can encourage clients to implement safety and risk management programs, which can reduce claims frequency and improve outcomes. By helping clients take control of their claims, brokers position themselves as essential advocates in achieving smoother claims handling and better client experiences.

Enhancing Client Risk Management Practices

Effective risk management is not only a strategic priority for clients — it directly affects their insurance costs, claims experience and overall profitability. For example, industries with significant physical risks, like construction and manufacturing, can see substantial benefits from implementing comprehensive safety programs. According to the U.S. Bureau of Labor Statistics, businesses with strong safety programs can significantly reduce workplace injuries, which leads to fewer workers' compensation and liability claims. Over time, this can improve clients' claims histories and lead to more favorable premium rates.

By guiding clients to adopt robust risk management strategies, such as safety training and real-time monitoring technology, brokers help stabilize clients' insurance costs, making them less vulnerable to market fluctuations and claims-driven premium hikes.

Innovative Risk Financing Options: Adding Captive Insurance to the Toolkit

For clients who face unique or complex risks, alternative risk financing options such as captive insurance can offer significant advantages. While not suitable for every client, captives allow businesses to retain and manage risk more effectively, with benefits such as greater premium stability and customized coverage. According to industry data, nearly every Fortune 500 company now uses captive insurance for some portion of their risk management program, with captive formations growing among small and midsize businesses, underscoring its value in stabilizing volatile premiums and addressing niche risks.

A captive can be particularly beneficial for businesses with frequent, high-volume claims or those seeking customized coverage outside traditional markets. For example, a construction firm dealing with regular but predictable liability claims might use a captive to manage these costs more efficiently, while still maintaining traditional coverage for catastrophic events. Brokers who offer captives as one of several advanced risk financing strategies provide clients with greater control and flexibility.

See also: P&C Trends Point to Transformative 2025

Building a Strategic, Long-Term Partnership with Clients

Success in the evolving insurance landscape requires brokers to go beyond one-off policy placements and build enduring relationships with clients. By acting as strategic advisers, brokers can help clients not only manage immediate risks but also achieve long-term stability. Clients who view their brokers as invested partners are more likely to remain engaged and receptive to future recommendations.

In this regard, captives are one of many solutions brokers can suggest as part of a comprehensive, client-centered approach. By emphasizing risk management practices, transparent claims handling and strategic solutions tailored to individual needs, brokers foster trust and loyalty — key components of lasting partnerships.

Future-Proofing With a Diverse Set of Solutions

The challenges and opportunities in the P&C industry continue to grow, and brokers who build a versatile, innovative toolkit will be best positioned to meet evolving client needs. From structured programs and TPAs to specialized coverages and captives, today's brokers have a wide array of strategies at their disposal. By focusing on education, strategic advising and client-specific solutions, brokers can build resilient relationships, creating value and positioning themselves as trusted advisers for the long term.

In a market where client demands and risks are constantly shifting, brokers who prioritize a consultative approach and embrace diverse, customized solutions will be the ones who lead — helping their clients navigate the future of risk with confidence.

Capitalizing on a data-driven future is fundamental to reclaiming insurance's rightful place as the backbone of societal resilience and progress.

The future of insurance hinges on relationships. These relationships extend between people, their possessions, health, future, present, companies, families and ability to thrive in the face of losses.

It's a complex web that insurers must navigate. It extends beyond customers to include ecosystems - comprising both in-house innovations and integrated partner solutions - their staff, and adaptive business models and pricing that all interact simultaneously. At the core of this relational network lies data, the foundation upon which insurers must build sustainable, adaptive enterprises.

For example, if insurers hope to adopt AI as a foundational tool for delivering smarter, more adaptive customer experiences, the business and supporting technology model will need to change substantially. Harnessing multi-agent AI and applying it responsibly and securely across operations requires a robust data model. One that centers data on the customer and the dynamic world they inhabit, processes it in a fluid, near real-time manner and then integrates the resulting insights into personalized customer experiences.

Consider this scenario: You're involved in a car accident and press your car's "help" button. Instantly, emergency services and roadside assistance are alerted and dispatched to your location. Your family receives an automated text, reassuring them that you're safe, while your car begins interacting with a network of connected systems. The car initiates your insurance claim, retrieving policy details, assessing damage via integrated sensors and pre-filling forms for you.

As the process unfolds, you receive real-time notifications: repair options tailored to your location, transparent updates on claim progress and reminders about next steps. The system anticipates your needs, suggesting rental car services or alternative transport arrangements, ensuring your journey is minimally disrupted.

This is the power of data orchestration -- an intelligent and connected data ecosystem working together to transform stressful moments into smooth, supportive experiences.

However, disconnected, policy-centric insurers will continue to struggle to participate in this data-driven world. The question is, what does the insurance sector need to do to harness the value of data orchestration and apply it to transform customer experiences for the better?

In short, a fundamental rethinking of how insurance is built.

Insurers must shift from being policy-centric to customer-centric, ensuring their systems can adapt dynamically through the seamless flow of data. Whether that's enabling smooth integrations or rapidly shaping personalized experiences through low-code user interface (UI) capability tools, adaptability must be at the core of their design.

This adaptivity is reinforced by being born into the cloud as opposed to adapted to be hosted by it. This creates significant core resiliency and transferability between cloud platforms.

Such a foundation gives insurers the potential to operate like e-commerce style businesses, offering innovative products that address whole insurance needs. This approach also empowers them to overcome challenges in selling, servicing and partnering across a diverse technological ecosystem.

This is about creating a true adaptive future. One where data is no longer abstracted, stored, analyzed and then painstakingly reintegrated through layers of legacy systems and policy-based architecture. A future where insights don't have to be manually engineered back into the customer experience only to be hard-coded and rendered inflexible over time.

For those in multiple partnerships, the challenges are even greater -- constantly reconfiguring how data interacts with new services or ecosystems.

Principally, businesses need to intelligently orchestrate customers and build relationships and products and services into those relationships -- doing so in ever-widening ecosystems.

Data-driven futures are about treating data as a perishable asset, constantly mining it for insight and acting on it. AI will do much of the analysis and even much of the customer orchestration over the coming years, but even this lower level of use for AI is difficult if you're not built right. This is potentially at the heart of the legacy issue and why it is only now arriving at its crunch point.

Operating more efficiently, keeping up with regulation and competing on price has worked for insurers, but at this stage even doing those things competitively will require a significant shift in enterprise design.

It's time for a change, and intelligently orchestrating data is fundamental to all of it.

The insurance landscape is evolving at an unprecedented rate, driven by a convergence of technological advancements and shifting customer expectations. Recent research from IDC and Workday found that more insurers are investing in cloud technology, data analytics and artificial intelligence as they advance toward core modernization. Leaders in this fast-moving industry must understand the challenges and opportunities that lie ahead. AI is poised to reshape the industry as we know it today.

Here are three predictions for how technology will affect the insurance landscape and the steps to drive success in the age of AI.

Beyond the Hype: Building AI-Ready Data Pipelines

The transformative potential of AI in insurance is undeniable. However, the reality is that many insurers are grappling with fragmented, outdated data landscapes. While the promise of AI-driven insights is alluring, there's a critical truth to face: Without a robust and agile data pipeline, the dream of AI will remain just that – a dream.

The IDC and Workday research confirms this challenge, revealing that "improved data quantity and quality" is a top priority for 33% of insurance executives. This isn't only about collecting more data; it's about ensuring that data is accurate, accessible and actionable.

Leaders must look beyond the AI hype and prioritize the development of AI-ready data pipelines. This means investing in data integration tools, implementing data governance frameworks and fostering a data-driven culture within organizations. By addressing data quality issues head-on, insurers can unlock the true potential of AI for informed decision-making and strategic advantage.

From Segmentation to Hyper-Personalization

Across industries, AI is leading the hyper-personalization movement, and insurance is no exception. The days of one-size-fits-all insurance products are gone. Today's customers demand personalized experiences tailored to their unique needs and preferences, and AI is the key to delivering this level of customization.

The research also found that insurers are exploring AI for "policy customization and generation." This goes beyond simple segmentation; it's about leveraging AI to analyze individual risk profiles, predict customer behavior and offer dynamic pricing and coverage options.

Imagine empowering agents with AI-driven tools that provide real-time insights into customer needs, enabling them to offer personalized recommendations and build stronger relationships. This shift toward hyper-personalization won't just improve customer relationships – it will be a key differentiator in an increasingly competitive market.

We’re already seeing strides when it comes to companies using AI to hyper-personalize the benefits experience for employees. With Workday Wellness, for example, insurers and benefits providers can use AI to gain deeper insights into benefits and wellness data – e.g. participation, usage, claims and more – to better understand which offerings employers’ employees want and are using so they can adapt their benefits to better meet employees’ needs. 

The Rise of the AI-Powered ERP

Leaders have long viewed enterprise resource planning (ERP) systems as table stakes for insurance organizations, but their role is on the cusp of a transformation – thanks to AI. ERP systems will evolve into dynamic hubs for AI-driven automation and intelligence across all core insurance functions.

The research reveals a growing trend toward AI integration in finance, with 31% of insurers making it a top priority. From automating financial processes and improving forecasting accuracy to enhancing reporting capabilities, AI within ERP systems is set to redefine how insurers manage their finances. Meanwhile, 26% of insurers are focusing on AI in human capital management, paving the way for AI-powered tools within ERP systems to optimize talent management.

By embedding AI capabilities within ERP systems, insurers are unlocking a more connected, agile organization with streamlined operations, enhanced productivity and a holistic view of their business. This will enable them to make data-driven decisions, identify opportunities and respond to market changes with agility.

Leading the AI Transformation

The journey toward an AI-powered future requires strong leadership and a clear strategic vision. It's all too easy to get caught up in the AI noise, but with steadfast leadership and an action plan for the future, organizations will be poised to lead through the AI revolution and position themselves for success in the future of insurance.

Out Front Ideas with Kimberly and Mark kicks off yearly with our popular 20 Issues to Watch webinar. While there are certainly more than 20 issues to discuss, we focused on the high-impact matters relating to risk management and employee benefits that need more attention. These are essential issues for every risk manager, HR manager, and insurance professional to monitor in 2025.

1. Climate Change

For risk managers and insurance carriers, climate change is not a political discussion. Weather risks are intensifying and becoming increasingly unpredictable. Hurricane Helene destroyed major interstates in western North Carolina and eastern Tennessee, where flood damage was unexpected. The Los Angeles wildfires have devastated the second-largest metropolitan area in the U.S., forcing over 200,000 people to evacuate. Additionally, California regulations have restricted carriers from using catastrophe modeling instead of historical losses to appropriately adjust premiums, creating an unsustainable business model. Over the last two years, this has resulted in cancellations or non-renewals in wildfire-prone areas.

2. Mental Health and Well-Being

Expanded mental healthcare facilities, digital health solutions, and practitioners offering online services are opening access for more patients. Interventional psychiatry is also using advanced treatments, like brain stimulation, new medications, and enhanced psychotherapy, to manage difficult-to-treat mental health conditions. From an employer perspective, leaders must be upskilled to understand the impact of disabilities and neurodiversity on their employees. Understanding how these differences affect their performance and interactions can lead to better opportunities for retaining great employees.

3. Aging Infrastructure

According to the American Road & Transportation Builders Association, around 36% of U.S. bridges need repair or replacement. Many water systems are also aging, with some areas, like Jackson, Mississippi, experiencing water crises that leave their residents without safe drinking water for weeks. The U.S. electrical grid, built in the 1960s and '70s, has 70% of its transmission lines that are over 25 years old.  Many of these have led to wildfires, which could worsen over time. 

4. Employee Benefit Landscape

According to Deloitte, employer-sponsored health insurance plans cover roughly 154 million people in the U.S., and costs have escalated for the third year in a row. Employers continue to seek affordable plans to encourage well-care and prevention. Additional benefits like accident and injury coverage, pet insurance, paid leave, reproductive health, and more continue to be popular offerings that are important to the workforce. Unsurprisingly, GLP-1 drug coverage is now being offered by one in three employers. The highly effective weight loss drug could become more widely available, with the potential to increase health equity.

5. Election Impact

Government regulations could be upended, as the Trump administration has promised to reduce their impact. Last year’s overturned Chevron deference ruling could potentially affect the Medicare set-aside (MSA) industry, with its compliance rules based on a limited section of statutory language. Additionally, risk managers should continue to closely monitor domestic risks, such as the most recent terrorist attack, on Jan. 1, as well as rising geopolitical risks that could affect war risk exclusions.

6. European Union (EU) Regulations Affecting U.S. Companies 

The EU’s Corporate Sustainability Reporting Directive (CSRD) aims to standardize sustainability information so companies can create comparable and reliable details for stakeholders. This environmental, social, and governance (ESG) regulation applies to EU and non-EU companies, including public and private organizations. Implementation is staggered through 2029, with the first report submissions due in 2025. There are 3,000 U.S. companies either exporting or doing business in the EU that must report, which is expected to grow to 10,000 U.S. companies at full implementation and include 50,000 companies globally. Additionally, U.S. companies need to understand compliance with the AI Act, which uses a risk-based assessment to create more ethical AI, and the General Data Protection Regulation (GDPR), which defines personal data usage.

7. Insurance Marketplace

Brokers and risk managers may be experiencing rate fatigue, but insurance carriers face increased jury awards, property losses, and vehicle and property repairs. Until combined ratios return to profitable levels, rates will likely continue increasing. Parametric insurance, which insures a policyholder against a specific event by paying a set amount if the triggering event occurs, is becoming more popular for harder-to-insure properties. With no appraisals or valuation disputes, they are quick to settle. Finally, per- and polyfluoroalkyl substances (PFAS) claims are set to reach $80 billion in litigation costs, according to The Insurer TV. Reinsurers are beginning to exclude these claims, and these exclusions may eventually reach the primary coverage layer.

See also: Insurance Industry Embraces Tech, Trust in 2025

8. Evolving Technology and AI

From improving safety and loss control programs to forecasting financial trends related to accidents and claims development, risk managers are using AI to establish new protocols for their organizations. Their improved ability to understand real-time risks in the business helps operational and executive leaders. Payers are rapidly evolving claims processing, as this tech supports claims teams’ productivity gains, improving operational consistency and quality performance. Other applications include claims triage, medical record and claims summarizations, reserve planning, fraud detection, and even virtual assistance for claims and clinical professionals.

9. Cyber

According to LexisNexis Risk Solutions, AI-assisted fraud schemes could cost over $1 trillion in the next year. Increased cyberattacks on U.S. government agencies, private organizations, and infrastructure have led to significant losses, with many calling for a federal government backstop to protect from even larger attacks. With an average global cost of around $4.9 million, cyber incidents remain a focus for risk managers and organizations alike. 

10. Diversity, Equity, and Inclusion (DEI) Perspectives

With some U.S. companies discontinuing DEI programming, groups should define their position. Inclusivity can be driven without a corporate stance, but employees want to feel respected and valued by their peers and leaders, which requires more transparent dialogue. Active job candidates will still search for DEI initiatives on company sites and social media to understand group policies and know they will be supported.

11. Labor Shortage Impact on Claims

Retail, restaurant, hospitality, and construction industries are still struggling to find workers. Employers are also trying to produce the same results with fewer employees, driving fatigue and overexertion among their workforces. Risk managers should monitor accident trends to note any correlation with staffing challenges. Employers should seek solutions for automating tasks, reducing strenuous activities, and monitoring unsafe practices.

12. Healthcare Landscape

Regulatory changes under the Trump administration could lead to more oversight of the Food and Drug Administration (FDA), with the Department of Health and Human Services (HHS) focused on vaccine safety, pharmacy benefits managers, and drug approvals. Transformative technology continues to drive patient-centered care with expanded telehealth, virtual health assistants, and advanced care. Lastly, healthcare staffing and burnout are continuing to drive workforce challenges. This year, nursing is expected to reach a 10% to 20% shortage of staffing necessary for direct patient care.

13. Exclusive Remedy in Workers’ Compensation

Most states have strict exceptions to workers’ compensation's exclusive remedy, which requires proving gross negligence or intentional acts. However, recent litigation in a couple of states has circumvented these restrictions. In Virginia, lawsuits filed in two workplace shootings alleged the employer was negligent by not taking action to ensure a safe workplace. Last September, the Pennsylvania Supreme Court ruled in Elite Care RX v Premier Comp Solutions, allowing the healthcare providers to file a civil suit for non-payment of bills. Finally, in November, an employee fired for fraud who sued in civil court for defamation was awarded a $34 million judgment. 

14. Optimizing Your Risk Management Program

Risk managers are deploying in-house data analytics and AI modeling to improve safety and loss control and their understanding associated with enterprise risks. They are working diligently to integrate risk management into strategic decision-making across their organizations and partnering closely with their business partners to enable a risk-aware workforce. Evolving risks may require a nuanced approach to risk assessment and mitigation. In the wake of United Healthcare CEO Brian Thompson’s assassination, organizations are rethinking public display and openness about the location of their executives and employees. Boardrooms across the U.S., for the insurance industry or otherwise, are reflecting on this incident to improve their employee safety.

See also: 2025 Insurance Outlook – 3 Major Trends

15. Biometric Privacy Laws

Unauthorized collection or disclosure of biometric information has led to several class action lawsuits, particularly in Illinois, but their statute was amended last year to limit damages on a per-person basis instead of per scan. Still, potential exposures are significant, with biometric privacy laws in Illinois, Texas, Washington, and New York City. Other states and municipalities are also considering similar legislation. Risk managers should monitor this evolving legislation and consult with counsel and other experts to ensure their policies with collections and use of biometric data follow statutes. 

16. Achieving Operational Excellence

With the culmination of workplace technology advancements, newer workforces, increasing retirements, and outdated workflows and processes, now is the time for organizations to rethink how they drive performance. Identifying cross-functional teams to assess strengths, weaknesses, and actionable improvements in a company’s operations, talent, and customer satisfaction may help drive meaningful changes to reach excellence in 2025.

17. Legal System Abuse

In 2023, jury awards over $10 million reached a 15-year high, with 27 cases reaching over $100 million. This trend affects every business and public entity, raising the costs of goods, services, and taxes for every American. Legal system abuse is driven by deceptive attorney advertising, anti-corporate sentiments, and the devaluation of money, but the solutions are systemic. Tort reform on judgment caps could help, but little progress has been made. Additionally, litigation funding needs extensive oversight, particularly as it threatens U.S. national security. Chinese government-backed companies use litigation financing to pursue patent infringement claims against U.S. technology and defense companies, not to prevail in litigation but to access trade secrets through the discovery process.

18. Managing Through Mergers, Acquisitions, and Divestitures

HUB International’s Outlook 2025 report noted that 45% of business leaders surveyed report planning or implementing strategic partnerships, 43% are planning or executing mergers and acquisitions (M&A), and 35% are planning international expansion. Risk managers preparing for these events should ensure their teams adequately understand these projects to identify, analyze, and mitigate potential risks. Consider the following items throughout the process: due diligence and deal intricacies, planning and executing integration, enterprise risk assessment, mapping regulatory compliance, broker partner and insurance reviews, understanding new and long-tail claims, and post-event operation models.

19. Workers’ Compensation Claims Trends

In the last two years, more states have revised fee schedules to catch up with the increasing costs of providing care, which, coupled with a growing shortage of medical providers, is likely to increase medical inflation. Catastrophic claims, while infrequent, are becoming increasingly expensive, with new medical technology and care, longer life expectancies, and higher rates of accident survivability. Different generations in the workforce are also creating specific challenges. Workers aged 75 and older are the fastest-growing group in the workforce, quadrupling since 1964. When injured, this group experiences more severe injuries and recovers more slowly. However, increasing disability durations in the younger workforce are also trending upward. While unclear, there is speculation that there is a greater valuation on work-life balance, so younger employees do not return until they are fully healed. Lastly, the industry should continue to monitor post-traumatic stress disorder (PTSD) presumption claims. Some states are expanding mental-mental claims to the entire workforce, versus the first responders that initially benefited. 

20. Navigating Headwinds

Macro factors, whether economic, political, technological, or environmental, always affect businesses. In today’s environment, it is not the cost of goods, competition, or regulation affecting us the most, but rather the convergence of speed, complexity, and noise. Business decisions are expected to be made quickly, issues are more nuanced than ever, and demands are at every corner, with more stakeholders and communication methods. Getting the right answer is more difficult, but identifying and preparing for approaching risks is evolving organizational risk management.

Listen to the archive of our complete Issues to Watch webinar here. Follow Out Front Ideas with Kimberly and Mark on LinkedIn for more information about coming events and webinars.

Insurance Thought Leadership

How do you see cyber risks evolving?

Vishal Kundi

If we look at how cyber risks have evolved, particularly in the last five years, we have seen threat actors getting better at exploiting vulnerabilities and emerging technologies like IoT and AI to expand the attack surface, making it harder to fully safeguard against breaches.

Looking at our claims data, about 80% of cyber claims are due to human error. Employees or individuals inadvertently open the door to cybercriminals, either by leaving security gaps unattended to or making networks more vulnerable. Our key objective here is to provide customers with alerts when we detect potential risks. The idea is that with the right education and tools, they can address these issues before they can cause a problem.

Another growing threat is the rise of social engineering attacks as more businesses move to online banking. We see increasing instances where hackers trick customers into paying fraudulent invoices by using compromised email accounts or fake communications. This type of threat is harder to address purely with technology because it boils down to awareness. Businesses need to be more vigilant about verifying payment requests and changes in banking details.

Insurance Thought Leadership

I like your "predict, prevent, and insure" model. The more we can predict and prevent cyber events, the less we need to insure, creating a safer world. Can you tell us more about your preventive approach, particularly with your scanning and alert platform?

Vishal Kundi

We’ve developed a robust system that looks for threats and risk signals, which help us identify higher probabilities of a loss. For instance, we can tell if a client’s website isn't properly secured or if their email addresses and passwords have been stolen.

These signals don’t necessarily mean a breach is imminent, but they do increase the chances of a targeted attack. At a deeper level, we monitor "hacker chatter" on dark web forums to see if someone is selling our customers' data. For example, if we spot a post offering Fishman Inc.’s data for sale, we can alert our client’s team through our Hackbusters service to take action and reduce vulnerabilities before an attack occurs. This proactive approach continues to evolve and become more sophisticated.

That said, while we work to secure our customers, hackers are constantly evolving, as well. We also package these predictive and preventive tools into our all-in-one Cyberboxx products, which provide coverage for both individuals and businesses.

Insurance Thought Leadership

How do you see cyber threats evolving further? I’m hearing more about hackers threatening to publicize sensitive information, rather than just encrypting data and demanding ransom for decryption tools.

Vishal Kundi

That’s a very insightful point. Cybercriminals are constantly looking for new ways to extract money, and they’ve realized that the ability to rebuild data no longer holds the same weight. What truly gets a company’s attention now is the threat to its reputation, particularly when it comes to customers. If a hacker can threaten to publicly expose sensitive customer data, that becomes a far more effective tool for extortion.

Another trend is that smaller businesses are becoming more digitally savvy and increasingly dependent on cloud services and third-party applications. However, when these external services experience outages or breaches, they can bring the entire business to a halt. This risk is known as "contingent business interruption." A prime example of this occurred last year in the auto dealership sector, when a widely used point-of-sale software was compromised. The breach affected thousands of dealerships across North America and Europe, highlighting how interconnected and vulnerable businesses can be when they rely on external digital tools.

Insurance Thought Leadership

How should companies approach cybersecurity risks that are beyond their immediate control, especially with third-party vendors and contractors? I’m thinking of incidents like the Target breach, where hackers exploited a vulnerability in a third-party vendor.

Vishal Kundi

Larger enterprises, in particular, are now asking suppliers to disclose their cyber insurance coverage and security measures as part of the procurement process, trying to avoid scenarios like the Target breach, where a third-party vendor’s weak security led to a massive incident. Cyber insurance policies typically include coverage for such losses caused by third party suppliers they are connected to. It covers the loss of income or operations that occurs when a third-party service provider or vendor suffers a cyber event, such as a breach or outage, affecting your business.

Insurance Thought Leadership

When you work with carriers and customers to predict and prevent problems, how does that look in practice?

Vishal Kundi

As a Lloyd’s of London coverholder, we are authorized by a Lloyd’s syndicate (or multiple syndicates) to assess risks, underwrite and issue insurance policies on their behalf, in addition to providing the Predict & Prevent services to our customers. From that lens, customers get the peace of mind of the coverage and the all-in-one prediction and prevention.

A new trend we’re seeing is more insurers looking to provide cyber insurance to their customers. They see the benefits of replicating our Predict & Prevent approach. They don’t have the technology and expertise to put this in place, and we’ve been approached to white-label our solutions for them. This is a huge testament to the effectiveness of the systems we’ve developed.

We’re also seeing major interest from mega brands in banking, financial services, travel and retail. These industries are integrating our cyber protection offerings into their products, helping their customers stay safe online. In India, for instance, we work with the country’s version of Zillow, where users can add our digital protection when making rent payments. We’re also embedded in telecom subscription plans in Canada.

This integration shows that customers expect large brands to offer protection while they transact online. We've developed methodologies to underwrite entire customer groups and provide relevant cyber and digital safety services at scale. This approach is proving highly effective for us.

Insurance Thought Leadership

Embedded insurance is a growing trend, and what you’re describing is a perfect example. People don’t usually think about buying your insurance, but they’re paying a small amount for key protection as part of another transaction, just when they need it.

Vishal Kundi

Exactly. We use embedded insurance as an entry point. As customers become more digitally savvy, they can choose to "buy up" from that initial protection as their needs evolve.

We’re now exploring ways to develop new products for various affinity groups and organizations, such as cyber insurance for business travelers and employee benefits. There are so many ways we can protect people beyond traditional insurance models.

The beauty of digital risk is that it’s no longer about geographic location. Your risk is tied to your digital footprint, which makes it easier for us to work globally. For example, we can work with telecom companies in Canada and India with the same ease.

We’ve also identified opportunities to provide value to customer groups that traditionally struggle to get cyber insurance. For instance, a large Christian faith group approached us wanting to insure their parishes. What they really needed was access to emergency cyber support. So we created a non-indemnified service called Cyberboxx Assist, where parishes can reach out to our Hackbusters team 24/7 in case of a breach.

Insurance Thought Leadership

How do you see cyber risk and coverage unfolding with traditional lines of insurance?

Vishal Kundi

As businesses become more digital, every part of their operations now involves some level of cyber risk. When we insure a company for a cyber policy, we’re looking at two main things: the cost of getting the business data systems back up and running and the cost of third-party lawsuits. There's also the issue of cybercrime, where companies are targeted by fraudsters.

Let’s look at the example of property insurance. Many traditional cyber insurance policies may not automatically cover physical property damage caused by a cyber incident. Take a hospital. What if a cyber breach compromises an MRI machine? What if that breach leads to patient injury or another event? Would that fall under the hospital’s liability insurance, cyber insurance or even their medical practice insurance? We’re starting to see more questions about how to properly categorize these types of risks, and specialist coverages like cyber property damage to start filling in some of those gaps.

In addition, board accountability is becoming a hot topic. Directors and officers are increasingly held responsible for a company’s cyber infrastructure, which raises questions about whether their D&O insurance should cover this risk.

These evolving scenarios show how intertwined cyber risk is with other lines of insurance.

Insurance Thought Leadership

As a baby boomer, I appreciate that you’re focusing on this demographic. What problems are you solving for us?

Vishal Kundi

We define boomers as people between 61 and 79. As they navigate the digital world, they often don’t have the same safety awareness as younger generations that have been around the technology for a longer part of their lives. Cybercriminals are targeting this group, knowing they hold significant wealth and may not be as digitally savvy.

Insurance Thought Leadership

We’re seeing cyber risks rise, yet premiums are often decreasing. Does this track with what you’re seeing?

Vishal Kundi

That’s spot on. As companies improve their ability to manage security risks and losses remain within expected limits, insurers are becoming more confident in offering better terms and pricing. However, over time, as losses begin to exceed premiums, we typically see upward pressure on prices. This cycle—where premiums rise after a period of stability or decline—is a natural part of the insurance market, and it’s one we’re likely to see play out in the cyber insurance space, as well.

Insurance Thought Leadership

Thanks, Vishal.

About Vishal Kundi

As the co-founder and CEO of BOXX, Vishal Kundi aims to help make the world a digital safer place. Prior to BOXX, Vishal held the role of chief sales officer at Arthur J. Gallagher. Vishal brings a global perspective to building a new company, having lived and worked across the world, including in Dublin, London, Hong Kong, Santiago and Toronto. He has played a pivotal role in both mature businesses and insurance startups.