Generative AI is rapidly reshaping how businesses process information, make decisions, and serve customers. It’s also amplifying a long-standing challenge: fraud in vehicle insurance claims.

Fraud in auto claims costs the U.S. property and casualty sector an estimated $45 billion annually, according to the Coalition Against Insurance Fraud. That burden adds up to about $700 in extra premiums for each household (PropertyCasualty360, May 2024). 

And the problem is evolving quickly: The Guardian reported a 300% increase in AI-manipulated vehicle images submitted to one U.K. insurer in just one year (The Guardian, May 2024). If that stat holds true, it makes deterring auto claims fraud that much more urgent an issue to address, especially because of how bad actors can use generative AI to manipulate claims submissions.

With GenAI, bad actors can fabricate auto claims scenarios with alarming realism, doctoring photos, swapping license plates, or creating deepfake “walkaround” videos of damage that never occurred. In one case, fraudsters digitally altered a van’s image lifted from social media to add a cracked bumper, submitting it with a fake invoice for over $1,000 in damages. Investigators discovered the untouched original online, exposing the deception (The Guardian, May 2024). 

Tools like metadata analysis or image forensics aren’t foolproof fail safes: metadata can be stripped or spoofed, and forensic models can struggle to keep up with the pace of new generative techniques. Meanwhile, manual claim reviews can be slow and costly to scale.

Insurtech applications of solutions like UVeye exemplify how trust can be embedded directly into the claims process. Their approach uses a three-layer system to validate vehicle condition: Multi-camera scans capture detailed, frame-by-frame imagery; encrypted digital fingerprints create a tamper-proof record; and third-party oversight adds impartiality to the verification process. 

This isn’t just about detecting fraud after the fact; it’s about creating deterrence. By establishing a trusted vehicle history, verifying damage through a third-party, and automating assessments, this approach could reduce false claims and streamline workflows—driving both accuracy and efficiency, while also safeguarding integrity. Taken all together, these elements shift the claims process from one that reacts to deception to one that could neutralize it—while also creating a faster, fairer experience for legitimate claimants.

No single solution can address this risk on its own; collaboration among stakeholders across the risk management and insurance ecosystem is essential. That’s why The Institutes’ RiskStream Collaborative is developing scalable, systemic tools like RAPID X, which enables secure, private, permissioned exchange of first-notice-of-loss data among carriers during a mutual event. At the same time, RiskStream’s AI Council brings together insurers, insurtechs, and research organizations to identify common AI use cases, such as fraud prevention, and to promote ethical, multiparty solutions that protect private data.

Together, these initiatives form the backbone of a more resilient claims ecosystem, one built on trusted data, shared standards, and aligned incentives. As generative AI continues to reshape the landscape, the industry must meet this moment with bold, coordinated action. 

Combating fraud is only the beginning. The real opportunity lies in transforming claims into a faster, fairer, and more secure experience for all stakeholders: insurers, service providers, and most importantly, policyholders.

Works Cited

Coalition Against Insurance Fraud, 2023 Annual Report. 

Ashley Hattle-Cleminshaw, PropertyCasualty360, “Fraudsters using AI to manipulate images for false claims,” May 8, 2024. https://www.propertycasualty360.com/2024/05/08/fraudsters-using-ai-to-manipulate-images-for-false-claims

Rupert Jones, The Guardian, “Car insurance scam: fake damage added to photos,” May 2, 2024. https://www.theguardian.com/business/article/2024/may/02/car-insurance-scam-fake-damaged-added-photos-manipulated 

Nicos Vekiarides, Insurance Journal, “Deepfake Fraud Is on the Rise. Here's How Insurers Can Respond,” July 17, 2024. https://www.insurancejournal.com/news/national/2024/07/17/784226.html

UVeye Research, 2025 White Paper.

The Institutes RiskStream Collaborative: RAPID X and AI Council Initiative Overview.

This article was first published on The Skills Edge Blog at The Institutes.

The insurance industry is facing a perfect storm: a wave of retirements, a shortage of specialized talent, and a new generation of workers with different expectations. Without a plan to capture institutional knowledge and modernize operations, insurers risk falling behind.

In this report, we explore the root causes of the insurance talent crisis—and how forward-thinking organizations are using technology to bridge the gap.

Download the eBook Now  

Sponsored by: Origami Risk

It's been a wild and bewildering few years in our industry, and almost everything seems to be in flux. Leaders are seeking some reliable sense of what to expect so they can strategize and plan effectively. 

Three consecutive years of rate increases have taken a toll on consumers and businesses but have achieved the desired goal of profitability -- at least for now, as insured losses from catastrophe events across the globe in the first half of 2025 increased to almost $100 billion, which marks the second highest recorded after 2011's $140 billion, according to an Aon report. These figures are up from $71 billion in H1 2024 and are threatening, especially as hurricane season has yet to peak.

Lately, industry colleagues and client inquiries are shifting from product design and market entry to more strategic planning. Meanwhile, insurtech funding is rebounding with renewed urgency and excitement for all things AI, but also testing more recently adopted investor parameters, established after years of excesses.

What follows is an executive level review of our thought leadership articles (all of which can be accessed at Insurance and InsurTech Blog) published over the past few months, mined for insights. It turns out the majority of the trends we have identified and illuminated are emerging.

There are other noteworthy developments, too, such as Progressive claiming the No. 1 spot in market share, unseating State Farm. The most-talked-about new insurance/insurtech entrants—Root, Lemonade and Hippo—have survived, evolved or thrived despite declarations of their demise. And, let's not overlook a milestone, as P&C reached $1 trillion in written premiums for the first time.

Looking back at some of 2025 predictions, we note that Predict & Prevent continues to gain traction. The electrical detection, fire prevention solution by Ting is a shining example. Advances in leak detection and water shut-off along with workplace injury avoidance are also highlights. Legal abuse centered on litigation financing is finally getting more attention; record-setting verdicts are adding pressure, on top of weather risk. Finally, there is anticipation of greater M&A activity. 

And 2025 is just the halfway point of the decade. So remain buckled in and stay tuned.

Here are some of our most-read and commented-on articles:

(Re)defining Empathy in Insurance

The expression "empathy in insurance" is as abused and misunderstood as "innovation in insurance." The underlying intent and value of both are important but vague, contradictory at times and often misapplied by industry practitioners.

The future success of insurance depends on repositioning the industry for higher relevance to the new consumer and stakeholder alike. Redefining empathy amid exponential gains in technology is a big step forward in thoughtful and responsible use of AI in insurance.

Human touch in insurance is not going away any time soon, but your next co-worker is likely to be AI-powered.

Here is the link.

AI Can Fix Everything in Insurance

Every time we read an article or a marketing piece espousing the astounding power of AI as applied to insurance, we cannot help but think about Gus Portokalos!

As you may recall, Gus was the bride's father in the 2002 hit movie "My Big Fat Greek Wedding," who famously suggests, "Put some Windex on it!" as a solution to all manner of problems, including cuts and scrapes. Gus proudly related every word, phrase and meaning back to his Greek ancestry as a solution or fix to each conversation. A lot of people are treating AI in the same fashion.

Even the typically thoughtful Bill Gates gushed that AI is "the first technology that has no limit" and "could be as revolutionary as the internet or mobile phones."

As with the greatest man-made inventions that have shaped human history, including the wheel, printing press, electricity, airplane and internet, AI is likely to drive unimaginable benefits, innovation and unexpected consequences. Unlike these earlier advances, however, AI may the first man-made invention that threatens its creators. We have been warned!

Here is the link. 

Trust, Personalization and Transparency

The insurance industry is at a crossroads. Brewing negative consumer sentiment about insurance affordability and premium fairness is spilling over as profitability struggles threaten markets. As the industry takes needed action, insurers find it difficult to inform and educate a customer base that views pricing as opaque and overly complicated. All of this raises the question: Can premium adequacy and trustworthiness co-exist?

The year ahead offers a pivotal opportunity for the insurance industry to redefine itself. By prioritizing transparency and personalizing policies, insurers can address premium leakage while restoring trust. Companies that lead with these values will not only strengthen their bottom lines but also reshape the industry's reputation for the better.

Here is the link. 

P&C Insurance: Mind the Gap(s)

The expression "Mind the Gap" dates to the 1960s and announcements on the London Underground. The purpose was to warn passengers of the potentially dangerous gap between the train door and platform, which are not perfectly aligned. The line has since evolved to become a general warning about the danger of open space or gap between two points.

It applies especially well to the many risks and headwinds faced by the insurance industry today. And if unattended, the gap may be impossible, or at least much harder, to close.

The role of innovation and insurtech cannot be overstated for an industry that historically is people- and labor-intensive. Closing these gaps is vital for the insurance industry and its contributions to the economy and consumer livelihoods. Long-term insurance stability is in the best interests of investors, financiers and risk takers of all types, including businesses and consumers. Minding the gap is foundational for industry success in 2025 and beyond.

It's time to mind the gap(s).

Here is the link. 

P&C Insurance Claims: The Time Has Come

For those of us who have worked in this industry for a decade or longer, when you honestly assess how claims handling has evolved over time, you would fairly conclude that while certain aspects have improved – some even impressively – the fundamental model, process, service and financial outcomes have essentially remained unchanged or marginally improved.

When comparing insurance claim modernization with that by others in financial and consumer services, the shortcomings become even more obvious. Yet the environment in which claims occur and are resolved has changed significantly.

The reasons and underlying factors for this lack of breakthrough are many and complex and playing catch up in real time has not proven to be easy so far, but it is possible – and mandatory.

The time is now, conditions are ripe, the solutions are at hand and the future of the industry awaits.

Here is the link. 

Get Connected

A complete library of our thought leadership articles can be found at Insurance and InsurTech Blog. You may also subscribe to our free daily Connected Newsletter or podcast (Connected Podcast on Apple podcasts or Connected Podcast on Spotify).

Traditional insurance models are no longer fit for today’s fast-evolving landscape. Mounting costs, outdated systems, and shifting customer expectations demand a bold transformation. This new research reveals why now is the time for insurers to modernize their operating models – leveraging Cloud, AI/ML, GenAI, IoT, and more – to drive efficiency, innovation, and sustainable growth. Discover how industry leaders are reimagining their foundations to stay competitive and profitable.  

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Sponsored by ITL Partner: Majesco

While on vacation last week at the Jersey shore, my mind wandered far afield. Perhaps because my daughters repeatedly urged me to watch "Sinners," my thinking ranged to vampires and then zombies. 

Eventually, my mental meandering resolved itself into a renewed belief in the importance of scenario planning, especially in these unpredictable times, and the insurance industry should absolutely be preparing for a whole range of possibilities.

Let's start with the one that amused me as I sat on the beach: the possibility of a zombie apocalypse. 

A key issue: Are those who get infected by the hordes of zombies dead or merely "undead"?

As I understand zombie lore, the decision could go either way. Zombies don't show any brain activity and have no heartbeat. Yet they still have their physical bodies, and they still function — in that straight-armed, "I'm coming to eat your brain" kind of way. 

Life insurers would have to come to a decision and be prepared to defend it.

If zombies are considered to be "undead," all sorts of other types of insurance kick in. Zombies decay and are known to lose limbs, so there could be lots of disability claims, for instance.

There would be auto accidents galore, as people fled. 

There might be liability claims against property owners — or not. I'm liable if someone slips and falls because of my carelessness, but am I really liable if a defense I've rigged up blows a zombie's brains out? What if my system blows out the brains of an uninfected neighbor looking for protection? 

As for health insurers, you might think they'd be inundated with claims, but there's no treatment for zombies. There would presumably be loads of people injured fleeing the zombies, but would hospitals still be functioning? What would the CPT code be for an injury while avoiding an attack by a zombie?

And on and on and on.

In the real world, where even the multiplying hordes of conspiracy theorists aren't claiming zombies exist, Royal Dutch Shell is the poster child for scenario planning. Based on research at the RAND Corporation in the 1960s, it set up a group that considered, among many other things, the possibility of a surge in oil prices. Shell then put contingency plans in place that left it well-prepared when prices quadrupled in just a few weeks during the oil crisis of 1973.  

For me, the key hurdle for scenario planning is to make sure you don't think you're predicting the future. As this article explains in some detail, based on the Shell example, you're just trying to get outside the mental model that you use to view the world. Even if none of your scenarios come to pass — and they likely won't — you've developed a more robust view of your environment and are better prepared. 

Now is a great time to apply that sort of discipline in insurance because of all the uncertainty about government policy, about geopolitics and about the economy. 

The Trump administration has for months talked about abolishing the Federal Emergency Management Agency but may be backing off after the disastrous flash flood in Texas. Tariff policies are all over the place. What's going to happen with Ukraine, Gaza, Iran...? Economists are predicting a resurgence of inflation in the U.S., and the data released today suggest it may be starting, but many of the expected effects from Trump policies have been muted this far. Will they, in fact, show up? When?

Your strategic decisions may not change much based on some of those issues, but it's worth gaming out the possibilities for any that might. 

In the meantime, stay away from those zombies.

Cheers,

Paul

The flash flooding in Texas has, tragically, killed more than 100 people, and much-deserved finger pointing has begun about who all is to blame. As responsibility gets sorted out over the coming weeks and months, I think we need to recognize another aspect of the problem, one that goes well beyond local, state and federal authorities. We humans just don't think and behave right.

The flood happened in what's known as the most dangerous river valley in the U.S., but local and state officials have for years decided not to install early warning systems because they didn't think voters would approve of the spending. Lots of people discounted the forecasts of heavy rain that the National Weather Service issued in the days leading up to the floods.

If we can't even prepare for flooding in what's known as Flash Flood Alley, where can we get it right?

I'm really quite discouraged. I'm beginning to think human behavior may be intractable.

To be clear, I'm happy to point fingers at lots of people in authority. There was a massive failure to prepare here, as this story in the Washington Post describes.

State and local authorities not only didn't invest in warning systems; they also underestimated the logistical difficulties of alerting people in remote areas, even though cellphone coverage is known to be spotty and severe weather can obviously cause power outages. At the federal level, the DOGE chainsaw led to some 600 people being cut at the National Weather Service or taking early retirement this spring, and many experts say the lack of personnel likely contributed to the inadequacy of warnings about the Texas flood. 

The problem will get worse at the federal level, too, because the Trump administration says it will scale the Federal Emergency Management Agency (FEMA) way back or even eliminate it as part of a plan to "empower states." Already, the Trump administration has said it will, at the end of this month, cut off access to a data source that is considered to be crucial for hurricane forecasting. 

But even beyond the (many) failures of authorities, I think we have to acknowledge that people really aren't built to prepare for disasters. We reason based on our personal experience, and we get complacent because we haven't experienced a flood, a wildfire, a hurricane, a tornado and so on.  

I realize money is scarce in many areas and can understand why voters would be reluctant to invest in warning systems. I also realize that this flood was unprecedented in this particular area.

But we live in a time of unprecedented weather, and the problems are only going to get worse. So we need to do far better at making ourselves and our properties more resilient in the face of impending natural disasters. 

Yet I'm not sure we will. 

I'm not sure we can, as humans.    

All I can think to do is the sort of thing I've recommended in the past, so we can at least minimized the catastrophes. Insurers have a major opportunity to guide policyholders on how to mitigate risk, including possibly offering incentives through discounts on premiums. Insurers can also help communities of people work together. 

We won't solve the problem. We humans are hard-wired against a real answer, it seems. But we can have a serious rethink and at least try to do better.

That's the best I've got, I'm afraid. 

Cheers,

Paul

Insurance fraud remains the second-most costly white-collar crime in the U.S., after tax evasion. (1) The Coalition Against Insurance Fraud reports that 78% of U.S. consumers are concerned about insurance fraud (2), most likely because they know that fraud doesn't just affect insurers; the losses are passed on to policyholders through higher premiums. The Federal Bureau of Investigation reports that insurance fraud costs an average American family $400 to $700 annually due to increased premiums to cover the expense. (3)

Meanwhile, many property and casualty (P&C) insurers are facing growing customer attrition due to recent inflation-driven policy rate hikes. (4) In this environment, continuing to raise premiums to offset fraud losses is likely not a viable strategy for long-term profitability and market share growth.

Instead, insurers can equip themselves to vanquish fraud before incidents occur. They can shift from relying on traditional fraud detection methods to investing in more advanced exposure and prevention techniques. In a recent Deloitte survey of insurance executives, 35% of respondents chose fraud detection as one of the top five areas for developing or implementing generative artificial intelligence applications over the next 12 months. (5)

Deloitte predicts that, by implementing AI-driven technologies and integrating real-time analysis from multiple modalities, P&C insurers could reduce fraudulent claims and save between $80 billion and $160 billion by 2032.

AI-fueled multimodal technologies refer to advanced systems that leverage AI to process and integrate data from multiple modalities, including text, images, audio, video, and sensor data. By analyzing diverse types of data, these technologies can generate more comprehensive and accurate insights.

Why is P&C insurance fraud detection so challenging?

An estimated 10% of P&C insurance claims are fraudulent, resulting in a $122 billion loss annually, or 40% of the total fraud losses of the insurance industry. (6) Fraud is so prevalent because typically, policyholders only interact with their insurance providers when paying premiums annually or when they need to file claims. This infrequent interaction can limit insurers' ability to continuously oversee policyholders' activities, allowing fraudulent activities to go undetected.

Fraud is typically segmented into soft and hard incidents. Soft fraud involves inflating a legitimate claim, like overstating repair costs or exaggerating an injury. Hard fraud is when premeditated actions create a false claim – for instance, if a policyholder stages an accident, commits arson or fakes a theft. Soft fraud is more common, likely because it's hard to prove; it accounts for 60% of all incidents. (7)

Mounting pressure propels demand for advanced detection tools

The onset of the COVID-19 pandemic accelerated digitization, creating both opportunities for fraudsters and a flurry of innovative solutions. (8) Fraud-detection technology has become a rapidly growing industry, estimated to multiply eight times, from $4 billion in 2023 to $32 billion by 2032. (9) Simultaneously, pressure from regulatory bodies is pushing insurers to implement fraud detection systems. (10)

How can AI help detect and prevent fraud?

AI is equipping insurers with new fraud detection models that can free human investigators to focus on more complex fraudulent cases. Combining AI-driven anti-fraud technologies with advanced data analytics enhances insurers' capabilities to detect and prevent fraud. This can be beneficial in the property claims and personal auto insurance segments due to their complexity and sheer volume of data, need for real-time processing, and potential for significant cost savings and efficiency improvements. (11)

Multiple techniques such as automated business rules, embedded AI and machine learning methods, text mining, anomaly detection, and network link analysis could score millions of claims in real time. Combining data from various modalities could help identify patterns and enhance the investigative process by reducing false positives, increasing detection rates of fraudulent claims, and saving on costs associated with fraud investigations. Such techniques must be deployed with human oversight and in alignment with the laws of each jurisdiction. AI can be used in:

• Text analytics. natural language processing analyzes textual data of claims forms, emails, and social media posts to identify keywords and entities. While claims with suspicious language or inconsistent details can be flagged for further investigation, regulations like the Colorado AI Act require AI algorithm-based models to avoid discrimination and bias when flagging risk. (12)
• Audio-image-video analysis. Speech recognition and sentiment analysis can examine customer calls for signs of duress, allowed under the European Union's AI Act on emotion inference for safety. (13) Photo analytics can uncover irregularities in metadata, manipulation, and repeated use. Causation analytics can identify if alleged injuries were likely consistent with the experienced accident. Video analytics can verify the occurrence and extent of damage, identify authenticity of images, and highlight signs of tampering or staging.
• Geospatial analysis. Satellite images and comprehensive 3D drone footage can verify the extent and location of damage that may not be clearly visible in physical inspections. This could also reduce the risk of personal injury to claims personnel, especially at natural disaster sites.
• Internet of Things data. Real-time surveillance devices like vehicle telematics can reconstruct accidents and verify the legitimacy of claims. Smart home sensors like water leak detectors and security cameras can help gather evidence that can be used to verify claims and detect fraudulent or staged activities.
• Simulation models. Replicating the behavior of medical providers, repair shops, and others that individuals may work with under different scenarios in a controlled virtual environment can identify patterns and deviations from standard industry practices and detect instances such as overbilling, unnecessary services, and coordinated activities or probable collision rings between entities.

Combining AI and human foresight could be the way forward

Over the past two decades, insurers have established special investigative units to detect and mitigate fraud. Looking ahead, anti-fraud leaders face several challenges. Insurers that pair sophisticated technology with human enablement could potentially save billions of dollars for policyholders. Attracting and retaining skilled talent, along with continued support for automation, will likely also be important for companies as they look to achieve their long-term anti-fraud goals.

Endnotes

1. Defined as intentional deception in the insurance process, from policy purchase to claims settlement; Ashley Kilroy, "Insurance fraud statistics 2025," Forbes, January 3, 2025.

2. Kilroy, "Insurance fraud statistics 2025."

3. National Insurance Crime Bureau (NICB), "NICB and Agero join forces to combat insurance fraud," press release, June 12, 2024.

4. Kelly Cusick, Michelle Canaan, and Namrata Sharma, "Bridging insurance gaps to prepare homeowners for emerging climate change risks," Deloitte Insights, May 2, 2024.

5. Sandee Suhrada, Stephen Casaceli, and Dishank Jain, "Are insurers truly ready to scale gen AI?" Deloitte Insights, April 4, 2025.

6. Covers fraud from property, auto, and workers compensation; Kilroy, "Insurance fraud statistics 2025"; Deloitte Center for Financial Services analysis.

7. Discussion with Kedar Kamalapurkar, Deloitte insurance claims leader, December 13, 2023; Deloitte Center for Financial Services analysis.

8. Satish Lalchand et al., "Generative AI is expected to magnify the risk of deepfakes and other fraud in banking," Deloitte Insights, May 29, 2024.

9. Global Market Insights (GMI), Insurance fraud detection market size, May 2024; Amanda Paule, "Insurance companies are betting on AI and mass data analytics in a battle against fraud that costs billions," Business Insider, October 24, 2023.

10. Joe Desantis et al., "2025 insurance regulatory outlook," Deloitte Insights, February 21, 2025.

11. Kilroy, "Insurance fraud statistics 2025."

12. Tatiana Rice, Keir Lamont, and Jordan Francis, "The Colorado Artificial Intelligence Act," FPF US Legislation Policy Brief, July 2024.

13. European Commission, "AI Act enters into force," Aug. 1, 2024.

Summer has long been the season of transition. It's when families relocate, leases turn over, and homeowners settle into new properties before the school year begins. In fact, nearly 45% of U.S. home moves occur between May and August. For insurance professionals, this seasonal surge in home transitions presents a prime opportunity, not just to update policies but to initiate deeper conversations about financial protection and preparedness.

And this discussion is well timed as summer brings new beginnings and the peak of many natural disasters. Wildfires, hurricanes, severe storms, and tornadoes are all active perils during these months. All too often, clients stepping into a new home are doing so without a clear plan for how they would weather the financial aftermath of a catastrophe that may hit their property.

The recent frequency and severity of natural disasters have made one thing clear: Having a policy isn't the same as being prepared. In today's volatile climate, insurance professionals must act as financial resilience advisors, helping clients build layered protection plans that go beyond traditional coverage and prepare them for the full financial impact of disaster. This shift in mindset doesn't just benefit clients, it elevates the agent-client relationship and positions agents as long-term partners in their financial wellbeing.

Start With the Emergency Savings Conversation

According to a 2024 Empower Research report, 37% of Americans can't cover a $400 emergency. Yet a wildfire evacuation or storm displacement can cost thousands in temporary housing, lost wages, and everyday essentials. When disaster strikes, it's rarely just a $400 problem, and the financial shock often hits long before an insurance claim can be processed.

When clients are moving into a new home or renewing their policy, encourage them to evaluate their emergency savings with this simple question: If a disaster hit tomorrow and you couldn't return home or work for two to three weeks or more, how would you manage your expenses?

This can prompt clients to reassess their emergency savings and rethink how they've structured their coverage. It's a gateway to a more meaningful discussion about true financial readiness and matching them with insurance solutions to fit their needs and their environment.

Match Coverage to Risk and Lifestyle

Every client has a unique risk profile, and their coverage combination should reflect this. Encourage clients to consider their:

• Geographic Risk: Is their area prone to hurricanes, wildfires, or earthquakes?
• Household Makeup: Do they have dependents, seniors, or pets to consider for evacuation or temporary care planning?
• Income Stability: Could they afford to miss a paycheck, or two, without dipping into long-term savings?

Using tools like FEMA disaster data and regional risk maps can ground these conversations in facts. Between 2013 and 2023, nearly 89% of all U.S. counties declared a natural disaster. Clients need to understand: No region is immune, and the financial fallout of disaster is real.

Identify the Gaps in Traditional Coverage

Many clients assume their homeowners policy has them covered and underestimate their financial vulnerability. This creates a valuable opportunity to educate them on where those policies fall short and how those gaps could affect their recovery process.

Here are a few common misconceptions to address:

• "I'm covered for earthquakes and floods." Earthquake and flood damage are not typically covered under standard homeowners or renters policies, which many clients aren't aware of until it's too late.
• "I'll file a claim and get help right away." Clients may not realize that after a large-scale disaster, insurance claims can take weeks, even months, to process.
• "I won't have to pay much out of pocket." Many homeowners underestimate how expensive their insurance deductible can be, especially with high-deductible plans that help lower premiums. After a loss, some are surprised to learn they need to pay thousands up front before coverage kicks in.

This is where supplemental disaster insurance can fill critical gaps in traditional policies. A solution like Recoop Disaster Insurance offers up to $25,000 in flexible, lump-sum payouts within days, not weeks, for a variety of perils. These funds can be used for whatever matters most in the moment: temporary housing, pet boarding, medical expenses, keeping up with the bills or covering insurance deductibles. Supplemental coverage isn't just a nice-to-have; it's a practical, affordable way to protect finances when disaster strikes.

Advocate for a Layered Protection Plan

The most resilient financial plans are layered with: 1) emergency savings for immediate needs, 2) traditional insurance to protect structures and belongings, and 3) supplemental coverage to provide cash flow support during the critical interim period. Together, these elements can help clients avoid high-interest debt, protect long-term savings, and stay financially afloat when the unthinkable happens.

The Bottom Line for Agents

Helping clients navigate this broader landscape of risk management is a brand differentiator. By bringing these conversations to the forefront, especially during seasonal inflection points like summer moves, you demonstrate a deep commitment to your clients.

You're not just writing policies; you're building relationships based on trust and foresight. That positions you as an indispensable advisor and earns the kind of loyalty that lasts well beyond the policy renewal.

The months ahead will bring more storms, heat waves, and wildfires. With more Americans on the move this summer, there's no better time to have these conversations and help clients disaster-proof their finances. The next disaster may be unpredictable, but your clients' financial preparedness doesn't have to be.

The  2025 Los Angeles County wildfires were among the worst natural disasters in American history. California isn't a stranger to these events. However, even the nation's richest state couldn't prepare for the scale of devastation caused by the Palisades, Eaton, and Hughes fires that erupted in roughly two weeks, engulfing tens of thousands of acres in flames and displacing thousands of families.

Although these devastating blazes reached 100% containment over three weeks after they began, they've made headlines again midyear. USAA, AAA, and State Farm policyholders have sued their insurers for alleged underinsurance, igniting a firestorm of controversy.

Policyholders Walk on Hot Coals

According to an estimate from the Los Angeles County Economic Development, these wildfires caused between $28 billion and $53.8 billion of property damage. The Palisades and Eaton fires accounted for most of the destruction. These incidents collectively incinerated 11,665 multifamily buildings, single-family residences, and motor and mobile homes, razing neighborhoods of multimillion-dollar properties to the ground.

The disruption and distress of Los Angeles wildfire survivors are unfathomable. California Gov. Gavin Newsom has made swift recovery a top priority. By the end of January, insurance companies had released $4.2 billion to partially pay 14,417 out of 31,210 claims filed by affected property owners.

Under a consumer protection law that Insurance Commissioner Ricardo Lara sponsored in 2020, insured individuals were entitled to receive advance funds worth at least 30% of their homeowners insurance policy's dwelling limit. They could also receive up to $250,000 for replacing personal property or contents in a total loss after a disaster without submitting an itemized claim.

In early February, Commissioner Lara requested insurers pay affected wildfire victims at least 75% of their contents coverage limits without requiring a detailed inventory of their personal property. Some insurance companies didn't answer the call and suffered no legal repercussions. Still, the California Department of Insurance (CDI) named them when it publicized the lists of insurers that agreed and those that said no.

The advance payments many distressed policyholders received could mitigate the gravity of the situation. Ultimately, the cleanup speed determines how soon homeowners can rebuild what they lost and return to normalcy.

Federal disaster officials initially estimated that it could take 18 months to remove all the debris from the burned areas. President Trump ordered an accelerated process in late January, causing the cleanup procedure to progress months ahead of schedule.

As of the third week of June, phase 2 of the cleanup had been about 66% complete. Los Angeles County had received 77 temporary housing applications, approved 33 and reported four completed. Regarding rebuilds, the county had received 946 applications and issued 44 building permits, and most were in the zoning or building plan review stage.

Premium Increases Fan the Flames

Despite the government's effort to speed the cleanup process, many wildfire victims think quick recovery is far-fetched. The ordeal of hundreds of State Farm and FAIR Plan customers continues after they experience claim delays, disputes and dismissals. Their horror stories include getting denied for services needed to verify contaminants in their properties, receiving late compensation for temporary lodging expenses and dealing with unhelpful adjusters.

After enduring these setbacks, the policyholders received more bad news when Commissioner Lara granted State Farm's request for a 17% emergency rate increase statewide in the second week of May. An administrative judge endorsed the increase to help replenish the company's capital after the wildfires, arguing that it was fair and in the best interest of consumers.

Commissioner Lara was confident in his decision, saying he expects the company to justify its financial condition after the rate increase and provide a recovery plan before an impartial judge and members of the CDI.

The rate approval didn't sit well with distressed policyholders, who have been widely dissatisfied with how State Farm has handled their claims. The timing added insult to injury, as the state's insurance regulator swiftly approved the request before investigating the reports of the insurer's illegal delays, low-ball offers and denials.

Providing incentives to a high-profile insurer that has come under fire for serving its customers poorly with the green light to charge higher premiums would naturally leave a bad taste in many people's mouths. The move has enraged many wildfire survivors who feel State Farm's coffers should be adequate for such a crisis after the company unfailingly collected premiums.

Insurance Commissioner Fights Fire With Water

In mid-June, Commissioner Lara launched an official investigation into State Farm's alleged failures to fulfill its legal obligations to customers in handling the claims of Los Angeles wildfire victims. The review aims to determine whether the company complied with California's consumer protection and claim-handling laws. The wildfire survivors view this development as a critical step toward accountability, although it wouldn't be surprising if some are cautiously optimistic.

The commission has a history of accommodating insurance companies' needs to discourage them from leaving the state over fears of massive losses due to intensifying natural disasters.

In 2023, California's chief insurance regulator assured insurers that the state would allow them to consider future climate risks when determining rates, agreeing with the notion that the past was no longer the reliable predictor of the future it used to be. This privilege is available only to the insurance companies that write new policies for homeowners in locations with the most risk.

Although the rule change had merits, Consumer Watchdog founder Harvey Rosenfield sounded the alarm, stating that the announcement could raise homeowners' and renters' insurance premiums by hundreds or thousands of dollars.

The commissioner countered critics by highlighting that customers who embrace climate resilience could enjoy lower premiums. Property owners can apply for grants worth $100,000 to $5 million to fund projects to mitigate the effects of extreme heat, which can subsequently reduce wildfire risk.

Some Insurers Are in Hot Water

The underwhelming claim services frustrated many wildfire survivors, but the discovery of gross underinsurance lit a fire under them.

In early June, a press release by the Newport Beach, California-based law firm Bentley & More revealed that a group of homeowners affected by the Palisades and Eaton fires filed lawsuits against USAA and AAA alleging widespread fraud, negligence and bad faith. The plaintiffs accused the companies of routinely underinsuring policyholders by at least 50% of the rebuilding costs by using flawed estimating software.

The complainants added that the home insurance providers had prevented them from buying additional protection, claiming their coverage was sufficient. The aggrieved parties say their insurers had required them to pay thousands of dollars upfront before getting compensated.

The complaint states that the CDI has already flagged USAA for pervasive underinsurance through a targeted market conduct examination. The department said the insurer needs to make millions of additional payments to insureds to correct the situation.

The most common trigger for a market conduct exam is the frequency of complaints. The CDI must have reviewed USAA more closely after receiving too many claims of it engaging in this unfair business practice. The commissioner could impose an administrative penalty of up to $300,000 for each California Insurance Code violation and suspend or revoke the insurer's license.

Another group of wildfire survivors has taken legal action against State Farm alleging systematic underinsurance. One complainant says their dwelling limit was $2 million below the estimated amount to rebuild their property.

Before these lawsuits, some California homeowners had accused many major insurance industry players of collusion. In April, the wildfire victims sued 25 large insurers, allegint they were involved in an illegal scheme designed to force homeowners onto the FAIR Plan, violating the state's antitrust and unfair competition laws.

The plaintiffs connected the dots when dozens of insurance providers suddenly and simultaneously stopped offering coverage or writing new policies in fire-prone areas in 2023. The decision left countless homeowners with no choice but to use California's insurance plan of last resort. This alleged conspiracy caused homeowners to be underinsured while reducing the financial responsibility of home insurance companies in the state, the plaintiffs say.

The state's attorney general enforces California's antitrust laws civilly and criminally through investigations of potential violations and litigation. A guilty individual may go to prison, while an erring business may be liable for several times the amount of victims' financial injury.

Navigating the Dangers of Wildfire Risk

Only time will tell how these cases unfold. Regardless of how the accused parties decide to defend themselves and minimize reputational damage, the insurance industry should learn from these events to better manage wildfire claims in the future.

The threat of a hurricane or an earthquake is enough to make anyone tremble. Fear around these catastrophes reverberates far beyond the insurance world, where they have been officially dubbed "primary perils."

Hurricanes and earthquakes earned this "primary" distinction because, for the longest time, they posed the greatest risk to carrier solvency. There was so much concern around hurricanes and earthquakes that the science of catastrophe risk modeling began with the desire to understand and quantify their risks.

In thinking we were tackling the "primary problems," so much of the industry has overlooked the cumulative, material impact of "secondary perils." Secondary events like wildfires and severe convective storms have gained momentum in our blind spots and now pose equal threat to insurance operations.

It all raises the question: Is this "primary/secondary" distinction still relevant, or perhaps even dangerous, in today's environment?

Removing this distinction, both in concept and in practice, will give insurers more solid footing to overcome the insurance crisis.

The insurance community must eradicate the outdated peril hierarchy not only internally, but also for property owners, who may not realize their inherent peril bias as they make decisions around how to protect the places they call home.

Tear away the tiers

In terms of destruction, "secondary perils" have, since the mid- to late 2010s, usurped hurricanes and earthquakes.

In 2023, hail and tornadoes stemming from severe convective storms caused more insured losses than any hurricane during the 2023 season. Floods are also among the deadliest, most destructive perils.

In 2025 to date, wildfires (not yet technically considered a "primary peril") have outdone all natural catastrophes, with the Los Angeles blazes alone causing up to $45 billion in insured losses.

Clearly, there's nothing "secondary" about hail, tornadoes, floods, or wildfires.

Here's how we get all perils, and everyone, on the same page to protect insurers everywhere in their ability to reinforce communities:

Build an arsenal of resources to evaluate all perils

To nurture a realistic view of risk in today's environment, carriers need a full stack of resources to address every peril — including advanced catastrophe risk models for "secondary perils" that align with real-life scenarios. It's no longer enough to prioritize the biggest catastrophes; an effective risk management strategy involves looking at the potential magnitude of every kind of weather event.

Given that the nature of storms and other disasters changes each year and season, companies can protect their ability to succeed with sophisticated, high-fidelity, probabilistic risk models that simulate hundreds of thousands of years of potential events.

Working with risk modeling solution providers that regularly recalibrate their systems to adapt to a constantly changing environment is an investment that will deliver. When evaluating high-frequency events like severe convective storms, insurers need digital tools that reflect real-time conditions.

Understand when natural perils are amplified by the unnatural

It's not just about leveraging a full spectrum of risk models; it is also imperative to grasp why certain perils are posing increasingly significant threats to the insurance system. Understanding the nuances is how we get to the heart of risk that would otherwise be hard to quantify.

All perils are changing, and it's not always due to an unpredictable environment. We can no longer afford to ignore the myriad of components that are fueling emerging perils (literally).

One of the reasons why wildfires have led to more significant losses, and have thus become harder to insure against, is that they are increasingly becoming conflagrations. While wildfires are typically blazes that start in the wildlands and are largely fueled by natural vegetation, wildfire-induced conflagrations occur when these fires reach the built environment. When fed by man-made building materials, wildfire-induced conflagrations can burn down communities in just hours. This is what happened to the Pacific Palisades and Altadena neighborhoods during the monumental Los Angeles wildfires earlier this year.

The growing fallout from severe convective storms also has a human dimension. Since the global pandemic lifted the need for many workers to be physically present in corporate offices, large numbers of people have moved to storm-prone states in Tornado Alley, including Texas. As the built environment has become denser, the potential for insured losses has increased. This played into the impacts of the 2024 season, when Texas experienced unprecedented damage.

With all tll this in mind, digital tools can enhance your risk management strategy by  distinguishing man-made risks from traditional hazard risks.

Educate your consumers

Issuing policies doesn't have to be purely transactional; it can be educational, too.

To fully support their policyholders and build resilience in a world that seems to play peril roulette, carriers can educate consumers about the far-reaching impact of all weather events — both perils that can cause incredible damage in one fell swoop and the high-frequency events that cause compounded destruction.

Keeping prospects and policyholders informed about their options for adequate coverage builds invaluable risk literacy. This type of outreach doesn't have to be complicated, either; simple marketing campaigns or a slight reframing to embrace informative customer service will go a long way.

Many property owners are underinsured, particularly for floods, which can lead to significant out-of-pocket costs. By sharing insights gleaned from models and internal experts and encouraging policyholders to review their coverage on an annual basis, carriers can empower their policyholders to make more informed insurance decisions.

Severe convective storms are now affecting more areas, and with greater intensity, so it's crucial to educate more property owners about these perils and their new paths of destruction.

Risk literacy can also help protect more people from the impacts of wildfires. Those living distant from the wilderness-urban interface (WUI) may not realize they still could face significant burn potential from conflagrations.

Risk savviness drives more mitigation, which is key to building resilience within communities. When homeowners fortify their homes against the disasters most likely to strike them, they limit the impact even the worst catastrophes can have—not just on their own property but across their neighborhoods. Mitigation is contagious, too, helping insurers broaden their risk appetite in communities that may need protection the most.

Dive deeper; don't drown in risk

Weather events that once seemed immaterial have now become significant perils in their own right. With the insurance crisis in full swing, it's time to bring disasters like hail events, tornadoes, windstorms, floods, wildfires, and other emerging catastrophes into sharper focus.

We don't have to take blows from this crisis lying down. Instead, let's reinforce our risk management and underwriting functions with a full arsenal of risk modeling solutions. From there, we can amplify the resilience of communities everywhere.