The insurance industry is grappling with significant challenges, including rising loss costs due to social inflation and the increasing impact of climate change. According to Zywave’s loss data, the median loss over $1 million has grown substantially from approximately $2.5 million in 2012 to nearly $5.4 million in 2024. This trend underscores the need for insurers to reassess their strategies and operations.
In a recent interview, Sarah Jacobs, a product executive at Nationwide, emphasized that lowering costs is the first step toward transforming insurance’s value proposition. She suggested that insurers should focus on making insurance more than just paying claims. This perspective is particularly relevant as the industry faces mounting pressure to adapt to changing risk landscapes.
Climate change is emerging as a major concern, particularly for homeowners. Europe, with its unique soil conditions and status as the world’s fastest-warming continent, is especially exposed. The European Central Bank estimates that the region’s potential damage from sinking land could exceed €2.5 trillion ($2.9 trillion) across all euro-area financial institutions. This has significant implications for insurers operating in the region.
In the United States, regulatory scrutiny is intensifying. California’s insurance regulator has launched a formal investigation into State Farm’s handling of claims related to January’s Los Angeles wildfires. The probe follows complaints from groups of survivors who expressed concerns that the claims process could lead to confusion and delayed payouts.
The insurance industry is also seeing innovation in areas such as pet insurance. There’s a growing recognition that pet insurance needs to evolve beyond mere reimbursement. Insurers must actively support pet owners in predicting problems and delivering real-time value.
Furthermore, the issue of slow insurance claims payments is coming under scrutiny. Insurers that invest in modernizing how funds are held, moved, and monitored are likely to be better positioned to meet the evolving needs of their customers.
