A push for profitable growth will dominate P&C insurance in 2025, propelled by a race for technological innovation. Amid rising climate volatility, evolving policyholder demands, and disruptive competitors, carriers will look for novel ways to differentiate themselves with compelling new coverage models while mitigating evolving risks. While the past few years have seen notable progress in telematics and digital claims management, 2025 promises more profound transformation—from “agentic AI” that executes entire workflows to super apps that consolidate insurance transactions. Forrester expects P&C tech spending to jump by 8% in 2025, while Celent foresees core systems further blending with next-gen frameworks. Below are the major trends to watch—and what they mean for carriers seeking a competitive edge in the year ahead.

Generative AI 2.0 Meets Agentic AI

Generative AI will continue to evolve in 2025, even as agentic AI gains attention. Over the past year, generative artificial intelligence has proven itself as a co-pilot on several fronts. When integrated to a modern insurance platform, for example, GenAI-based tools that offer claims summaries and guidance on the next-best actions for claims teams have been shown to improve claims handling times by 60% while cutting costs by 30%. In the year ahead, many carriers will begin combining GenAI with other forms of AI to reimagine processes for and across entire domains. Indeed, it could prove crucial to supporting human insurance professionals amid talent shortages and the impending retirement cliff.

Instead of just responding to prompts or offering guidance, new forms of agentic AI can independently execute key processes with as much (or as little) supervision as desired. In personal lines underwriting, for instance, agentic AI can assess live telematics, social media activity, behavioral insights, and other internal and external data sources to dynamically craft personalized, accurate, and competitively priced policies. On the claims side, agentic AI can validate policy terms, cross-reference known fraud markers, finalize payouts in hours rather than weeks, and keep the claimant up to date at every step. Look for regulators to zero in on transparency and data protection, of course. However, the momentum is clear: According to Capgemini, 82% plan to adopt agentic AI within the next three years.

LA Wildfires Fuel Demand for Coverage Model Innovation

If the $300 billion in damages caused by hurricanes Helene and Milton in hard-hit Florida and other southeastern states last fall didn’t drive the point home enough, January’s $150 billion, multi-blaze inferno in Los Angeles should make it all too apparent: As the frequency and severity of climate-related risks escalate and capacity in high-vulnerability markets shrinks, growth-oriented insurtechs and carriers will look to next-gen data sources—HazardHub, FireBreak, Faura, etc.—and advanced analytics to innovate new ways to fill coverage gaps profitably.

In 2025, look for parametric products to expand beyond large commercial accounts and into small businesses and even residential lines. In December, universities in Florida and California began participation in an initiative to study “community-based parametric reciprocal exchanges,” where homeowners and small businesses pool resources to share risks. Under this approach, pre-determined payouts are triggered automatically based on a predefined claims trigger—wildfire, business interruption, crop yields—or any other peril tracked by a third-party index.

As it stands now, parametric ranks as the most in-demand alternative risk solution in recent commercial lines surveys, outscoring custom, structured solutions, and captives. But watch for advances in the residential market, as well. Kettle, an MGA with thousands of customers in LA County, uses global satellite data and AI-enabled risk assessment of historical and future-looking data to provide a form of parametric coverage to homeowners that augments or replaces other coverage. Others, like Ric, focus on specific perils, like flood.

Commercial Lines Outpace Personal Lines Modernization

Per McKinsey’s 2025 Global Insurance Report, commercial lines leaders are actively investing in AI to modernize underwriting. They’re also combining it with advanced automation to lower administration ratios two percentage points lower than peers and enabling underwriters to handle more broker submissions.

Watch for more to follow suit. Encumbered by having to access up to 15 different systems daily to do their jobs, commercial lines underwriters currently turn just a quarter of all broker submissions into written policies. Six in 10 submissions are left untouched. In 2025, look for carriers to tap generative AI to review incoming submissions against underwriting guidelines and determine risk eligibility, and agentic AI to independently manage underwriting processes, especially in the earliest stages. They’ll also automate portfolio management to ensure in-appetite consistency throughout the book of business, help underwriters scale new risks without coding changes, and more. In real-world deployments on our own platform, AI automation has been shown to help carriers quickly and accurately price risk—and achieve premium growth of up to 58%.

These same capabilities will come to claims operations as well. Today, 60% of workers compensation professionals rank intelligent claims process automation as key to shaping claims management. Among other things, AI-based automation can analyze vast amounts of adjuster notes, medical records, legal demand packages, and payment details to help claims handlers manage and coordinate claims operations more efficiently. Also, expect to see agentic AI adopt specific personas as part of personalized digital experiences for injured workers to help them keep track of to-do items, manage medical services requests, track claims payouts, and keep return-to-work efforts on schedule.

Personalization and Customer Experience Gain New Urgency

Customer experience (CX) faltered in 2024, with fewer than half of customers feeling insurance is worth the price. As a result, J.D. Power warns of a “Shop-a-Palooza” as consumers switch insurers in the year ahead. Still, Forrester predicts personalized, usage-based insurance will push these scores upward by at least one point. Embedded distribution will play a role in this. Meanwhile, super-apps continue to gain ground by letting policyholders acquire, manage, and pay for insurance products in one place. One-third of insurers plan to increase investments in super-apps and other omnichannel experiences.

Others in the industry see growth markets like small- and medium-sized enterprises, commercial specialty, and high-net-worth personal lines as a priority. High-net-worth individuals, for instance, own insurable assets valued at more than $251 trillion worldwide. Thanks to high-value art collections, jewelry, antiques, watercraft, and high-price residential and commercial properties, they represent a $40 billion premium opportunity in North America ($139 billion worldwide)—with just $5 billion currently placed with carriers. Many reside in areas prone to natural catastrophes, such as Florida and California. As a result, hyper-personalized coverage that delivers digital convenience paired and exceedingly proactive—even preemptive—customer service is the name of the game.

This can include simplified ways to submit a first-notice-of-loss through digital channels. It can also entail dedicated elite contractor networks that proactively complete repairs after events that might otherwise result in shortages of high-skilled labor. It can even include, as seen in during the LA wildfires, private firefighting crews. In the year ahead, carriers on the hunt for growth will feel the pull of this lucrative but demanding market.

Thrive in 2025: Positioning Your Organization for Success

In many ways, 2025 marks a tipping point for the P&C industry. For a sector that has been historically cautious and heavily regulated, new technological advances can be catalysts for innovation and growth. As carriers navigate evolving risks and changing customer needs, each of these trends points to a future where P&C insurance is faster, more data-driven, more automated, and more aligned with the needs of today’s modern insurance marketplace. For carriers seeking to gain an edge in the race for growth, focusing on these trends is a smart start:

• Invest in AI to accelerate processes while keeping regulators and customers confident in fair decisions
• Enrich risk models with data from next-generation data sources to inform coverage and pricing
• Innovate new coverage models to meet the needs of climate-challenged or underserved markets
• Elevate CX with apps and personalized experiences that rival world-class e-commerce experiences

The personal and commercial lines carriers best able to combine these strategies will be well-positioned to thrive—in 2025 and beyond.