The Future of Risk: What Insurers Are Betting On for 2025
A recent report from KPMG, released on November 15, 2023, provides a compelling look at the future of the insurance industry. Based on a survey of over 600 CEOs across 31 countries, the outlook paints a picture of significant transformation and strategic adjustments needed to navigate the coming years.
Background: Navigating Uncertainty
The insurance sector has faced considerable disruption in recent years. Factors like evolving customer expectations, technological advancements, and macroeconomic volatility have forced insurers to re-evaluate their approaches. KPMG has conducted similar CEO outlook surveys annually, providing valuable insights into the challenges and opportunities shaping the industry. The 2025 outlook builds upon trends observed in previous reports, highlighting the accelerating pace of change.
The survey targeted CEOs of insurance companies globally, with a strong representation from North America, Europe, and Asia-Pacific. KPMG’s analysis considered a broad range of factors, including economic forecasts, regulatory changes, and technological innovations.
Key Developments: AI, Climate & the Customer
Several key developments are dominating the conversation among insurance executives. Artificial intelligence (AI) is consistently cited as a transformative force, with many CEOs planning significant investments in areas like claims processing, underwriting, and personalized customer service. The report highlights a growing focus on leveraging AI to improve efficiency and reduce operational costs.
Climate change remains a critical concern. CEOs are increasingly grappling with the escalating costs of climate-related risks, including extreme weather events. This is driving innovation in risk modeling, pricing strategies, and sustainable insurance products.
Customer experience is also a major priority. Insurers are recognizing the need to offer more personalized, convenient, and digitally-driven services to meet evolving customer demands. This includes expanding digital channels, improving claims handling processes, and offering tailored insurance solutions.
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Impact: From Underwriters to End-Users
The shifts highlighted in the KPMG report will have a broad impact across the insurance value chain. Underwriters will need to develop new risk assessment models to account for climate change and emerging technologies. Claims adjusters will be empowered by AI-driven tools to streamline the claims process and improve accuracy.
Customers will benefit from more personalized insurance products, faster claims processing, and improved customer service. However, they may also face increased premiums as insurers adapt to higher risk environments. The report suggests a greater demand for transparency and trust in the insurance industry.
The report also impacts insurance brokers, who will need to adapt to the changing needs of their clients and offer more value-added services. Insurtech companies will continue to play a vital role in driving innovation and disrupting traditional insurance models.
What Next: Preparing for the Future
KPMG anticipates that the insurance industry will continue to evolve rapidly in the coming years. Key milestones to watch include the widespread adoption of AI-powered solutions, the development of more sophisticated climate risk models, and the further personalization of insurance products.
AI Integration: Beyond Automation
The next phase of AI adoption won’t just be about automating routine tasks. CEOs are looking to AI for predictive analytics, proactive risk mitigation, and entirely new product offerings. Expect to see more insurers using AI for fraud detection, personalized pricing, and real-time risk assessment.
Sustainability & ESG:Environmental, Social, and Governance (ESG) considerations are becoming increasingly important. Insurers are expected to play a greater role in promoting sustainable practices and addressing climate change risks. This includes offering insurance products that support renewable energy, promoting resilient infrastructure, and investing in climate adaptation projects.
Data Security & Privacy:
With increased reliance on data and digital technologies, data security and privacy are paramount. Insurers will need to invest in robust cybersecurity measures and comply with evolving data privacy regulations. Building customer trust through responsible data handling will be crucial for long-term success.
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The KPMG 2025 Insurance CEO Outlook offers a valuable roadmap for navigating the challenges and opportunities that lie ahead. By embracing innovation, prioritizing customer experience, and addressing the critical issues of climate change and data security, insurers can position themselves for success in the years to come.
