Insurance Industry Navigating Economic, Technological and Customer Changes

Economic volatility, climate change and technology are reshaping insurer operational strategies, Gallagher Bassett report finds.

usinessmen or traders are showing off their growing virtual holographic stocks.

The insurance industry globally is navigating a number of claims challenges, driven by a perfect storm of economic volatility, climate change, technological advancements, and evolving customer expectations, according to a report by Gallagher Bassett.

These forces are reshaping the operational landscape for insurers, influencing everything from strategic decision-making to resource allocation, according to the survey of 200 carriers, underwriting agencies and managing general agents across North America, the United Kingdom, Australia, and New Zealand.

Data and cybersecurity risks have emerged as the primary concern of insurers, with 45% of North American respondents and 44% of global respondents citing this as their top challenge. Close behind is the issue of premium affordability and insurability, worrying 44% of North American respondents and 42% of their global counterparts. Rounding out the top three is the ever-present specter of increasing market competition, a challenge acknowledged by 37% of insurers across all regions.

The financial health of insurance carriers is under strain due to two key factors, according to the report. First, the industry is witnessing a sharp rise in settlement costs for litigated claims. This trend is particularly pronounced globally, with 54% of carriers reporting higher settlement expenses, while 43% of North American insurers are experiencing this cost surge.

Second, the burden of legacy claims continues to weigh heavily on profitability. An overwhelming 76% of global carriers and 71% of North American insurers identify these long-standing claims as a major obstacle to organizational efficiency and financial performance.

Strategic Responses to Market Challenges

In response to current market pressures, insurance carriers are implementing a range of strategic measures to offset rising claims costs and maintain profitability, Gallagher Bassett found. The most widespread approach is increasing premium rates, with 57% of carriers globally and 55% in North America adopting this strategy.

Beyond rate hikes, insurers are focusing on tightening their underwriting guidelines, particularly in North America where 49% of carriers have implemented stricter criteria. This approach allows for more precise risk assessment and pricing, helping to maintain a balanced portfolio in challenging market conditions.

Additionally, 47% of carriers worldwide are strengthening their claims management processes. This enhancement enables insurers to better handle the complexities of modern claims, potentially reducing costs and improving efficiency in claims resolution, the report noted.

Carriers are adapting their claims resolution strategies to address emerging challenges. A significant trend is the increased use of alternative dispute resolution methods, with 51% of carriers globally and 48% in North America turning to these approaches.

Some insurers are taking innovative approaches to litigation, such as utilizing mediation to resolve disputes before they reach jury trials or agreeing on high/low brackets for jury verdicts to reduce financial uncertainty, according to the report. These strategies aim to expedite claims settlement while controlling costs in an increasingly litigious environment.

In North America, 35% of carriers are partnering with third-party claims administrators to manage the growing challenges posed by legacy claims.

Talent Retention Solutions

Labor shortages also are having an effect across the insurance landscape, impacting growth potential and claims management efficiency. This issue is particularly acute in the health insurance sector, where increased workloads and occupational hazards are exacerbating the problem, the report noted. Some 72% of global carriers and 66% of North American insurers reported that labor shortages are moderately to significantly impacting their ability to grow and manage claims effectively.

Recognizing the critical role of skilled professionals in navigating market challenges, insurance carriers are prioritizing talent retention and attraction. Globally, 60% of insurers are focusing on enhancing employee benefits as their primary strategy to attract and retain skilled talent. This approach acknowledges the competitive labor market and the need to offer compelling compensation packages.

In North America, the leading strategy for talent retention is offering flexible work arrangements, with 61% of carriers adopting this approach. This trend reflects a growing emphasis on work-life balance and the changing expectations of the workforce in the wake of recent global events.

Technology and Environmental Adaptations

In the face of evolving challenges, insurance carriers are increasingly turning to cutting-edge technologies to streamline operations and enhance efficiency. Generative AI has emerged as a game-changer in claims resolution, with 63% of North American carriers now leveraging this technology — a significant increase from previous years, according to the report. Globally, the adoption rate stands at 55%, indicating a widespread recognition of AI’s potential to transform claims management processes.

Fraud detection remains a critical concern for insurers, and technology is proving to be a valuable ally in this battle. Over half of both global and North American survey respondents report utilizing generative AI to identify fraudulent activities.

As climate change continues to drive more frequent and severe weather events, insurers are adapting their strategies to meet these new challenges head-on, Gallagher Bassett reported. A significant 81% of global carriers are adjusting their resource management strategies to better handle climate-related events, particularly during downtimes between catastrophic incidents.

In North America, the response to climate change is taking on a more nuanced approach. While 58% of carriers report moderate shifts in resource management, 15% are making significant moves toward flexible, scalable resource models. This percentage is higher than the global average of 13%, indicating that North American insurers are at the forefront of developing adaptable solutions to climate-related challenges.

The importance of workforce flexibility in addressing climate change impacts cannot be overstated. Half of the surveyed North American carriers are focusing on cross-training employees, enabling them to respond more effectively to a variety of climate-related claims and scenarios.

Looking ahead, insurers anticipate that climate trends will necessitate changes in their clients’ approach to risk management. Globally, 57% of carriers expect their clients to make adjustments to insurance coverage and risk assessments in response to evolving climate patterns. This shift underscores the far-reaching implications of climate change on the insurance industry and its customers.

View the full Gallagher Bassett report here. &

The R&I Editorial Team can be reached at [email protected].

The Green Transformation: How Philadelphia Insurance Bolsters Companies Seeking Alternative Energy Solutions

Wind, solar and geothermal energy solutions are rising in popularity among insureds. Initiatives in this green transformation have environmental underwriting support from the experts at Philadelphia Insurance Companies.

By: Philadelphia Insurance Companies | March 3, 2025

Businesses know the green transformation is well underway, and they are preparing in the best way possible: by working with their environmental insurance partners to get ahead of risk and keep informed.

“Green transformation” is more than a climate shift or weather patterns; it’s a social transference to more environmentally sustainable energy solutions like solar, wind and geothermal sources.

“As companies invest in green transformation, and begin shifting their business models away from exclusive investment, use, or support of traditional energy sources like petroleum and coal, they are starting to look at the alternative energy space,” said Jamie Langes, Vice President of Environmental Underwriting for Philadelphia Insurance Companies (PHLY).

“Insurance can champion this repositioning by supplying financial support needed to companies engaged in green transformation through policies and programs.”

This is a promising growth area for environmental insurers and their clients—one that insurers are increasingly willing to support and help free up capital. Here’s a deeper look at businesses’ interest in green transformation, the potential underwriting challenges of alternative energy solutions and the grounds for a good partnership.

A Bigger Interest in Green Transformation

Jamie Langes, Vice President of Environmental Underwriting, Philadelphia Insurance Companies

There are plenty of reasons why companies are looking at green and alternative energy solutions. Sustainability is a big reason, as is the profit motive.

Insurance companies are looking at this shift with interest, with some carriers even reducing support for traditional energy sources to help bolster investment opportunities in green energy.

“In the insurance sphere as a whole, carriers are actively engaged in identifying strategies to deploy their capacity, and making conscious determinations regarding coverage offerings that as a marketplace, we have committed to allot to green transformation,” Langes said of carrier interest.

Green energy is important for businesses’ future as it provides a renewable source of energy. As interest turns toward utilizing the big three—solar, wind and geothermal—so too does the financial support to sustain these endeavors.

“The more companies dive into green transformation, and the more insurers support those operations fiscally, we’re projecting this could easily set a market pace in the billions in a very short time,” Langes said.

How Insurance Supports Green Transformation

Venturing into green energy should not be done lightly; that’s why it’s important to work with an environmental underwriting team that has its finger on the pulse of green transformation.

Businesses looking into alternative energy require support from the insurance marketplace in order to secure adequate liability transfer, as well as limit rising risks. Insurance plays its role by supplying financial support to these companies engaged in green transformation to be able to function.

“Insurance capacity is growing, and rate is supporting new ventures from a balance of coverage and premium,” Langes said.

Insurance further provides a risk management perspective that helps sustain start-up costs and exposures for liability. Having the backing of an experienced underwriting team can be the difference between sound risk management and coverage and failure to launch.

“Green transformation is being leveraged as one component of our environmental approach,” said Langes, “and with [PHLY’s] expertise and experience, that approach is finding new ways to do business—including collaboration and a long-term vision, which embraces our role as a financial vehicle for progressing and assisting green transformation and technology through insurance.”

Traditional and Alternative: An Important Underwriting Balance

There is one thing that a good underwriting team must also review when aiding clients in their green transformation: Underwriting for traditional energy sources has the benefit of historical data to help guide decision-making.

“The insurance marketplace has ample actuarial data to gauge pricing parameters and risk acceptance vehicles from insuring traditional sources of energy long-term. As a result, insurers understand how to write that risk explicitly to make sure they’re able to not only support the business but also have the profitability to support their insureds should there be a claims situation,” Langes explained.

In contrast, “Green energy and design risks don’t have that much value proposition data yet since these exposures are still relatively new in the insurance marketplace as an insurable risk.”

To fully bring about green alternatives, underwriters must lean into this transitional period with a pulse on both sides of the energy aisle. It will take additional considerations during the process, including a review of rates, coverage options and availability, and detailed terms and conditions to best service green transformation companies.

“The businesses have to coexist. Existing traditional energy sourcing companies that are investing in green solar, wind or geothermal will still have their original exposures; just less over time,” Langes said.

“The underwriting challenge, therefore, is that we must underwrite the two dichotomies, green transformation along with traditional, as companies transition forward.”

Environmental Underwriting Experts at Your Service

Insurance is a partnership forged by the insurer’s deep understanding of the insured’s risk management needs. At PHLY, the team is dedicated to better understanding its client partners’ businesses inside and out.

Companies looking to join the green transformation can rest easy knowing that the environmental underwriting team at PHLY applies this same level of understanding.

“We’re proactive in our approach, more than reactive,” Langes continued. “This means that what’s next, what’s new, what our insureds’ needs are, remains at the forefront of our decision making. Investing in green transformation is a fairly new endeavor for many insurance companies, but we, at PHLY, have the advantage that we’re always willing to be engaged in the evolving conversation.”

“We are integrating green transformation options into our coverage positions, investing in these initiatives as we would for any operation,” Langes said.

As part of Tokio Marine Group, its parent company, PHLY can further leverage the insurance experts within the umbrella to evaluate, at the highest level, the societal changes and community interest in green transformation and what clients are looking for from their financial insurance partners.

Further, PHLY has built an environmental underwriting team with tenured experience in the marketplace. But it’s more than that: “We not only have the experience but also the expertise,” said Langes. “Many of our underwriters come from the consulting field, so they also understand the technical aspects of sustainable energy solutions. We leverage that into collaboration, and towards being a resource for brokers to help them support their clients for insurance. Tokio Marine and PHLY bring all of that expertise to the table on products and service.”

This dedication to green transformation has enabled PHLY to have competitive and tailored coverage. Underwriters are paying close attention to companies transitioning to alternative energy solutions, as well as looking at related fields to constantly and consistently remain in the know.

To learn more, visit: https://www.phly.com/ESdivision/es-environmental.aspx

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.

Philadelphia Insurance Companies (PHLY) offers product-specific resources, alliances, and service capabilities to achieve a multi-faceted approach to risk management, including safety program development, site audits, and training (including interactive web-based training). We offer a wide range of products and value-added services at financial terms to be agreed upon to help you achieve your risk management goals.