2025 Consumer Insurance Outlook Report
By Brian O’Connell, Sr. Insurance Analyst for IQ
2024 has been a volatile year for the U.S. insurance sector.
Rising costs, wild storms, a stubbornly sluggish economy, a new chief occupant at 1600 Pennsylvania Avenue, and major technological developments like artificial intelligence and machine learning have all changed the game for insurance companies.
“2025 is going to be filled with a mix of challenges and opportunities,” says Gregg Barrett, CEO at WaterStreet Company, a Montana-based property and casualty insurance services company. “We’re seeing increased attention on flood and catastrophe insurance as severe weather events like hurricanes Helene, Milton, and Rafael become more severe and frequent”
Additionally, rising reinsurance costs and heightened risks have put pressure on insurers, particularly in states like Florida, Texas, California, and Louisiana, where last-resort, state-backed insurance programs are on the rise, Barret adds.
“Despite these hurdles, there’s an opportunity for insurers to diversify their risks and pass that off to the consumer,” he says. “We’ll be keeping a close eye on how insurers leverage advanced analytics; AI will continue driving improvements in underwriting, claims processing, and customer service, making operations more efficient.”
How will all of the above issues impact the big consumer insurance channels in 2025?
Here’s what industry experts have to say.
How the president-elect’s planned policies may impact the insurance landscape.
Unsurprisingly, the incoming administration’s policies are highly likely to shake up the insurance landscape.
Exhibit “A” is Robert F. Kennedy running the U.S. Health and Human Services agency, and expected new legislative efforts.” In particular, there could be a heightened focus on new health and regulatory compliance,” says Danny Ray, a licensed insurance agent in Jacksonville, Fla.
Team Trump should also have a policy impact on the auto sector.
“For starters, the push toward electric vehicles (EVs) might lead to updated coverage frameworks as insurers navigate EV-specific risks and incentives,” Ray notes. “This regulatory environment will require insurers to be more agile than ever.”
Home Insurance Dealing With Mother Nature
The home insurance channel has several burners going, although weather-related events might be the hottest.
“I’m concerned about the home insurance market especially when it comes to costly events impacted by climate change like flooding and wildfires,” says Max Dugan-Knight, a climate scientist at Deep Sky, a carbon removal project developer. “Climate change has been accelerating faster than most climate scientists expected, and this has already had destabilizing impacts on the home insurance and reinsurance markets in climate change-vulnerable states like Florida.”
Additionally, “far too few” Americans have flood insurance (under 5%), and some may be in the market after high-profile events like Hurricane Helene and Milton, Dugan-Knight notes.
“The big question is will government programs like National Flood Insurance Program (NFIP) continue to have the resources necessary to provide it,” he adds. “If not, will private insurers be able to keep rates affordable given the increasing frequency and severity of these extreme events? Those are valid considerations.”
To stabilize things, home insurance consumers should pay attention to how climate change will impact their location. “Websites like Zillow now offer some climate risk analysis for specific addresses,” Dugan-Knight says. “This data is far from perfect because of the unpredictability of the climate system, but it is prudent to be aware of your home’s flood or wildfire risk.”
While some risks are unavoidable, there are steps you can take to reduce your home’s vulnerability to wildfire. “Start by cutting down encroaching trees, for example,” he adds. “These measures can not only reduce your risk but also your home insurance rate.”
Technological Disruption and Insurance
Digital disruptions – and opportunities – are also casting a big shadow over the consumer insurance sector these days.
“There’s a lot going on,” says Joel Pepera, director of product development at Arity, a data science technology firm in Washington, D.C. “For instance, AI-driven telematics reduces bias in auto insurance pricing for underserved or high-risk areas. AI-powered telematics reduces bias in how insurers evaluate driving risk by focusing on what truly matters—behavior behind the wheel.”
Factors like hard braking or distracted driving, which are fully within a driver’s control, paint a far clearer picture of actual risk than traditional proxies like ZIP codes, Pepera says.
“For drivers in high-risk or underserved areas, this shift is a game-changer,” he notes. “It empowers safety-conscious individuals to break free from one-size-fits-all pricing and earn lower premiums by proving their driving skills. It’s not just about fairness—it’s about rewarding drivers for what they can control, not where they live.”
AI is gaining influence in all key insurance operational areas.
“Underwriting, claims administration and entitlement, and customer care are the three pillars of consumer insurance that are being instantly and immensely transformed due to AI technology,” says David Milo, insurance strategy consultant and founder of Independent Lending in Orange County, Cal.
By 2025, an increasing number of insurers are expected to have AI-enabled systems to analyze past data and create algorithms that better identify risk, set prices, and make tailored offerings, Milo says. “That means faster settlements, more effective recommendations of policies, and better risk pricing will be among the advantages to be had by consumers,” he notes.
Additionally, the combination of crypto and insurance is still in its infancy stages.
“Despite that, some industry players are venturing into blockchain technology for fraud management, ensuring effective claim resolution, and smart contract management,” Milo says. “Products that insure crypto assets as well as cover DeFi: decentralize finance risk may become more popular in 2025.”
On the downside, AI risks abound for insurance consumers and insurance companies — especially with potential claims targets.
For example, workplace shutdowns stemming from AI-system malfunctions “could trigger business interruption claims,” Swiss Re states. Additionally, businesses and their employees could be held liable for mistaken or misinterpreted advice driven by faulty AI research.
Swiss Re also notes that senior company executives could be held responsible for failing to deal with the “risks associated with implementation of AI-driven processes that have led to financial losses or reputational damage. D&O and liability claims may be triggered.” Even consumers who make policy decision on faulty AI outputs (think insurance company chatbots or policy recommendation algorithms) could make a legal case against insurers.
Travel Insurance in the Public Policy Eye
2024 could look more like 2016 for the U.S. travel insurance sector.
“During President Trump’s first term, his travel ban had lasting effects as it barred travelers from certain regions and raised concerns about shifting entry policies,” says Joe Cronin, president of international citizens insurance in Boston, Mass.
In addition to this scenario, there was a drastic decrease in travel to the US during Trump’s presidency, costing the country $4.6 billion and 40,000 jobs, according to the US Travel Association. “If these or similar policies were to be reintroduced in 2025, the travel insurance industry might experience increased demand for “cancel for any reason” policies, catering to travelers wary of booking trips amid policy volatility,” Cronin says. “There would be a higher demand for flexible coverage options.”
Healthcare access for US expats could be curbed, too, starting in 2025.
“Under Trump’s administration, immigration policies became more restrictive and have made it difficult for non-citizens to apply and enroll in subsidized healthcare programs sponsored by the US Government, as well as to obtain permanent resident status,” Cronin says.
If these measures return during his second term, US expatriates are likely to depend more on private international health plans.
“Insurers can anticipate greater demands for providing emergency medical evacuation and a larger share of international health plans offering more comprehensive health coverage for regions where healthcare is not easily obtainable,” Cronin adds. “This scenario will likely push insurance providers to innovate policies that address enhanced risks while remaining cost-competitive for expatriates.”
It’s also possible that President Trump’s attempts to impose tariffs on its largest trading partners would have an adverse effect on international and domestic travel expenditures.
“Increased pricing for fuel imports or airline fleet purchases may directly influence airfare and operational expenses, making tourism more expensive,” Cronin notes. “Increasing expenses may discourage foreign tourists, which in turn will curtail foreign tourist traffic.”
For the travel insurance industry, this dynamic might spark greater interest in trip cancellation or delay coverage, especially for budget-conscious travelers. “Insurers may also need to rework pricing models to accommodate risks tied to volatile trade conditions and their ripple effects on global travel,” Cronin adds.
Healthcare Insurance Getting More Expensive
Healthcare increases will be common in 2025.
“As a result of the high demand for health services, expenses related to healthcare are surging and there is a high likelihood for insurance premiums to be raised,” Milo says. “Pricing models will also be affected by government shifts in the healthcare system or reforms in government healthcare practice.”
Emerging health treatment could be set for change, too.
“More than one insurance provider stated that they might cover weight loss medications such as Ozempic and drugs used for the management of diabetes,” Milo notes. “It’s likely that COVID-19 related coverage, including boosters, will still be in place since the pandemic is still a threat to public health.”
Additionally, as consumers demand wellness and lifestyle treatments, a few insurance companies might decide to cover or provide discounts for cosmetic procedures. “That list includes plastic surgery and getting injections of Botox Eccleston, D 2010,” Milo adds. “A greater number of insurers can offer flexible health plans which are more convenient for customers.”
There’s more. As more and more attention is paid to pediatric and geriatric patients because of respiratory diseases, “many insurance schemes may soon incorporate vaccinations like RSV (respiratory syncytial virus) shots for its at-risk populations,” Milo notes.
Life Insurance Moves
Life insurance premiums should be headed upward in 2025, albeit at a moderate pace.
According to Swiss Re Institute, life insurance premium forecasts should see 2.7% annual premium growth in 2025 and 2026. That, however, is below the long-term trend of 3.7% as measured annually by Swiss Re from 2014 to 2023. The company reports that US insurance consumers should expect smaller rate increases next year.
Insurers are seeing huge demand for disability and long-term care insurance as Gen X ages to retirement, and the baby boomers are mostly already there, so prices may soar higher by 2026.
“Looking ahead, the demand for risk protection will be driven by cyclical factors such as improving mortgage markets, and structural trends like rising costs of healthcare and nursing services, an aging population as well as attractive product bundling,” Swiss Re notes in its report.
While life insurance rates look reasonable for 2025, locking in a policy early can secure favorable rates before further economic disruptions or inflationary adjustments.
“If you’re considering life insurance, it’s best to act soon because premiums typically rise with age and health changes,” says Yehuda Tropper, CEO and life insurance and life settlement advisor at Beca Life in Baltimore, Md.
For life insurance consumers looking for pricing relief, Tropper advises looking into declining-balance term insurance.
“The death benefit reduces annually as your financial needs drop,” he says. “For example, if you only need life insurance until you pay off your mortgage, then the death benefit will decrease as your mortgage balance decreases. These plans are cheaper than permanent life or standard term life policies.”
Auto rate hikes on the doorstep. Consumers can also expect auto insurance rates to rise next year and by more than other consumer insurance channels.
“As an industry, insurers increased auto rates to return to profitability but as a result, policyholders took to shopping their policies to find rate relief,” says Henry Kowall, director of product insurance at Arity. “Having to contend with lower customer retention, some carriers are spending again on advertising to try to win over these new shoppers and grow sales.”
According to MediaRadar data, ad spending by Allstate, GEICO, Liberty Mutual, Progressive, and State Farm jumped a combined 121% in Q3 2024, reaching $1.7 billion.
‘Prevailing sentiment is that 2025 will see carriers continue to focus on growth and ad spending to attract the record level of policyholders willing to swap brand loyalty for lower auto premiums,” Kowall says. “But this introduces potential risks including growing “profitably” and retaining existing customers.”
With an understanding of existing driving history at the point of sale, customers can benefit from competitive quotes based on their safe driving behavior, while insurers can grow profitably by better matching rates to risk.
“Additionally, for existing policyholders at risk for renewing because of rate increases, carriers can offer a better rate by adjusting their premiums with their existing driving history,” Kowall adds. “Insurers can also use driving data to deploy more effective spend of their advertising budgets and target profitable auto shopper leads while offering these leads with targeted, personalized quotes to result in higher bind rates.”
What Insurance Consumers Need To Do In 2025
There is no shortage of challenges facing US insurance consumers heading into the new year. “That’s okay, as consumers can optimize their insurance coverage while also self-organizing amidst great change,” Milo says.
Milo offers the following action steps to get insurance consumers ready for 2025.
Bundle coverage: Provision assisting consumers to combine home, automobile and any other policy with one insurer in order to access discounted rates. “That should be the norm for 2025,” he says.
Increase Deductibles: An expanding selection of higher deductibles on home and automobile policies should reduce premium charges.
Monitor health insurance plans: Consumers should monitor new trends and developments within the medical space, which may require alternative options. “Consider health care plans that are dynamic and might be cost-effective,” Milo advises.
Embrace technology: Take full advantage of telematics or AI-based apps that monitor driving lifestyle and health practices. “Consumers can also receive personalized policy suggestions via AI,” he adds.
Review coverage regularly: Regular review of coverage can cut unnecessary costs and ensure adequate insurance.
Consumers should also brace for price hikes next year, but good preparation may curb the pricing pain.
“Unfortunately, rate increases are expected in areas like property and casualty, home, and auto insurance, driven by rising reinsurance costs, increases in claims related to climate events, and supply chain issues as well as increasing costs of materials,” Barrett says. “Consumers in high-risk areas, particularly for those prone to natural disasters, could face the steepest increases, as insurers pass on the costs of managing these elevated risks.”
In 2025, insurance customers can also expect more insurers to pull back from high-risk areas, increase premiums, or impose stricter coverage limits.
“We could see more takeouts like we saw in Florida, and more homeowners will be incentivized to make their properties more resilient to possibly improve their rates,” Barrett says. “Thus, the name of the game in 2025 is preparation. To reduce insurance rates, shop around, bundle your policies, and update your coverage as needed.
