New Year, New You: Insurance Innovation in 2025

Innovation will return after a pandemic hiatus, with a focus on efficiencies rather than moonshots

The end of the year is both a time for reflection and a time for goal setting. For insurers, it’s also a time to budget, manage technology project portfolios, and identify key strategic initiatives for the coming year.

Celent expects that 2025 will be a year of transformative efficiency for carriers. Believe it or not, P/C insurance entered a growth era in 2025. It’s not the days of old: claims costs aren’t going down, and neither are average global temperatures or extreme weather events. Insurers’ new lodestar is realizing growth through streamlining and removing legacy friction. Growth is driving technology investment, investment is driving efficiency, and efficiency facilitates growth, in a virtuous cycle.

As insurers make these technology investments, innovation is back on as a strategic priority. But it won’t look quite like it has in prior years.

Innovation in 2025: Efficiency, Not Iconoclasm

Innovation as a concept itself underwent substantial changes during the pandemic. When we thought about the future in 2017, 2018, and 2019, we did so in an industry that was seeing a booming insuretech sector take huge swings at upending traditional insurance paradigms. “Innovation” meant finding new types of products and new ways of selling them: microcoverages, on-demand coverage, gig insurance, embedded insurance, and so on.

Insurers followed this lead. 60% of North American P/C insurers cited innovation as a key business goal in 2019. Carriers weren’t as focused on re-engineering the concept of “insurance” itself, but they brought a heavy emphasis to new product types and direct-to-consumer sales.

Understandably, that changed during the pandemic. As costs increased and insurers margins tightened, insurers’ focus on innovation dwindled, with roughly 20-30% of insurers listing it as a top priority.

In 2024 and 2025, innovation is rebounding as a priority for insurers, but with a different sort of urgency, one focused on transformative efficiency, tactical wins, and finding savings to shore up growth. It won’t be as experimental; the projects insurers greenlight will be more likely to create immediate impact and will have shorter runways to prove out. Rather than remaking insurance entirely, Innovation in 2025 will focus on making insurance smarter, better, and faster.

Challenges for Insurers

This won’t be easy for insurers, who are still facing a number of financial, structural, and technological challenges:

• Talent crunch: A perennial concern for insurers that has only become more urgent as in-house experts continue to age out and finding replacements continues to be difficult.
• Remote and hybrid work: Hybrid is still the norm across the industry, which brings morale benefits and time savings—but a lot of innovation still happens face-to-face when people can collaborate directly.
• Costs are still up everywhere: Increases driven by inflation and supply chain crunch aren’t falling, and the cost of insurance is still high for many consumers. Insurers are crunched by reinsurance rates, only some of which can be defrayed by premium hikes.
• Carrier technology readiness: Many insurers still have mixed technology environments. That creates opportunities for innovation, but it also means that operationalizing those new gains across the enterprise may be difficult.
• ROI isn’t easy: When every dollar matters, it's difficult to make the case for something that might produce value but isn’t a sure bet. Innovation projects will have a much shorter leash to demonstrate returns.

Some of these difficulties are new, and others are familiar, with added dimensions and urgency. Nevertheless, insurers should still recognize 2025 as a year of opportunity in spite of the many challenges they face.

Fresh Ways Forward

To innovate in 2025, insurers will need to blend new working models with digital tools. Paradoxically, they need to democratize innovation mindsets throughout their organization, even though they won’t be able to take a shot on every project.

First, treat every employee like an innovator. Welcome perspectives from different departments and empower employees to suggest opportunities for process improvement. Find ways to meet in person, at least occasionally—hackathons are especially worthwhile investments in time.

Second, take an outside-in approach, and especially consider real-world experiences with insurance. Every person in the insurance industry is also an insurance customer. Could a frustrating call with a health insurer create insight for your personal or commercial auto coverage? Or, if you didn’t understand anything about insurance, how would you perceive a process or interaction you might be taking for granted?

Finally, in an age of efficiency, no problem is too small. Optimizing or automating even single steps from a larger process can create substantial gains. Insurers should consider process mining and task mining to visualize workflows or capture individual user interactions within a transaction; both can identify opportunities to streamline.

2025 will be a challenging environment for insurers to innovate and experiment. But innovate they will, and I expect we’ll see some tremendous wins in the coming year. The future is here, whether we like it or not; how the industry adapts will be fascinating, exciting, and (I think) inspiring to watch.