5 Predictions for the Insurance Industry in 2026
The insurance industry’s old sense of steady certainty has slipped away. PwC’s “Insurance 2030” notes that “the stability that insurers have long relied on for predictable risk pricing and consistent growth is disappearing.”
The firm points to a rapid sequence of shocks—a pandemic, political unrest, supply-chain failures, global conflict, high inflation and extreme weather—observing that “only 20 years ago, most of these events would have seemed unlikely” and that experiencing them all within less than half a decade was “unthinkable.”
PwC refers to these long-running disruptions as STEEP forces—social, technological, economic, environmental and political factors—and warns that these influences are only increasing and “are leading to a fractured world in which insurers have to cover a greater array and frequency of intensifying risks,” PwC says.
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Because of this, 2026 is shaping up to be a year where insurers must balance opportunity and risk in equal measure. Here are five trends that will take hold in the year ahead.
1) The Industry Prepares to Advance
WTW’s “Insurance Marketplace Realities” report for 2026 describes late 2025 as a “unique and promising inflection point” where years of volatility are giving way to a “clear and stable horizon.”
With capital abundant, technological advancements accelerating and risk insight tools more powerful than ever, “the industry is poised for progress,” WTW said.
According to the firm, “[artificial intelligence] is no longer a vision for the future; it’s a force actively reshaping our industry today.” WTW highlights AI-driven insights embedded into platforms and new products emerging that reflect the scale of a digital, automated economy.
Meanwhile, capital strength is another key theme. WTW reports that industry surplus has surpassed $1 trillion and reinsurance capital exceeds $725 billion, noting that this abundance “is not just stabilizing—it’s energizing.”
Swiss Re’s “US Property and Casualty Outlook” forecasts a steady but moderated performance environment. The firm expects “industry return on equity (ROE) of 10% in 2025 and 2026,” driven by investment earnings even as underwriting softens, as illustrated by a projected two-point increase in loss ratios next year.
Swiss Re projects premium growth slowing to “5.5% in 2025” and “4% in 2026,” describing the outlook as “sunny skies but pack an umbrella.”
2) Climate Data to Get Real
Climate modeling is undergoing its own transformation. According to “2026 Insurance Outlook: Separating Reality from Hype,” a report by ePayPolicy, climate variables that once appeared “in quarterly risk reviews are now showing up in daily pricing models.” The firm emphasizes that the shift is not merely about using more data but using it dynamically, stating that “models update as fast as the weather itself.”
This change reflects the pressure of rising catastrophic losses. In the years ahead, carriers and managing general agents (MGAs) will draw on parcel-level data—including soil composition and heat-island effects, where cities become significantly warmer than nearby rural areas—to refine risk selection and inform new types of coverage.
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ePayPolicy notes that 2026 will be less about tweaking rates and more about “redesigning how products respond with parametric triggers, resilient home incentives and dynamic midterm policy adjustments.”
According to the National Weather Service (NWS), climate predictions for 2026 include a continued trend of record-breaking global temperatures, with a high probability that the period 2022-2026 will be the hottest five-year period on record.
For winter 2025-2026, NWS says that a La Niña event is expected to influence U.S. weather, bringing warmer-than-normal temperatures to the southern and eastern U.S., wetter-than-normal conditions to the northern U.S. and the Pacific Northwest, and potential drought to the U.S. Southwest.
3) Customer Service to Make or Break Insurance Experiences
Forrester anticipates major changes in how carriers engage with policyholders. Forrester’s “Predictions 2026: Insurance” report shows that auto and home insurers saw declining customer experience (CX) index scores in 2025, driven in part by “double-digit rate increases” and rising distrust. In response, Forrester predicts that “P&C carriers will double their CX investment to boost customer engagement.”
Forrester’s data reveals that quick issue resolution and competitive rates are the two most important drivers of satisfaction. At the same time, the ability to “easily check the status of a claim” has become a critical expectation. Forrester also says that proactive communication, transparent rate explanations and personalized options—including usage-based insurance—“will enhance customer engagement and satisfaction.”
After multiple years of sizable rate actions, auto retention fell as consumers discovered they have real leverage, according to TransUnion’s “2026 Personal and Commercial Lines Annual Insurance Outlook.”
“In 2026, carriers will continue to combat that trend by matching communication and service to evolving expectations: Value for money and ease of use lead the list of what customers say they value most,” the report said.
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TransUnion also reports that communication preferences differ sharply by generation. Email and phone remain the top channels overall, with younger customers more receptive to email and baby boomers gravitating toward phone or in-person conversations. For claims, TransUnion finds that “telephone is still preferred across generations,” meaning AI chat or app updates should support, not replace, live assistance.
Price pressure is also reshaping retention, with TransUnion noting that even loyal customers shopped for lower premiums in 2025.
However, carriers that stand out for clear value—strong service, brand stability, unique discounts or meaningful add-on coverages—are more likely to retain policyholders. TransUnion’s survey shows the strongest retention drivers are “proactive outreach about discounts,” early notice of rate increases and a well-known brand.
4) AI to Reshape Operations
According to “Reinventing insurance: An industry beyond the tipping point,” PwC expects a major operational shift as carriers adopt “increasingly powerful AI tools, including agentic AI and deep learning.” These capabilities help interpret data related to “general trends, specific incidents and individuals” far faster than in the past, supporting underwriting, advisory work and customer interactions.
Yet PwC warns that “the human element remains vital.” Carriers are not ready to rely fully on automated recommendations due to concerns about bias and accuracy. That makes “responsible governance of AI and its outputs” essential, especially for brokers and agents whose advice underpins trust.
Also, adopting agentic AI and other technologies pose significant operational challenges and risks. According to a PwC survey, 93% of insurance executives say the industry’s pace of change has accelerated beyond what traditional strategic planning can effectively address.
Use AI Without Losing the Human Touch
PwC emphasizes that responsible governance is essential, and the rise of agentic AI introduces new risks that make oversight even more critical. These systems expand an organization’s attack surface and can be vulnerable to threats, such as data poisoning, prompt injection and other manipulations that compromise sensitive information.
Beyond security, limited transparency and insufficient human oversight can lead to errors or unintended actions that undermine trust or flout emerging and evolving regulations. Ethical concerns also come into play, including accountability, privacy challenges and the potential for embedded bias. These risks underscore the need for clear guardrails and human judgment as carriers integrate AI more deeply into their operations.
Another notable shift is occurring in IT. PwC writes that modern infrastructure is freeing IT departments from acting as maintenance units and allowing them to “strategically guide insurers’ business” through partnerships, ecosystem development and innovation leadership.
5) Cyber Insurance Market to Grow as AI Increases Threat Velocity
Forrester predicts the cyber insurance market will grow by 15% in 2026 as AI reshapes the threat landscape. “AI has become a weapon for bad actors and a target itself,” fueling more attacks and increasing breach frequency, according to Forrester’s “Predictions 2026: Insurance” report.
Financial services and insurance organizations experienced an average of 2.3 breaches in the past 12 months, according to Forrester’s 2025 data, with costs averaging $3.9 million.
Because AI-driven threats are evolving faster than many organizations can defend, Forrester argues that cyber insurers must move beyond financial protection to become “proactive partners in cybersecurity.” The firm expects carriers to expand into risk mitigation tools, cyber defense services and underwriting approaches explicitly designed for AI-enabled exposures.
Cyber insurance rates in the U.S. declined an average of 5% in the fourth quarter of 2024, marking the first quarterly decrease following seven years of rising rates, according to the National Association of Insurance Commissioners’ (NAIC) “Report on the Cybersecurity Insurance Market.”
“As companies continued to invest in their cybersecurity controls, which is looked upon favorably by underwriters, many also sought to increase limits, reduce retentions, and make other program improvements,” the report said, explaining the decrease in cyber insurance rates.
Yet, “cyber risk remains a top concern for organizations,” the report continued. “Mitigating third-party-driven cyber incidents with widespread consequences, even non-malicious events such as the July 2024 CrowdStrike incident, may only increase in importance as companies continue to integrate more third-party solutions.”
Meanwhile, privacy litigation is shaping up to be the “next frontier of digital risk,” according to Coalition’s “State of Web Privacy” report.
The report, based on nearly 200 cyber insurance claims and scans of 5,000 business websites, shows that lawsuits over how businesses collect and use data have surged. It also found that the increase is driven largely by aggressive plaintiff’s attorneys leveraging decades-old privacy laws in modern contexts.
The findings highlight how privacy exposure has expanded beyond large enterprises, with nearly 60% of web privacy claims reported by businesses with less than $100 million in revenue.
The report also found that 77% of all wrongful data collection claims originated from website tracking and 73% of claims involved analytics technologies, such as Google Analytics or the Meta Pixel.
Further, chatbots accounted for 5% of all claims, with lawsuits citing decades-old state wiretap laws, such as Florida’s Security of Communications Act, which were written long before these technologies existed.
2026 is shaping up to be a year of transformation for the insurance industry. From AI-driven operational shifts and dynamic climate modeling to heightened cyber and privacy risks, industry players must balance innovation with oversight. Those that embrace technology must also double down on responsibility, ensure a smooth customer experience and manage emerging threats, including regulatory and criminal exposures.
Will Jones is IA editor-in-chief.
