Insurance Industry Trends: Navigating Shifts and Opportunities in 2025 as an Independent Agent

The insurance industry is transforming, driven by the rise of artificial intelligence (AI), the introduction of groundbreaking products like embedded insurance and parametric policies, and the impact of decarbonization initiatives are rapidly gaining widespread adoption. Navigating an evolving landscape involves understanding how emerging trends, products, and changes impact an agency’s operations.

ISU Steadfast is committed to supporting independent agencies in evaluating emerging trends that can transform operations and provide the resources needed for a competitive edge.

Major Trends Shaping the Industry

Increased Adoption of AI and Generative AI

According to a recent report by KPMG, AI, including generative AI, has a projected market value of $79 billion by 2033. The insurance industry uses AI to enhance underwriting, automate claims processing, streamline operations, personalize products, and improve customer experiences.

 “Those who use AI tools will have a big head start over those who don’t.”

Optimizing Internal Workflows

At ISU Steadfast, we have identified two primary categories of AI use: in-house development and external product exploration. “We’ve integrated AI tools to optimize internal workflows,” says ISU Steadfast President Steve Pearson.

“For example, tasks previously handled by a dedicated staff, such as categorizing policies and routing them to the appropriate personnel, are now automated. This shift has reduced manual labor, increased accuracy, and allowed staff to focus on higher-value responsibilities,” explains Pearson.

Reviewing New Tools

A dedicated team at ISU Steadfast reviews emerging AI-driven tools.

“Our goal is to guide our members. While no single product has yet received our full recommendation, the progress in AI technology suggests that transformative solutions are imminent,” according to Pearson. “Those who use AI tools will have a big head start over those who don’t.”

The Rise of Embedded Insurance

Embedded insurance represents a significant shift in how insurance products are sold and

consumed. Rather than being offered separately, insurance is seamlessly integrated into purchasing goods or services, providing a more straightforward experience for consumers who value expediency and simplicity. Examples include providing travel insurance as part of flight or vacation package bookings and including renters or homeowners insurance as part of the lease or mortgage process.

“This concept is bringing insurance into everyday transactions and broader ecosystems,” according to Pearson. However, as Pearson explains, while embedded insurance puts pressure on the traditional independent agency system, customers still want to consult an expert before making a major purchase like home insurance.

Parametric Policies

As risks from flooding, convective storms, and wildfires escalate, insurers are developing products emphasizing resilience and sustainability. Parametric policies are one example.

These policies pay based on specific triggers, like hail size or tornado strength, without needing a traditional loss adjustment. They’re popular because they help property owners cover large deductibles or risks excluded from standard policies. For instance, a parametric hail policy can provide extra coverage for high-deductible properties in hail-prone areas. 

Impact of Decarbonization Initiatives on Underwriting

Decarbonization programs reshape the underwriting landscape as industries work toward net-zero carbon goals, creating new risks and opportunities. Sectors like energy, transportation, and manufacturing face challenges such as renewable energy technology reliability, stranded fossil fuel assets, and evolving supply chains, alongside stricter ESG regulations and carbon reporting requirements.

While sustainable insurance products like carbon credit coverage and green infrastructure guarantees present growth opportunities, insurers must navigate data gaps, market volatility, and transition risks. Success will require balancing short-term exposures with long-term benefits, embracing new technologies, and collaborating with clients on proactive risk management strategies.

Challenges and Opportunities for Independent Agents

Agency consolidation and carrier exclusivity have created challenges for smaller agencies that compete against larger organizations with the advantage of premium volume and insurer agreements.

“To compete against larger firms, focus on developing expertise in specific niche markets in your geographic footprint and building stronger client relationships,” says Pearson.

Also, differentiate your agency by offering tailored recommendations and niche products that digital platforms may overlook.

Portfolio Management: Book Shaping

“The excess and surplus (E&S) market has dramatically risen in recent years, growing from 20% to nearly 40% of ISU Steadfast agencies’ business,” notes Pearson. This shift reflects challenges in the preferred market, such as carrier constraints and appetite limitations.

While the E&S market offers stability and sustainability, it also presents disadvantages, including lower commission rates and more labor-intensive processing. To rebalance your book of business back to the preferred market, ISU Steadfast recommends what is known as “book shaping,” which involves:

• Assessing whether E&S policies can return to the preferred market at renewal
• Motivating account managers to focus on desired business metrics like premium size, cross-sells, and admitted versus E&S placements
• Tying bonuses to these goals to drive proactive management and align with the agency’s strategy

“Book shaping can help agencies reduce costs and gain more power in negotiating terms and pricing in the admitted market,” says Pearson.

How ISU Steadfast Supports Trend-Aligned Strategies

ISU Steadfast offers several critical resources that empower our members in today’s changing environment, including:

• Broader carrier access: Members enjoy enhanced commissions, no volume requirements, and access to Lloyd’s of London for hard-to-place risks via Steadfast Group.
• Advanced technology tools: Our commercial lines submission engine simplifies quoting and binding small commercial business, supported by a broad range of carrier partners.
• Community support: Members benefit from networking, sharing best practices, and collaborating through conferences, regional meetings, and forums to improve metrics, strategies, and operations.
• Profit-sharing opportunities: Agencies gain access to collective profit-sharing agreements and bonuses for growth and retention while maintaining independence in account management.

Stay Ahead of Industry Trends with ISU Steadfast

To remain competitive, it’s critical for independent agents to stay ahead of where the industry is heading and refine their operations. “As AI tools mature, new products are launched, and market dynamics shift, ISU Steadfast remains a trusted partner in guiding independent agencies toward a more efficient, profitable, and empowered future,” says Pearson. 

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