Insurance Industry Trends to Look out for in 2025

Written by:
Mark Camp | CEO & Founder
Propello Cloud

Key Takeaways

What are the Challenges Facing the Insurance Industry?

What are the Key Trends Shaping the Insurance Industry?

Macroeconomic Factors

Today's economic climate of rising inflation and interest rates forces many insurance companies to pass the extra cost onto customers. As a result, customers upset with an increase in their premiums look elsewhere for a better deal. It's a catch-22 scenario. Insurance companies can't be expected to retain the customers who they pass the extra cost on to. And there lies the problem. Instead of securing retention, insurers secure the opposite; annual churn.

We all know that customers switch insurance provider the second their coverage ends. It's a trend firmly embedded in the insurance sector, and one that as insurance customers ourselves has become the standard practice. But who can blame customers for wanting better deals? Similarly, who can blame insurance companies for negative macroeconomic factors that push them toward higher churn? It's a vicious cycle of prices going up and customers switching. 

That said, there is a solution. Insurance companies can offer a suite of tailored rewards, exclusive perks, and seamless digital experiences. All of these are proven methods of inspiring customer loyalty in spite of rising costs. 

Changing Customer Preferences

Gone are the days of a product or service fully satisfying customers. In this digital era, customers have grown accustomed to a world of personalisation, convenience and seamless experiences. What they receive in one sector, they have come to expect in other sectors including the insurance industry. To stay competitive, insurers must adapt.

From conversations with insurance companies, we've learned there's growing consumer demand for omnichannel experiences. Contrary to what the sector at large may think, customers do actually want to hear from their insurers. They want to be engaged with across multiple touchpoints and channels, whether that's on mobile apps, social media, chatbots or virtual assistants. 

Every insurer we speak to is a testament that the industry is waking up to changing customer preferences. They recognise the importance of possessing engagement tools that can deliver experiences customers demand. What they may not realise about these tools, with the right solution they are simply a launchpad towards even more effective strategies. We're talking gamification, personalised rewards content, and targeted offers focussed on different points in the customer journey. 

Regulatory Changes and Compliance Pressures 

In the UK we saw the introduction of the FCA's 2022 Consumer Duty. This was mainly a crackdown on pricewalking. At first glance, these stricter regulations may be perceived as an extra hurdle to jump, given that they disrupt governance and potentially lead to high compliance costs. Which would only serve to further exacerbate the challenge of delivering competitively priced products. 

Whilst these regulations address internal governance, aimed to stamp out deceptive practices around products and services, and increase transparency around data and cybersecurity, there's an opportunity to deliver extra value whilst adhering to industry regulations. 

Full disclosure of products and services could be an excellent educational event where the customer is incentivised with rewards to learn the most important terms and conditions of their insurance policy. More responsible risk management could be achieved through offering discounts on complementary products from partnered brands. Finally, a loyalty programme could reward long-term engagement and responsible behaviour, reducing the frequency of claims, leading to smoother claims handling and quicker dispute resolutions.

1) Shift to Customer-Centric Business Models

The majority of customers still resort to cancelling policies. In the UK, 1.3 million car insurance policies are cancelled each year. As higher interest rates hit, this staggering number is set to increase. Inflation is hitting vehicle insurance more acutely than other sub-sector.

As a result, there’s a sharp rise in more flexible and accessible products and services on the market, a trend that’s set to continue during current economic headwinds. Some insurers are now offering pay-as-you-go models (or usage-based insurance models) that allow customers to pay only for the coverage optionsthey need, when they need it.

2) Leveraging Data and Insights to Deliver Personalisation 

In our 2025 Loyalty Uncovered Report, 83% of the insurers we spoke to said they were actively investing in data-gathering and improved personalisation. Telematics plays a major role in this. They allow insurers to track customer behaviour. Originally, this was to ensure customers adhered to their policy terms and demonstrated safe behaviours like driving responsibly.

However, in recent years following development of advanced software for data-gathering, the use case of telematics has expanded, widening the implications of personalisation. For example, a wearable may track the running sessions of a health insurance policyholder, transfer that data to the insurer's loyalty app, and reward them with an eGift for running shoes after reaching a jogging milestone. 

Not only is the reward relevant to the policyholder, it also encourages healthy behaviours that reduce their risk profile. This advanced level of personalisation can also be extended across other important parts of the experience, such as customer service. Insurers can flag coverage gaps, alert policyholders of unusual activity, and tailor communications and self-service tools to customer preferences. 

3) Rise in Telematic Wearables

Most consumers are familiar with telematics. The first widespread example were GPS powered devices in cars for tracking driving behaviours. However, the advent of smartwatches and other wearable devices has revolutionised the way insurers assess risks and track their customers using telematics.

There are wider implications of telematics particularly for sub-sectors. Insurers use it to personalise rewards using live data from black boxes. But what if it goes beyond personal driving behaviours? Could the ever increasing popularity of wearables play a role in the pet sub-sector? We explored an example for how wearables could work for health insurance policyholders. 

There's implications for other sub-verticals, including travel and home insurance too. And since the technology continues to advance at a rapid pace, the way insurance companies use wearables to promote desired behaviours, build customer loyalty, and track risks will be subject to their expertise and imagination. 

Source: Tourmo

Insurers can use driving behaviour analysis to reward customers for responsible behaviour while keeping insurance premiums fair. This also encourages retention and increases lifetime value for the insurer.

4) Investment in Strategic Partnerships

One of the most exciting opportunities we've identified is the potential for strategic loyalty partnerships to create unique, highly relevant rewards that resonate with insurance customers. In fact, in our 2025 Loyalty Uncovered Report, the insurance industry was the second highest investor in brand partnerships after retail. An overwhelming 86% of insurers have or are planning to invest in brand partnerships. 

Aside from prospects that we've spoken to, some of our insurance clients rely on brand partnerships right now. They're able to access extensive networks of suitable brand partners. There, they can tailor co-created rewards with complementary brands. Referring back to our health insurer example from earlier, our clients could partner with a fitness brand to offer exclusive discounts on gym memberships. Why? Because:

• The gym gets new members.

• The insurer improves their value proposition with rewards for the customer that promotes positive, healthy behaviours, and long-term satisfaction.

We’ve already seen some insurers drive growth and innovation by embracing industry convergence and embedded insurance. Bundling insurance products with other complementary services helps insurers reach new customers and create integrated experiences. Innovative partnerships are the next natural step.

5) Increased Digitalisation and Connected Technology

With greater personalisation and omnichannel support in play, it's natural to see further progression towards digitalisation and connective technology. To meet the expectations of the modern consumer insurers need the right digital tools and platforms for streamlining operations, reducing their costs, and enhancng the overall customer experience.  

Take the development of low-code or no-code enterprise IT for instance. Whilst the majority of the sector continue to rely on legacy systems, tools and processes, there’s a shift occurring as more options of no-code tools enter insurance markets. Typically, these zero code software solutions are developed with a focus on security and regulatory compliance, allowing for seamless integration with internal resources. In fact, no-code solutions: 

• Ease the burden on internal resources whilst enhancing customer experiences.

• Reduce time-to-market of new digital applications.

Summary of digitalisation in insurance: EY

APIs

Let’s not forget the role of APIs that allow for seamless integrations. APIs have paved the way to leverage real-time customer data between platforms, in order to deliver cohesive personalised experiences. Reward programmes use CRM data and the customer insights it reveals to shape hyper-relevant reward offers that incentivise policy renewals. No wonder from the insurers that we spoke to 77% are currently investing in this area. 

Mobile first

There's also a case for adopting digital channels like online portals and mobile apps. They are a great fit for giving insurance customers exactly what they want; self-service. These channels allow customers to:

• Generate their own quotes online.

• Resolve queries with chatbots.

• Even resolve claims in some cases. 

Self-service tools build on the positive impact that no-code solutions and API applications have on businesses. They free up agents from having to deal with queries or generating quotes. And for the customer, it delivers a quick and convenient experience.

 
Data Security

With larger datasets comes the need for robust cybersecurity measures. Insurers who collect, store and share vast volumes of sensitive data in third party platforms, must invest in capable security solutions. These safeguard customer data against cyber threats which is essential for a trustworthy brand reputation.

Artificial Intelligence

As digitalisation and connected technologies reshape insurance, artificial intelligence is becoming a key solution for many companies. This is due mainly to its capabilities in automating routine processes and analysing real-time data from wearables and telematics. AI also speeds up decision-making and adds depth to personalisation efforts. Its growing role will be explored in more detail in the following section. 

6) Artificial Intelligence (AI) Advancements

Whilst part of ongoing digitalisation, artificial intelligence remains unprecedented in terms of its innovation. For that reason alone it deserve its own section. It has revolutionised most sectors, the insurance sector included, enhancing underwriting, claims management and customer service. Generative AI even informs product development, assists with marketing efforts and gives personalisation that extra edge. 

Machine learning algorithms also impact underwriting trends and claims management. By using predictive analytics, ML reduces operational costs and improves risk exposure accuracy. In addition, insurers continue to use technologies like the Internet of Things (IoT) for real-time data gathering and risk assessment. Even blockchain technology plays a role in securing smart contracts and improving transparency around claims processing.

However, implementing these technologies - in particular AI - comes with its own challenges. 

Source: KPMG

That's why collaborations with InsurTech firms are so valuable. These tech-savvy startups offer innovative solutions like AI-powered chatbots and virtual assistants to handle customer inquiries. Again, this frees up human agents to focus on more complex and urgent priorities.  

There's even more use cases for AI in terms of loyalty programmes. With it, insurers can automatically serve the right rewards to the right customers at the right time. As a result of implementing AI in your loyalty initiatives, dynamic experiences, responsive to the individual needs, interests and preferences of every customer will emerge. Setting the standard of a rewards experience, unprecedented in its depth and scope. That's why the insurance sector came in second for investing in AI. The majority of the sector understand AI-led loyalty initiatives are their ticket to truly unique brand differentiation and long-term retention. Which is why over 65% of them are investing in AI-led loyalty initiatives this year. 

7) Continual Focus on ESG

Since 2020, the top 30 insurance firms have boosted their ESG rankings by an impressive 20 points. The momentum doesn’t seem to be slowing. While meeting regulatory standards is a big part of the push, many insurers are also thinking ahead, using ESG as a lens for shaping future governance and business practices.

Half of the insurers we spoke to said they’re actively working to improve their ESG scores, driven largely by growing customer expectations. Our finding actually coincide with other other sources too. Likewise, a study by Bain & Company found that millennials, more than any other age group, are likely to buy from or switch to insurers with strong ESG credentials.

Interestingly, the same research revealed that customers tend to prioritise things like ethical governance and social responsibility over environmental impact — even though most insurers still focus heavily on the latter.

8) Gamification

Keeping customers engaged between renewals has always been a challenge. In many cases, policies remain untouched for most of the year, with little interaction unless a claim is made. But in the modern insurance industry, engagement should definitely not be limited to the point of purchase.

Gamification with rewards encourages small, everyday actions at every touchpoint. This could be as simple as logging into a mobile app, completing a short safety quiz, or participating in a challenge related to health, home, or car usage. These activities keep the customer involved and also help reinforce behaviours that lower risk.

By using gamified experiences, insurers have an opportunity to make the relationship feel more interactive and rewarding without needing a claim to trigger communication. Plus, it keeps the insurance brand top of mind, insulating the existing customer base from competitors' marketing efforts.