(Image credit: IIR.)
There is an uncomfortable question confronting the property and casualty insurance industry:
Are we experiencing a temporary backlash, or is insurance entering a new era of fundamental distrust?
Insurance has never been an easy product to love. Consumers pay premiums for something they hope they never need, governed by contracts that can be difficult to understand and fully appreciated only when a loss occurs. The relationship can change dramatically in a single claim. But something feels different today.
Distrust is broader, louder and increasingly connected to public frustration over rising costs, corporate power, artificial intelligence, data collection, climate risk and the perceived behavior of large institutions.
Whether distrust itself has increased is difficult to measure. What is unmistakable is that it has become more intense, more visible and more readily amplified.
For an industry whose fundamental product is a promise—we will be there when something goes wrong—trust is paramount.
A Warning We Issued Before
In December 2024, Stephen Applebaum and I wrote “Broken Trust—Insurance Industry Included.” Our premise was straightforward: the public reaction following the killing of UnitedHealthcare CEO Brian Thompson was an alarm bell for the entire insurance industry, not simply the health insurance sector. We pointed to rising premiums, coverage withdrawals, privacy concerns, widening protection gaps and growing skepticism toward technology as evidence of a broader erosion of confidence.
Nearly two years later, that warning appears increasingly relevant. The issue is no longer simply whether consumers trust their insurance company. It is whether the public increasingly distrusts the insurance system itself.
The Symbol of a Much Larger Problem
The December 2024 killing of Brian Thompson was horrifying. Yet the public reaction to the alleged perpetrator, Luigi Mangione, revealed something the insurance industry should not dismiss as an isolated social phenomenon.
Polling following the killing showed unusually strong sympathy for Mangione among younger Americans. The reaction was not really about one individual. It reflected anger toward a system that many people believe has become too powerful, too complicated and too disconnected from the people it serves.
UnitedHealthcare operates primarily in health insurance, not P&C. But to the public, “insurance company” can be a more important category than the distinctions between health, auto, homeowners or commercial insurance. That should concern every P&C executive.
Then Came the Claims Controversies
In 2025, a U.S. Senate hearing examined insurance claims practices following natural disasters, with executives from Allstate and State Farm appearing alongside policyholders, adjusters and a consumer advocate. Allegations that claim evaluations had been manipulated or unfairly reduced received significant attention, although the insurers disputed them.
In June 2026, Oklahoma Attorney General Gentner Drummond filed another lawsuit against State Farm, alleging that the insurer’s “Hail Focus Initiative” used undisclosed standards and other practices to reduce payments on hail and wind claims. State Farm disputes the allegations.
In late August, Los Angeles County sued State Farm over its handling of claims following the January 2025 Southern California wildfires, alleging delays, underpayments and other improper claims practices. State Farm has disputed the allegations and pointed to billions of dollars in wildfire claims it has paid.
These proceedings have not established that the insurers acted improperly. Lawsuits contain allegations, not findings of fact. But public trust is rarely determined by the eventual disposition of litigation. The narrative usually arrives first.
Profitability Makes the Narrative More Difficult
The industry’s financial performance adds another complication. P&C insurers produced exceptionally strong underwriting results in 2025 as premium growth and improved loss performance contributed to a record aggregate underwriting gain.
Strong insurer profitability is not inherently evidence of consumer mistreatment. Insurance is a capital-intensive business. Insurers need adequate returns to support capital, absorb catastrophe losses, pay claims, invest in technology and remain capable of writing business through difficult cycles.
But consumers do not necessarily see that complexity. Instead, the narrative can become:
My premium went up. My deductible went up. My claim was denied. The insurer made more money.
Whether that conclusion is actuarially accurate is almost beside the point. It is emotionally powerful. When consumers are already frustrated by inflation and the cost of housing, automobiles and repairs, insurance profitability becomes an easy target.
The “Closed Without Payment” Problem
A recent Wall Street Journal analysis of auto insurance claims illustrates the challenge. An analysis of NAIC data showed that 45 percent of certain liability and medical claims were closed without payment in 2025, compared with 35 percent in 2016. That is an important statistic—but it does not necessarily tell the whole story.
“Closed without payment” (CWP) does not equate to “wrongfully denied.” Claims can close without payment for numerous reasons, including coverage issues, duplicate claims, fraud and liability determinations. In claims operations, CWP is one measure used alongside assigned claims, reopened claims and net claim closures to monitor inventory and productivity.
Determining whether claim settlements are fair requires a much broader set of evidence, including average payments, reserve accuracy, reopening rates, quality reviews, customer surveys, market-conduct examinations and cycle times. Reporting practices can also differ among carriers. CWP volumes alone cannot establish whether insurers are paying claims fairly.
The Journal’s analysis also showed that the increase was concentrated in liability and medical claims, while physical-damage claims were being paid at essentially the same rate as a decade ago.
A technically correct defense can still fail as a trust strategy.
If consumers hear “nearly half of claims aren’t being paid,” a subsequent explanation about claim categories, coverage triggers and statistical methodology may never overcome the initial impression. The industry needs to communicate in a way that makes the underlying economics and claims experience understandable—not simply defensible.
Why Insurance Is Vulnerable
Insurance has structural characteristics that make trust difficult. It is intangible, complex and often mandatory. The customer pays first and receives value later—sometimes years later. And when the customer most needs the product, the insurer must determine whether, and how much, it will pay, which can easily create friction.
A policyholder sees a damaged roof. An insurer sees a contract, causation, exclusions, depreciation, replacement cost, engineering evidence, estimating methodology, fraud indicators and applicable regulation. Both may believe they are acting reasonably. But one side has generally spent decades learning how the system works. That asymmetry creates distrust.
Four Forces Amplifying the Problem
Affordability: Consumers have experienced dramatic increases in homeowners and auto premiums in many markets. Those increases have legitimate drivers—repair costs, medical costs, litigation, catastrophe losses, reinsurance, inflation and changing risk. But consumers experience one part of the equation: the bill.
Claims: The claim is the industry’s moment of truth. Every difficult claim creates a potential advocate—or detractor. Social media can now turn an individual dispute into a national story almost instantly.
AI and data: AI can improve claims accuracy, detect fraud, accelerate settlement and reduce administrative expense. But from a consumer’s perspective, AI can also sound like: a computer decided not to pay me. The broader public debate over AI, privacy, data centers and technology companies suggests this skepticism will grow.
Distrust of institutions: Insurance is not operating in isolation. Banks, pharmaceutical companies, technology companies, healthcare organizations and other large institutions are experiencing versions of the same credibility challenge. Insurance is particularly vulnerable because its product is fundamentally built on trust.
The Industry’s Response
There are reasons for optimism. Some insurers recognize that restoring trust requires more than advertising.
Farmers Insurance (Los Angeles) has introduced a Coverage Review initiative designed to help consumers better understand what their policies do and do not cover. Importantly, the service is available even to consumers insured elsewhere. This attacks the trust problem upstream by not waiting for a claim to explain the policy. Time will tell whether this is simply clever marketing or a new way to encourage discussions that consumers tend to avoid.
State Farm has announced a $5 billion dividend for qualifying auto customers while reducing auto rates in many markets. Progressive (Mayfield Village, Ohio) began returning excess profits to eligible Florida personal auto policyholders earlier than state law required. USAA (San Antonio) reported returning a record $3.8 billion to members in 2025 through distributions, dividends, bank rebates and rewards.
These actions matter. But trust is not restored by one dividend, one advertising campaign or one rate decrease. It is restored through repeated evidence that an organization behaves consistently with the promise it makes.
The Ecosystem Has a Role to Play
This is not solely a carrier problem. Solution providers, claims technology companies, TPAs, adjusters, brokers, agents, consultants and analysts all influence the customer’s perception of insurance. Every automated decision, claims estimate, AI recommendation, vendor interaction and confusing communication becomes part of the insurance brand.
The industry’s technology agenda cannot simply be about doing things faster and cheaper. It also has to be about doing things in a way customers perceive as fair, understandable and trustworthy.
Instead of asking only, Can AI make this decision?
We should ask, Can the customer understand why this decision was made?
Instead of asking, Can we automate this claims process?
We should ask, Where does a human being add trust and judgment?
And instead of asking only, Can we reduce claims expense?
We should ask, Can we reduce expense without damaging the customer’s perception of fairness?
The Uncomfortable Opportunity
The industry should not respond to today’s distrust by simply defending itself more aggressively.
Some criticism is unfair, and some statistics are presented without sufficient context. Some claims disputes are considerably more complicated than the headlines suggest. Insurers are confronting genuine challenges from catastrophe risk, inflation, litigation, repair costs and capital requirements.
All of that is true. But another truth is equally important: People do not trust institutions simply because the institution can prove it is technically correct.
Trust comes from transparency, consistency, empathy and evidence. The industry has an opportunity to use the same technology driving transformation to address the trust problem. AI can make insurance more automated—but also more transparent. Data can make underwriting more sophisticated—but also help consumers understand their risk. Claims analytics can reduce leakage—but also identify where customers experience unnecessary friction.
And stronger profitability can provide the capital to invest in better products, better experiences and better claims operations.
The Real Question
Insurance does not need to become universally loved. It needs to remain credible.
When someone buys homeowners insurance, auto insurance or commercial coverage, they are not really buying a policy document. They are buying confidence that when something goes wrong, someone will stand behind the promise.
That promise is the product.
The insurance industry has a trust deficit. The question is whether carriers and the broader ecosystem will treat that deficit as a public-relations problem—or recognize it as a structural business problem, a technology problem, a claims problem and ultimately a product problem.
The industry has spent enormous amounts of money making insurance more sophisticated. Perhaps the next investment should be making it easier to believe.