(Image source: The Digital Artist/Pixabay.)
We are now racing, not walking, into the back half of 2025. Budgeting and planning are now well underway in most organizations as they look to frame the end of this year and get ready for all that comes next. It is a year of notable contrasts. Fascinating developments in the technological world seem to be a counterpoint to a wide range of uncertainty from an economic perspective. Interest rate changes, an uncertain labor market, tariffs, and inflationary pressures are very much top of mind. Those elements run headlong into each other as insurance carriers look to both stay ahead of the curve in terms of leveraging emerging technology and, concurrently, pressing to create more operational efficiency.
It is rare in our experience to find a carrier incrementally adding expenses in order to leverage advances that come from the use of AI in its various forms, but many are looking to self-fund efforts by leveraging the capabilities to produce quick paybacks that can improve margins and reduce expense pressures that come from a highly competitive marketplace. There will be no free lunch on this.
When Yesterday’s Methods Meet Tomorrow’s Pressures
Interestingly, this focus on short term returns is consistent with what we have seen in our post-pandemic Silicon Valley Innovation Events. There’s a clear desire to continue to push hard for new advances and opportunities, but an “edginess” to it which didn’t exist in the pre-COVID world. A recent NY Times article referred to this as the “hard tech era” which reflects a significant change in organizational culture. Interestingly it also appears to coincide with a move of the epicenter for innovation back into San Francisco proper, marking a significant resurgence for a city that suffered more than most when the world went virtual in response to the rigors of the pandemic.
Author William Gibson, speculative fiction writer and essayist widely credited with pioneering the science fiction subgenre known as cyberpunk. (Source: Wikimedia.)
Which makes this also a great time to reflect on a wonderfully timeless quote from William Gibson, who noted that the future is already here … but that it isn’t evenly distributed. The tools and capabilities being created now bring some fascinating attributes and a potentially very short shelf life, given the even new/better things that are emerging in the current planning horizon. Being engaged, adaptive, and flexible, will be crucial.
Regulatory and Public Trust Risks Defy Old Playbooks
And yet it remains critically important to remember that we are in a highly regulated industry where the consequences of things done can have material, and long-term consequences. Regulators will continue to have a critical eye on actions which appear to create bias or do things which are not, broadly speaking, in the public good. Delta Airlines’ recent efforts to use AI-based tools to refine pricing models generated a rapid and stark reaction from both regulators and legislators who viewed what was shared as being a form of predatory actions on consumers.
Carriers neither want to be left behind in a competitive “arms race” nor wind up on the front pages of newspapers for doing things which can cause meaningful and long-term brand damage. Trust is difficult to build, but surprisingly easy to squander, for companies that fail to properly thread the needle between enhancing profitability and becoming a magnet for public scrutiny.
Losing Core Knowledge Weakens the Industry’s Resilience
Which leads to another major consideration for insurance carriers getting ready for 2026. As terrific as new technologies can be, there’s a danger in forgetting what business a company is actually in. Many are grappling with a loss of institutional knowledge and memory, as younger Boomers and older Gen X’ers get ready to leave the workforce. The knowledge that they have of not only what happens, but why, is crucial to effective and good order running of operations. Several of our CIO Study Group members have recently lamented how hard it has become for them to get good business requirements for transformational efforts.
Thinned out groups aren’t prepared to go back and fundamentally reimagine functions unrestricted by their knowledge of existing systems and processes, many of which have operated for decades based on the limitations of technology deployed sometime in the last century. This can lead to new systems that are effectively just more expensive versions of what they are replacing. As this problem becomes more pervasive, companies may need to consider new organizational and operational structures with more nuanced understandings of what efficiency means. For an industry famous for wanting “one size fits all solutions,” this may be a daunting task.
The Danger of Solving Non-Existent Problems
More to the point, a lack of understanding for how the elements of the industry work can lead to expensive solutions companies deploy that solve problems they don’t actually have. Recently, we’ve encountered a number of insurers focused on building engagement and experience solutions leveraging AI capabilities which sound reasonable as abstract concepts that could be applied to retail sales … but which completely ignore the relationship between manufacturing and distribution entities in the insurance industry as it has evolved in the United States. This could prove to be an expensive, yet avoidable, mistake.
Gibson was right about the way the future is likely to arrive. At the same time, insurance carriers should be mindful that they could be shocked by that future if they fail to pay appropriate attention to both context and the fundamentals of the business. In his book “Future Shock,” Alvin Toffler highlighted the challenges and issues with driving too much change in too short a period of time. This can be avoided for organizations and leaders that are planfully aware. Just because you can do something, doesn’t mean you should. That will be at the core of the prioritization decisions facing insurers now.
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