We’ve said it all before–rising costs, labor shortages, and other factors have created a “perfect...
.png?width=960&height=540&name=Option%201%20(1).png)
We’re only one month into 2025, and the insurance industry is already moving at full speed, with gripping headlines covering everything from the California wildfires to the total cost of natural disasters in 2024. While it’s tempting to tackle each challenge as it arises, forward-thinking P&C agents who develop proactive strategies will gain a stronger foothold to increase both market share and profits in the months ahead.
As we sift through the biggest market drivers in the P&C industry, three key trends stand out:
Frequency and severity of natural disasters
According to Aon, a global risk management and data analytics firm, insured losses reached $145 billion globally in 2024. Hurricane Helene was the costliest global event, causing $75 billion in damages, while Hurricane Milton became the costliest single insured loss event, resulting in $20 billion in claims. Additionally, the cost of the Hughes, Palisades, and Eaton fires in California has soared to an estimated $250 and $275 billion.
Source: National Centers for Environmental Information
Since 1980, the frequency of billion-dollar disaster events has increased by 575%. Both 2023 and 2024 saw significantly more disaster events compared to prior years, and 2025 is already shaping up to follow that trend.
Growing use of AI in risk modeling
As natural disasters increase, so does the demand for better risk modeling. AI dominated headlines in 2024, and for good reason. We’re at the beginning of a technological revolution, with AI impacting nearly every industry—including insurance. Risk modeling is one of the areas poised to benefit the most.
AI executives, Marcin Nowac, Founder of Decerto, and Wilson Chan, CEO of Permutable AI, describe the technology’s impact to the insurance industry as revolutionary and disruptive, particularly with:
- Predictive accuracy
- Speed & adaptability
- Identification of new risk variables
According to Deloitte, insurers need a forward-looking approach to risk modeling, including modernizing their infrastructure for assessment, analysis, and mitigation. Through the use of AI, underwriters should be better equipped to adapt in real time to changing conditions.
Traditional risk modeling relies on historical flood maps, actuarial tables, and past claims data—but AI has changed the game. AI-powered models now analyze real-time climate data, satellite imagery, geospatial analytics, and IoT sensor inputs to assess risk dynamically rather than relying on outdated assumptions.
AI can process massive datasets at unprecedented speeds, allowing underwriters to price risk more precisely than ever before. AI models can now factor in hyper-local conditions, like urban infrastructure, weather anomalies, and microclimate trends to ensure that pricing accurately reflects evolving risk levels.
This should allow underwriters to better predict and prepare for those billion-dollar disasters. It can also significantly change pricing algorithms to provide more accurate risk-based pricing.
However, as billion-dollar disasters become more frequent and risks grow more complex, the real question is: Will AI be leveraged to navigate this new reality, or will the industry face difficult choices about how to balance accurate risk pricing, market stability, and consumer accessibility?
Heightened awareness of the importance of risk management
Business owners across the country are increasingly aware of the impact natural disasters can have on their bottom line. Small storefronts struggle to reopen after major flooding. Logistics operations face delays and rerouting. Farms experience the loss of up to their entire crop yields.
This growing awareness has elevated the importance of risk management, creating more demand for insurance solutions. Small and medium-sized businesses are key drivers of local economies, and their inability to recover after a disaster can have widespread repercussions.
2025 marks a pivotal year for the risk-versus-reward equation in P&C agencies. With risk management becoming increasingly important and natural disasters on the rise, enterprising agents have a significant opportunity to expand their commercial business—especially with flood insurance solutions. However, as underwriters withdraw from high-risk areas to reassess their risk modeling, agencies that rely on only a few underwriters may find their options limited.
That’s why agents across the U.S. partner with AFR Insurance Services for their flood insurance solutions. AFR provides broad market access to both its growing network of private providers and the NFIP. By partnering with AFR Insurance Services, agents also gain access to over 30 years of flood expertise, empowering them to meet this growing demand and expand their business. Discover how AFR’s unmatched industry access and knowledge can work for you.
