Gallagher reveals the top insurance trends for Q1 2025

Which risks are poised to change the landscape?

Gallagher reveals the top insurance trends for Q1 2025

Insurance News

By Josh Recamara

Gallagher’s retail brokerage experts are monitoring several key trends as they enter the first quarter of 2025, focusing on issues that could shape the insurance and risk management landscape.

Soaring social inflation

Social inflation, which refers to the rising costs of insurance claims due to factors such as increased litigation, higher jury awards and broader definitions of liability, continues to be a key concern.

In particular, the frequency of “nuclear” and “thermonuclear” verdicts, where damages exceed $10 million and $100 million, respectively, is at record levels. These verdicts are often fueled by the growing public sentiment that businesses can absorb these costs.

Additionally, litigation funding is increasing, with third parties financing lawsuits in exchange for a share of any recovery.

Social inflation is impacting commercial auto liability, driving up jury awards, legal costs and premiums. The cost of claims is expected to continue rising in 2025.

Gallagher is advising that companies should review and strengthen their risk management and loss prevention programs. Brokers can also help ensure coverage limits are adequate to address potential large verdicts.

Dichotomy of AI adoption

Artificial intelligence (AI) offers opportunities to increase efficiency and improve data analysis but it also brings risks. Legal challenges related to AI are emerging, including issues such as copyright infringement, deceptive trade practices and breaches of privacy law. Moreover, AI is being exploited for phishing attacks and creating “deep fake” content, raising cybersecurity concerns.

As the use of AI expands, the insurance industry is expected to update policies to address AI-related risks.

To help mitigate risks, businesses should assess their AI risks and work with brokers to develop risk-mitigation plans, Gallagher said. Furthermore, understanding emerging AI regulations will also be crucial for staying compliant.

Persistent supply chain disruption

Supply chain disruptions continue to affect businesses, stemming from events such as product recalls, severe weather, cyberattacks and transport shutdowns.

The 2024 Gallagher study revealed business owners’ concerns over inflation-related cost increases and rising incidents of cargo theft. These disruptions may lead to business interruption claims and increased liability risks, Gallagher said.

Business owners are advised to discuss insurance solutions, such as contingent business interruption and supply chain insurance, with their brokers. Adopting emerging technologies like GPS and predictive analytics can help improve supply chain transparency.

Shifts in CAT losses

Catastrophe (CAT) losses, traditionally driven by hurricanes, have evolved, with an increasing focus on secondary perils such as hail, floods and wildfires. The insurance industry is adjusting its approach to underwriting and pricing for these risks, with recent events, including the significant California wildfires, highlighting the growing impact of such perils.

To mitigate this risk, Gallagher said that companies should update property valuations regularly to ensure their coverage remains adequate. Brokers can help explore options such as parametric insurance, which offers quick payouts or alternative risk financing solutions, including captives.

Impacts of global elections

Geopolitical risks, including those associated with global elections, can significantly impact commercial insurance. Volatility from political unrest, terrorism and civil disturbances may lead to higher premiums and increased claims.

This year’s global elections have added to geopolitical tensions, contributing to a more uncertain environment for businesses, Gallagher said.

Meanwhile, businesses with international operations are advised to work with brokers to assess their exposure to geopolitical risks and explore risk transfer solutions to mitigate potential impacts. These trends highlight evolving risks in the global landscape, and businesses are encouraged to work proactively with their insurance brokers to navigate these challenges effectively.

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