Insurance and reinsurance firms are budgeting more for merit pay in 2027 than all but two US industries. The figure is worth tracking for benefits brokers and advisers whose clients are trying to hold talent while healthcare costs keep climbing.
A Marsh survey of 1,001 US organizations found that employers across all industries plan to set base salary merit increases at 3.2% in 2027. Total salary increases are projected at 3.5%, including merit, promotions, cost-of-living, and other adjustments. The insurance and reinsurance sector landed at 3.6%, above the cross-industry average and tied with energy and non-financial services.
Only high tech at 3.8% and banking at 3.7% budgeted more. Those figures are still preliminary. As of July, 87% of organizations said their 2027 salary budgets had not yet been finalized. Marsh noted that projections at this stage have historically tracked closely with what employers actually deliver.
If the projections hold, 2027 will mark four consecutive years of merit increases in the same narrow band. The insurance sector's position near the top of the merit-spend table fits a labor market that has stayed competitive even as overall hiring has moderated.
The Q3 2026 Insurance Labor Market Study by The Jacobson Group and Aon found that 89% of insurance carriers plan to increase or maintain staff size over the next 12 months. Much of that activity is backfill hiring rather than headcount growth, and pay stays one of the primary tools employers have to keep key staff in place.
Economic uncertainty is shaping decisions across the board. More than half, or 57%, of Marsh's respondents said they expect economic conditions to have at least a moderate impact on 2027 compensation. Tauseef Rahman, Marsh's US workforce reward solutions leader, said employers should be more selective about where increases land.
"Economic uncertainty is top of mind for employers this year, and compensation dollars are tight," Rahman said. "To make the most of their budgets, employers should take a targeted approach, scrutinizing each compensation dollar and using data to direct increases where workforce needs and talent risk are the greatest."
A four-year plateau in merit budgets has a direct implication for total rewards strategy. When base pay increases are constrained, benefits programs tend to absorb more of the competition for talent. The Q3 2026 Jacobson/Aon study adds a wrinkle: voluntary turnover is slowing, which makes recruitment for certain positions harder as incumbents stay put.
That pressure puts benefits design in a more prominent role heading into 2027. Lockton's 2026 National Benefits Survey, drawn from 1,705 plan sponsors, found that 54% of employers now rank cost reduction as their top benefits priority, up from 38% in 2025.
When salary budgets are flat and benefits are being trimmed, the gap in total rewards carries retention risk. Brokers who can put a number on that gap have a specific case to make with clients, beyond comparing premiums.
The Marsh survey also found that AI is reaching compensation planning, though most organizations are still at an early stage. Nationally, 70% of organizations report at least some automation in compensation processes. The most common uses are market pricing recommendations and benchmarking, cited by 53% of respondents, followed by salary increase recommendations at 50%, and job matching and leveling at 49%.
Only 1% of organizations said they have reached an advanced level of AI use in compensation. That gap between broad adoption and meaningful transformation suggests most HR and compensation teams are still running AI tools alongside manual processes rather than replacing them.
Rahman said the remaining barriers are practical. "The barrier isn't interest; it's governance, data quality, and system integration," he said. "Once employers address these and other factors, AI can transform the compensation function, freeing up capacity for greater human thought and impact."
