2025 global insurance outlook: How global trends affect Nordic Insurers

In Denmark, public authorities and Insurers are having a dialogue about public infrastructure, coastal protection, and drainage, as well as how underground sewer systems pose an increased risk to property owners. To what extent is this a societal problem, and to what extent is it an insurance problem? In the case of the latter, it will end up being a problem for families and businesses with no insurance coverage. In direct comparison, one might also ask if other societal challenges are more important. The healthcare systems across the Nordics are under severe pressure by demographic changes, and the massive increase in mental health issues comes to mind… It is probably worthwhile for Insurers at large to have a Plan B. The availability of massive public funding and the time it will take to build interventions most likely entails Nordic Insurers having to stomach quite a few large-scale adverse weather events in the years to come.

Three strategies for adaptability
Looking ahead, Insurers can, in the main, choose three positions on climate change.

The first strategy is to take a wait-and-see approach. Leave it up to public authorities to perform the necessary maintenance on public infrastructure, adjust the risk appetite and pricing to protect the P&L, and just stay on the right side of compliance and regulation. Insurers do what they must do and nothing more because customers will not pay for added services. It is fair to say that Nordic Insurers have a relatively high maturity level when handling first-party risks and first-party coverage. When financial supervisory authorities assess climate risk management in their portfolios – and the FSA’s will – first-party risks are usually not the problem. However, what about third-party risks? What about the liability policies of architects, engineers, bricklayers, and carpenters building properties in an increasingly harsher climate? While the Nordics are clearly much less litigant than the US, I could see people in our part of the world start asking questions to builders who cannot say they did not know that the climate is changing.

The second strategy is to offer more insurance products and services to prevent climate-related damage. This needs to be combined, clearly, with prudent pricing, underwriting and portfolio management. A more robust property can protect the owner from costly projects and keep claims away from the Insurer. And if something does happen to the property in the event of extreme weather, the Insurer can offer climate-friendly and sustainable choices to rebuild what is lost or damaged. Related to this second strategy are also considerations about what kind of insurance products are ethical to offer to the market. Today, there are insurance products on the Nordic market where – if an environmental disaster happens because of a company’s careless actions – the company can use its insurance product to get off the hook. Is that a kind of behaviour Insurers want to support? If not, why haven’t they removed these insurance policies? From an ethical standpoint, certain obligations come with strategy number 2.

The third strategy is to take on a responsibility beyond the Insurer’s customer portfolio. The Insurer offers meaningful and concrete support to help societies improve climate resilience. On a tactical level, that could mean that Insurers are willing to provide company data for researchers or other stakeholders who, in return, can use these data to gain deeper knowledge about buildings, constructions, climate-resilient materials, etc. Ultimately, the Insurer’s winning formula for contributing to the public agenda is the ability to build more robust business cases and design insurance products that are better fit to meet future needs. Examples of this position on climate change are difficult to find, even internationally. However, we do have examples within healthcare, especially on health equality, where some US Health Insurers at scale have leveraged important capabilities for the greater good of societal health. There are also examples of non-life insurers having made their infrastructure and company resources available in sub-Saharan Africa for societies and philanthropist to (self) insure.

Multidisciplinary profit realization
Regarding AI, particularly GenAI, the technology represents a huge opportunity to drive business growth, improve efficiency, and deliver greater employee satisfaction. Before I became a consultant, I worked for some 20 years in the Nordic and European Insurance industry, including 8 years as an underwriter. And I can indeed attest, that some of the GenAI use cases we see in Underwriting and Claims are mind-blowing! The ability to be MUCH better, cheaper, and faster is massive.

However, the technology is still in its early stages. While companies are still figuring out how to leverage the full potential, taking a step back might be a good idea. Instead of trying to solve every new challenge with GenAI, you can probably still solve many challenges with more proven technologies, like simple machine learning or even more basic stuff like process design and aligned scorecards! Within Nordic insurance, the domain of Commercial Excellence comes to mind. Indeed, GenAI will change how good Insurers can be at Commercial Excellence – including very significant upgrades to customer service – but you do not have to go for the heavy guns first. I suggest you fund the journey to GenAI by taking some wins from improving the basics.

Another focus point for handling and managing GenAI in insurance is getting enough scale to drive profitability. To be more precise: How do you, as an Insurer, use a GenAI solution across business areas, and how do you make sure that all matters of compliance are handled once and for all when you build solutions for internal and external purposes? If you do not get all the legislation sorted in the underlying data foundation, you can quickly end up managing resource-demanding silo projects without multidisciplinary profit realization.

The special craftsmanship
When it comes to the soft parts of GenAI implementation, the human aspects, I find this quote from the 2025 Global insurance outlook very inspiring:

“The success of AI initiatives relies on having buy-in from the workforce, so as insurers develop their strategies, they should emphasize human sustainability, where organizations choose to focus more on how they can help their employees rather than how their employees can benefit their bottom line.”

Every day, employees worldwide can read about how computers will soon replace their jobs – most likely with a GenAI solution. So, how do we persuade employees in Nordic insurance companies to welcome the arrival of, for instance, advanced chatbot technology that is likely to put them out of work? Or even more difficult: How do you make your employees reflect and ask themselves how GenAI can make their job easier? As the quote puts it, we need existing and coming generations of employees to believe that computers will not replace but improve their ability to deliver the unique craftsmanship of the insurance industry. There will always be a need for humans to re-think and refine how the core processes of insurance are delivered to customers of tomorrow. While contemplating how to do that, we might as well use advanced technology to handle all the cumbersome tasks during a workday.

Two cost-out strategies
Finally, the Global Insurance outlook also evidence an exciting development within Life & Annuity (pension) companies who, for some time now, have faced two crucial questions when it comes to improving their future business:

• Technology has dramatically changed the circumstances for handling customers’ funds. The simple question is – which has no straight answer – why should people pay money for somebody actively managing their deposit when an algorithm can do the job just as well and maybe even better? We are already seeing new players in the market offering new kinds of products for handling pension funds. Life & Annuity companies relying solely on old delivery/operating models to manage their business need to scrutinize how they can offer their services in a much more customer-friendly way and with significantly lower price points
• When Life & Annuity companies perform a cost-out, they can choose from two strategies. They can run tight programs to reach fixed benchmark-based savings across all business units. Or they can look at the cost-out from a more strategic standpoint and, for instance, change the entire operating model to deliver on future needs, for example, by massively investing in new outsourcing capabilities. We can now see internationally that Life & Annuity companies have done “cookie-cutter” expense cuts for several years. That has obviously proven insufficient as the same Life & Annuity companies are now embarking on (business and) operating model transformations to reset themselves for the future

It will be interesting to see what happens in the Nordics, where we have yet to experience anything other than expense budget cuts. It is highly likely that Nordic Life & Annuity companies also have to make more transformative changes to compete in the future.