Insurtech Expert Forecasts Major Industry Shifts: M&A Surge and AI Revolution Expected in 2025

The insurance industry is poised for substantial transformation in 2025, with mergers and acquisitions expected to make a strong comeback and artificial intelligence set to revolutionize core operations, according to predictions released by insurance platform provider Novidea.

The forecast highlights several critical trends that will reshape the industry landscape. A key development is the anticipated surge in M&A activity as the U.S. economy continues its post-pandemic recovery, with venture capital investment in insurtechs expected to increase as interest rates normalize. This trend could significantly impact market consolidation and technology adoption across the sector.

The E&S (excess and surplus) market, which showed remarkable performance in 2024, is expected to maintain its growth trajectory in 2025. This expansion will likely drive increased investment in automation, AI, and data analytics technologies as companies seek to manage growing demand efficiently.

Climate-related challenges are expected to pose significant risks, particularly in the UK market, where extreme weather events are predicted to become more frequent. This shift could lead to higher insurance costs and potential coverage limitations for high-risk properties, forcing carriers and reinsurers to reassess their risk management strategies.

The predictions also indicate a critical juncture for cybersecurity insurance, with new specialized products expected to emerge in response to recent high-profile technology outages. This evolution suggests a growing need for more nuanced coverage options to address non-malicious business interruptions.

For industry stakeholders, these forecasts underscore the increasing importance of technological adaptation and the need for robust data management systems to remain competitive in an evolving market. The predictions particularly emphasize how traditional insurance operations must transform to meet changing customer expectations and market demands while maintaining profitability.