What Nonprofits and Social Services Should Expect from Insurance in 2025
I finished reading the Zywave Marketplace Report. Most people don’t want to read the 52-page report, so I’ve done it for you. As we step into 2025, there are some noteworthy trends, pricing shifts, and external factors shaping the market. I’m going to recap the biggest trends, then provide a synopsis of what to expect. Here’s a snapshot of what to expect in the world of insurance this year.
Pricing Predictions for 2025
Let’s start with the big question: How much will insurance cost in 2025? Here are some key projections:
Property Non-CAT: Expect rates to increase by 0% to 10%.
Catastrophic Exposed Property: Expect rates to increase 5% to 15%
General Liability: A modest rise of 1% to 9%.
Commercial Auto: A more substantial increase of 5% to 15%.
Workers Compensation: Relatively stable with changes ranging from -2% to 2%.
Cyber Insurance: A mixed bag with rates varying from -5% to 5%.
D&O (Directors and Officers):
Private and Nonprofits: -5% to flat.
Public Companies: -10% to flat.
Employment Practices Liability (EPL): Rates could swing between -5% to +5%.
What’s Driving Pricing Trends?
Softening for Profitable Accounts: Customers with clean loss histories may see better rates as insurers compete for low-risk business.
Catastrophic Losses: Catastrophic (CAT) losses, such as those caused by hurricanes and wildfires, continue to heavily influence rates in high-risk areas.
Investment Gains vs. Underwriting: Insurance companies made significant investment gains last year, but underwriting profits were thin. If investment performance dips, expect insurers to tighten pricing.
Inflation Impact: While inflation has moderated, its past severity has left a lasting imprint. Insurers are still navigating how to accurately reflect inflation in their pricing.
Trends to Watch in 2025
Beyond pricing, here are some key trends and challenges influencing the insurance industry this year:
1. Severe Weather
Severe weather events are becoming more frequent and destructive, especially in areas forming a triangle between Texas, Florida, and Minnesota. In 2024 alone, there were 19 major hurricanes, tornadoes, and other catastrophic weather events. Many experts agree that severe storms, extreme temperatures, wildfires, and flooding are here to stay.
For insurers, this means ongoing pressure to adjust premiums and coverage terms in CAT-prone regions. For consumers, it’s a reminder to review policies and understand coverage limits—particularly for natural disasters.
2. Social Inflation
“Social inflation” refers to rising costs of insurance claims due to societal and legal trends. Two major contributors are:
Third-Party Litigation Funding: Firms are now investing in lawsuits like stocks, enabling individuals to afford legal battles that they might have previously avoided. This dynamic makes lawsuits longer and more expensive, as these firms can afford to play the long game.
Large Settlements: Public sentiment often favors individuals over corporations, particularly in regions known as judicial hellholes. This trend contributes to an average annual growth of 11% in commercial litigation losses, which totaled $143 billion in 2023.
For businesses, this means higher liability insurance costs and the need to be extra vigilant about risk management.
3. Reinsurance Optimism
The reinsurance market—which supports insurance companies by taking on portions of their risk—has faced challenges, particularly in property insurance. CAT events caused a pullback in reinsurance capacity, but there’s mixed optimism for 2025. Some reinsurers are cautiously returning to the market, but pricing and capacity will remain volatile.
Economic Pressures
1. Medical Inflation
Medical costs are expected to rise by 8% this year—their highest level in recent memory. This directly impacts workers’ compensation and bodily injury claims. For insurers, it’s a delicate balancing act to account for these costs without overpricing policies.
2. Wage Inflation
Higher wages mean higher costs for disability claims and workers’ compensation policies. While wage growth is great for employees, it’s another cost pressure for businesses and insurers to manage.
The Remote Work Challenge
Remote work is no longer just a pandemic trend; it’s a permanent part of the workforce landscape. But it brings unique insurance challenges:
Cybersecurity Risks: Remote work increases the number of potential access points (or “endpoints”) for cybercriminals. This is driving demand for robust cyber insurance policies.
Workers’ Compensation: Home offices are now considered workplaces, creating new liability concerns. Employers need to ensure safe home work environments, which can be tricky to monitor.
Privacy and Compliance: Balancing employee privacy with cybersecurity measures is a growing challenge, especially when personal devices double as work tools.
Shifting Workplace Trends
1. People Are Working Later Into Their Career.
As people are living longer, they are also working later into their lives. Many people are working until they are 70-75 years old.
2. The Baby Boomer Generation Was Very Large. The Following Generations Are Not.
This is leading to a worker shortage. This impacts all lines of coverage. When there are not enough people, it is more difficult to provide a high level of care in professional environments. It’s difficult to find good drivers for trucking risks. The trickledown effect is quite serious.
3. New Workers Get Hurt More Often. Older Workers Get Hurt More Seriously.
This will make sense to many people that read it – new employees make more mistakes. They get hurt more frequently. They mess up the work. Their older counterparts do not make as many mistakes. However, when they get hurt, they are not as resilient, and their injuries are more severe.
Here Are What I Expect To Be Key Issues For Social Services With Their Insurance Renewals:
Do You Have Property in Exposed Areas Or Not? The insurance industry has agreed that weather patterns have changed permanently, but not they’re not sure what those new patterns look like. Each company has different models for storm patterns. That means one company may ask you for a Wind & Hail deductible on your property, when another company might not. This will be totally dependent on your local marketplace.
Continued Emphasis on Making Sure Properties are Insured to Value: There have been numerous studies in the insurance industry showing that many customers are underinsured by as much as 30% on their buildings. This is a result of a lot of inflation in a short period of time.
Invest in Cybersecurity: The number of ransomware attacks continue to rise year over year. We have seen from events with Crowdstrike in the last year that we are all reliant on a few key providers. Make sure that you have considered your Cyber risks.
Auto Safety Will Be Key: This is a line of coverage that continues to be troublesome for insurers. With vehicle replacement costs increasing, and liability trends pointing in the direction of higher settlements, there will be a strong preference for companies that have strong vehicle fleet safety programs. This is especially important for social service vehicles that regularly transport individuals. The potential claim costs for vehicles in your line of work are very high. Social Services with vehicle claims issues and bad housekeeping will have a very difficult time with their auto insurance renewals.
General Liability, Professional Liability and Umbrella Renewals Could be Challenging: In the last year, I witnessed a large pullback on Child Care and For-Profit Substance Use Disorder programs. Insurance companies continue to leave the marketplace. This is a result of the litigation trends that I mentioned earlier in this article. Professional Liability claims are prime targets for people looking to invest in lawsuits. Further, they are emotional lawsuits, and juries will tend to favor the claimant in these claims. I expect insurance companies to be selective in what they offer for liability insurance and limit how much Umbrella coverage they offer.
If You Have Been a Profitable Risk For Workers Compensation, Pricing Should Be Very Competitive: This is one line of coverage that has been very profitable for insurance companies for several years. The result is more companies are entering the space and offering competitive pricing to win market share.
Looking Ahead
The insurance industry in 2025 is shaped by a mix of economic pressures, evolving risks, and external factors like weather and litigation trends. While pricing is expected to soften for profitable customers, challenges like social inflation, severe weather, and economic uncertainty loom large.
For Social Services, the key is to stay informed and proactive. Insurance is all about managing risk, and 2025 offers plenty of opportunities to do just that—if you’re prepared.
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