From climate change to AI: Preparing for the future of insurance claims handling

 Cyber Security

2025 is set to be a transformative year for claims management, with factors such as climate change, technology advancements, and complex market dynamics reshaping the industry. As insurers grapple with these changes, companies that monitor the key shifts impacting claims management and adapt quickly will gain a critical edge. This article will share the trends, challenges, and opportunities ahead as we navigate this new era.

Key trends shaping the industry

In the past year, several significant trends have influenced the claims management space, reshaping the way insurers respond to client needs and market demands.

Climate-related catastrophes

The increasing frequency of climate-related disasters, such as floods, wildfires, and hailstorms has profoundly affected the industry. In 2024, Canadians filed an estimated 228,000 insurance claims tied to climate-related disasters, including flooding in Toronto and southern Ontario, the Jasper wildfire, the Calgary hailstorm, and flooding in Quebec. This marked a significant increase compared to the approximately 160,000 natural catastrophe-related claims filed across the country in 2023 [Canadian Underwriter]. These secondary catastrophic perils challenge insurers’ willingness to underwrite certain risks, while testing the claims industry’s ability to respond promptly. The increasing frequency and severity of these events demands innovative approaches from the industry.

Workforce demographics and the skills gap

The aging and retiring workforce continues to be a pressing issue, leading to a significant skills gap in various areas of claims management. This gap extends beyond adjusters to other critical roles within the industry. In fact, less than 5% of millennials express an interest in a career in insurance, while those under the age of 30 make up a mere 20% of the industry’s workforce [Insurance Business Mag]. Attracting, training, and retaining the next generation of talent is now an urgent priority for sustained success.

The role of technology in transforming claims management

Technology has emerged as a cornerstone of innovation in claims management, driving enhanced efficiency and improving the client experience.

Impact of AI on claims management

The use of AI in insurance is projected to increase significantly within the next two years, with 70% of respondents preparing to integrate AI models that use real-time data predictions, a notable jump from the current adoption rate of less than 30% [Insurance Business Mag]. The integration of Artificial Intelligence (AI) and machine learning are revolutionizing claims handling especially, providing tools that boost productivity while complementing – but not replacing – the role of adjusters. These technologies support desk adjusting, but adjusters still need to balance efficiency with client expectations and quality service.

Self-service claims platforms

Self-service claims technology is gaining traction, particularly in the U.S. market. These platforms empower clients to report claims without direct interaction with adjusters. While not a replacement for personalized service, these tools offer a level of convenience that aligns with evolving client preferences.

Emerging challenges and opportunities

As the claims management industry evolves, it must address key challenges while seizing opportunities to create value and drive progress.

Environmental, Social, and Governance (ESG) focus

Over the past five years, ESG factors have become increasingly central to claims operations. More companies, adjusters, and restoration contractors are measuring their carbon footprint and adopting environmentally conscious practices, reflecting a growing emphasis on sustainability.

Cybersecurity concerns

With cyber threats becoming more sophisticated, the exposure to data breaches and ransomware is a growing concern. According to a report by Insurance Bureau of Canada, cyber liability premiums increased from $18 million in 2015 to $550 million in 2023. Claims teams are developing new strategies to approach these risks, including making difficult decisions on ransomware payments and enhancing cybersecurity.

Consumer behavior and expectations

Consumer expectations in the claims industry are evolving rapidly, mirroring trends seen across other sectors. Today’s clients seek:

  • personalized experiences
  • omnichannel support
  • self-service options
  • simplified communication
  • ease of settlement

Claims handlers must remain agile and client-focused, adapting to these changing needs to provide the best possible service.

Investment priorities for the future

To remain competitive, businesses and leaders should make strategic investments in technology and talent. Self-service claims solutions and AI-powered tools will streamline processes and improve client satisfaction. These investments will help streamline claims processes and enhance client satisfaction.

Global and geopolitical influences

External factors, such as tariffs imposed by the U.S. on Canadian products and services, can significantly impact the claims industry, particularly through inflation and supply chain disruptions as products are reduced and adjusters become less available. Industries such as auto manufacturing, energy, and chemical/plastics/rubber production are among the most affected, with 80% to 95% of their exports relying on the U.S. market [Canadian Underwriter]. These factors underscore the pressing need for resilience and adaptability in operations, as well as proactive planning to protect against delays in claims handling.

Bold predictions for the upcoming year

Looking ahead, the continued trend of climate-related catastrophes will likely shape the claims landscape in profound ways. Insurers’ ability to respond to deliver timely and effective responses to these events will become a critical differentiator in an era of increasing consumer expectations. The integration of technology and a proactive approach to risk management will be essential in meeting these demands.

The claims industry is at a pivotal juncture, facing a mix of challenges and opportunities that will define its future. By staying informed, embracing innovation, and adapting to these changes, companies and individuals can navigate the evolving landscape and emerge stronger.

About the author:

John Russell is the Senior Vice President of Claims at Westland Insurance. With decades of experience in the industry, John is passionate about leveraging technology and strategic insights to enhance claims operations and drive exceptional client outcomes