Industry Trends to Exploit for 2026: Part Two

Agency owners must stay informed about significant new trends in the insurance industry. The following is part two of a two-part article highlighting seven industry trends insurance agencies should track for 2026. For part one, see Insurance Journal’s December 1 issue.

4.

Group Benefits and Health Insurance

As we enter 2026, escalating medical inflation–projected at nearly 8% for employer-sponsored plans–the tight talent market, and AI-driven innovations are transforming group health insurance. This creates prime opportunities for agents to guide clients toward sustainable, employee-centric strategies that control costs while boosting retention.

Premium hikes are relentless, with family coverage averaging $27,000 annually and workers contributing over $6,800. Employers are shifting to self-funded and level-funded models for midsize groups, embracing narrower networks, reference pricing, and site-of-care optimization to curb expenses. Pharmacy benefit managers (PBMs) are under scrutiny, with biosimilars and outcomes-based contracts emerging to tame specialty drug costs, which now drive over 50% of trends.

Benefits are evolving beyond physical health to encompass mental health, musculoskeletal (MSK) support, fertility, caregiving, and financial wellness. Virtual-first primary care and upgraded Employee Assistance Programs (EAPs) are standard, with outcomes-based vendor guarantees ensuring ROI. Incentives such as premium discounts or extra PTO encourage engagement with mindfulness apps and stress workshops. Creative group benefit brokers design a post-tax $500-$2,000 LSA (Lifestyle Savings Account) for gym, pet care, childcare, or commuting. It can be bundled with an FSA/HSA education and compliance checklist and sold as a mini-CAF 125 plan.

Gen Z and Millennials demand tailored options: defined contribution plans, buy-up credits, and expansive voluntary benefits menus featuring critical illness, accident, pet coverage, and student loan aid. Data analytics enable risk-stratified navigation, delivering personalized incentives and care pathways.

Telehealth is ubiquitous, augmented by AI triage, remote monitoring, and expert second opinions. Agents who use services that streamline multi-vendor portals–integrating enrollment, claims, and HRIS data–foster seamless experiences for the insured and deeper client loyalty.

Stricter rules on price transparency, MHPAEA parity, and data privacy loom large. Individual Coverage Health Reimbursement Arrangements (ICHRAs) and captives appeal to niche employers but require robust administration to mitigate pitfalls.

Bottom Line: In 2026, forward-thinking agents who champion data-driven, integrated benefits–blending cost control, personalization, and well-being–will become irreplaceable partners, helping employers thrive amid rising costs and evolving expectations.

5.

Natural Disasters’ Effect on Insurance

As 2026 unfolds, the relentless escalation of natural disasters–fueled by climate volatility, urban sprawl into vulnerable zones, and socioeconomic shifts–will amplify insured losses beyond 2025’s staggering $145 billion benchmark. Global economic losses from events such as hurricanes, wildfires, floods, and severe storms are projected to exceed $300 billion annually, with the insurance protection gap narrowing to under 40% but still leaving billions uninsured. Hotspots such as California (wildfires), Florida (hurricanes), and Southeast Asia (typhoons) face acute availability crises, prompting premium surges of 10-15% and non-renewals in high-risk corridors. For agents, this signals a pivot from reactive claims handling to strategic advisory roles in risk mitigation.

Insurers are doubling down on AI-driven risk modeling and predictive analytics, integrating satellite imagery, IoT (Internet of Things) sensor networks, and hyper-local climate forecasts to refine underwriting and dynamic pricing. Machine learning algorithms now simulate “black swan” scenarios with 20% greater accuracy, enabling proactive policy adjustments and reducing surprise losses. Agents can leverage these tools to consult on portfolio diversification, blending traditional P/C with emerging cat bonds for capital relief.

Resilience incentives are mainstreaming: Expect widespread adoption of discounts–up to 10%–for FORTIFIED-compliant homes and Firewise-certified communities, as insurers like USAA expand offerings to seismic retrofits and flood barriers. Public-private partnerships (PPPs) will proliferate as governments mandate enhanced reserves and transparency under evolving regulations.

Tech frontiers like drone assessments and real-time telematics will slash claims cycles by 50%, fostering trust. Ultimately, 2026 demands that agents champion “resilience-as-a-service.” Educate clients on adaptive strategies–from green retrofits to parametric hybrids–that transform peril into profit while safeguarding communities against an unforgiving climate.

Insurers offer more customized policies that cater to specific needs and risks associated with different geographical areas. New insurance products are emerging to address the changing risk landscape, such as “parametric insurance policies.” These policies pay out based on predefined parameters, such as the magnitude of an earthquake or the wind speed of a hurricane, allowing for faster claims processing. “Microinsurance” is designed to protect low-income individuals and communities; in this case, it provides affordable coverage for natural disaster risks. Governments and regulatory bodies are implementing stricter regulations to ensure insurers maintain adequate reserves and adopt sound risk management practices. Public-private partnerships are also becoming more common in addressing the financial challenges of natural disasters.

What to Expect: Ongoing challenges are expected in the U.S. insurance industry throughout 2026, particularly in personal lines, as regulators, planners, insurers, and property owners navigate the evolving landscape of property risk and ownership shaped by natural disasters.

6.

Insurtech

In 2026, insurtech surges forward, propelled by AI maturation, IoT (internet of Things) ubiquity, and seamless digital ecosystems, redefining insurance from reactive coverage to proactive, hyper-personalized ecosystems. With global premiums stabilizing amid competition, technology enables agents to pivot from transaction brokers to strategic advisors, unlocking $4.8 billion in AI-driven value alone. This evolution promises 30% operational efficiency gains while closing protection gaps for underserved segments.

AI and machine learning dominate, embedding predictive analytics into underwriting, claims, and fraud detection for precision pricing and 40% faster settlements. Generative AI powers dynamic policy tweaks via real-time behavioral data, while NLP-enhanced (Natural Language Programming) chatbots and virtual assistants elevate service, resolving 70% of queries instantly. Agents can leverage these for tailored risk consultations, blending historical claims with climate and health signals to outpace commoditized competitors.

IoT and telematics explode, with the market hitting $132 billion in 2026–up from $63 billion in 2024 at a 44.8% CAGR–driving usage-based insurance (UBI) beyond autos into homes, pets, and SMBs. Wearables and smart sensors enable proactive interventions, slashing claims by 25% through real-time alerts on driving habits or property vulnerabilities. For agents, this means bundling telematics audits with policies and fostering loyalty through data-backed discounts.

Embedded insurance matures into a $250 billion powerhouse, weaving coverage into e-commerce, travel apps, and SaaS platforms for frictionless uptake–projected at 35% annual growth. Blockchain secures these micro-transactions, while AR aids virtual claims inspections, cutting processing times in half.

Personalization peaks as algorithms fuse IoT streams with GenAI for bespoke offerings, ensuring equitable premiums and boosting retention by 20%. Cloud and low-code tools democratize adoption, empowering agents to co-create solutions.

Bottom Line: Embrace integrated platforms for advisory retainers, specialize in cyber-resilient bundles, and champion ethical AI to build trust. Innovation isn’t optional–it’s the lifeline for sustainable growth and client empowerment.

7.

Market Conditions

Entering 2026, the US P/C insurance market is leaning toward stabilization, with premium growth moderating to 4% amid robust capital reserves exceeding $1 trillion and competitive pressures easing amid the seven-year hard cycle. Combined ratios are projected to edge up to 99, signaling slight underwriting strain from persistent cat losses–estimated at $120 billion for 2025–and social inflation, yet ROEs hold steady at 10% buoyed by 4.2% investment yields. Regional hotspots like Florida

and California face sharper hikes, but national trends favor buyers in low-risk segments.

Commercial Lines Dynamics. Property softens further, with rates down 8-10% for preferred risks outside cat zones, thanks to ample capacity and reinsurance support. Casualty firms modestly (3-12%), driven by litigation in umbrella/excess and venue risks in states like New York. Commercial auto remains pressured (+5-10%) by repair inflation and tariffs on parts, while workers’ comp stabilizes–flat to down–in most states. E&S lines expand for flexibility, though growth dips below 10%.

Personal Lines Challenges. Homeowners’ rates climb 8-15% in disaster-prone areas, driven by wildfire and hurricane rebuild costs, while national averages ease slightly as mitigation credits proliferate. Private passenger auto sees combined ratios improve to ~96, but potential 2026 tariff hikes could reverse rate cuts, lifting premiums 4-7%. Shopping intensifies amid affordability woes.

U.S. Industry Resilience. Sustained profitability stems from disciplined underwriting and tech like geospatial analytics for cat triage. Captives and cat bonds absorb volatility.

Agent Playbook for 2026. Advise early renewals (90+ days) with mitigation data–telematics for auto, defensible space for property–to secure flat or better terms. Bundle cyber add-ons in commercial and parametric riders in personal for upsell. In a capacity-rich market, emphasize value: Reinvest savings into limits expansions, positioning your agency as indispensable amid softening commercial and sticky personal risks.

Summary

The first step is being proactive and knowing how current trends will affect the firm. Managing the agency in a way that exploits these trends will then allow the firm to succeed.

Part one of this report in the December 2025 issue included discussions on key trends for M&A activity and pricing, internal perpetuation options, and potential tax law changes.

Oak is the founder of the international consulting firm, Oak & Associates based in Sonoma, Calif. and Bend, Ore. Schoeffler is an associate of the firm. Website: www.oakandassociates.com. Phone: 707-935-6565. Email: catoak@gmail.com.

Topics Trends