12 Insurance Industry Trends Defining 2026

As insurers enter 2026, digital transformation continues amid economic volatility, regulatory pressure, and climate-driven risk. These forces are accelerating modernization, reshaping customer expectations, and redefining risk management. To stay competitive, insurers must be prepared for these 12 defining trends shaping the year ahead.

 1. Model Context Protocols (MCPs)

Model Context Protocol (MCP), set to become the standard for enterprise AI integration in 2026, is a new open standard defining how artificial intelligence systems connect to data, tools, and applications securely and consistently.¹ By replacing fragmented integrations with a universal protocol, MCP enables AI systems to access real-time, governed data across platforms like Google Drive and Slack.² Its greatest impact emerges in scenarios where information must flow fluidly yet remain governed — particularly in workflows requiring context, timeliness, and auditability across diverse systems. Since it offers a robust set of security features, One Inc is leveraging MCP to drive innovation by streamlining insurer reporting capabilities and developer workflows.

2. Customer Centricity

Customer centricity will remain a critical driver of retention and growth for insurers in 2026.The American Customer Satisfaction Index (ACSI) reports that customer experience scores declined industry-wide during a challenging 2025 marked by rising premiums, increasing natural disasters, and rapid technological change.³ Policyholders now expect hyper-personalized solutions and seamless interactions across digital and human channels. In response, leading insurers are combining AI-driven efficiency with a human touch and omnichannel strategies to deliver timely, relevant experiences that build trust and long-term loyalty in an increasingly competitive market.

3. Artificial Intelligence Advancements

AI is becoming the new operating system for insurance, poised to reshape the industry in 2026. Advancements such as generative and agentic AI are transforming core functions, reducing claims processing times by up to 40% and automating underwriting submission reviews.⁴ According to Capgemini, AI agents could generate up to $450 billion in economic value by 2028 through revenue growth and cost savings, yet most organizations remain unprepared to scale agentic AI effectively.⁵ Success will hinge on modern core systems, strong data governance, and robust cybersecurity to ensure both efficiency and trust.

4.  Life Insurance Modernization

Life insurance faces a critical modernization imperative in 2026. Global premiums are projected to grow by only 0.9% through 2040, as legacy systems and outdated value propositions fail to resonate with younger consumers.⁶ Although 68% of people under 40 consider life insurance essential, Capgemini notes that current offerings fall short of expectations for flexible, “phygital” experiences that blend digital and human touchpoints.⁷ To reverse declining penetration, insurers must prioritize digital transformation, mobile-first design, and personalized, data-driven guidance embedded within core products.

5. Auto Insurance Revolution

The auto insurance landscape is undergoing a forced revolution in 2026. While rate increases have moderated, J.D. Power reports that 26% of customers now carry deductibles above $1,000 to manage costs — significantly impacting satisfaction. At the same time, the growing complexity of technology-laden vehicles has extended repair cycle times, while claim severity continues to rise, with total losses now accounting for 27% of claims.⁸ To adapt, insurers must balance escalating repair costs with the need to deliver seamless, digital-first experiences to an increasingly price-sensitive, shopping-prone customer base.

6. Telematics & IoT

The rapid expansion of IoT and telematics is shifting insurance from reactive compensation to proactive prevention. Connected ecosystems — from smart home sensors that help avert water damage to vehicle telematics enabling real-time risk assessment — are powering a “predict and prevent” model. With usage-based insurance projected to reach $122 billion by 2034⁹, drivers increasingly expect transparent, behavior-based pricing. Realizing this potential, however, requires insurers to master complex data integration while delivering measurable ROI through reduced claims frequency and severity.

7. Property Insurance Evolution

After years of market hardening, property insurance is beginning to soften in 2026 as new capacity drives selective rate decreases. However, J.D. Power reports that 47% of homeowners still face premium increases, weakening loyalty among high-value customers.¹⁰ At the same time, LexisNexis notes catastrophe claims have reached a seven-year high, accounting for 42% of losses.¹¹ While underwriting remains strict in high-risk areas, insurers are investing in smart home technology to reduce water and fire damage. Success now hinges on balancing competitive pricing with proactive prevention to rebuild consumer trust.

8. AI-Powered Payment Orchestration

Payment orchestration is evolving from optional infrastructure to a strategic necessity in 2026. AI-powered platforms are central to this shift, using real-time routing decisions to improve authorization rates and reduce costs. Advanced machine learning models also strengthen security by detecting sophisticated fraud patterns that static rules often miss. In the United States, the payment orchestration platform market is forecast to reach $1.61 billion in revenue by 2030.¹² Success will depend on balancing automation with trust, while addressing risks such as algorithmic transparency and data privacy to support scalable, reliable global commerce

9. Virtual Card Growth

Virtual card adoption is set to transform insurance payments in 2026, with the global B2B virtual card market projected to expand from $5.2 trillion in 2025 to more than $14.6 trillion by 2029.¹³ While 88% of financial leaders are embracing virtual cards, a significant usage gap remains.¹⁴ For insurers, virtual cards enhance security, reduce fraud risk, and streamline supplier payments — an important advantage as late payments affect up to 97% of some sectors.¹⁵ For policyholders, they enable faster, more secure claim payouts

10. Cybersecurity and Risk Management

Cybersecurity and risk management are converging for insurers in 2026, as cyber threats remain a top concern for businesses, according to the 2025 Travelers Risk Index. With 25% of companies experiencing a cyber event in the past year — and 60% of those affected suffering multiple incidents — the threat remains persistent.¹⁶ Security breaches and extortion continue to rank among the most common cyber events impacting organizations. Despite heightened awareness, 46% of small businesses still lack cyber insurance.¹⁷ Proactive measures, including robust security controls and employee training to prevent social engineering, are critical to mitigating risk and protecting sensitive data.

11. Climate Risk Impact

Severe convective storms (SCS) remain the primary peril impacting insurance balance sheets in 2026.¹⁸ Global insured losses from natural catastrophes surpassed $100 billion for the sixth consecutive year in 2025, driven largely by SCS events and wildfires¹⁹. With climate change intensifying weather frequency, insurers are pivoting toward advanced data analytics to mitigate these risks. Beyond traditional reinsurance, the industry is increasingly focused on educating customers about resilience and exploring alternative risk transfer options to manage this escalating volatility.

12. Parametric Insurance

Parametric insurance is moving into the mainstream in 2026, with the market projected to reach $51.3 billion by 2034.²⁰ Driven by escalating climate-related disasters and increased AI adoption, these solutions deliver rapid liquidity where traditional policies often fall short. Industry focus is shifting toward hybrid models that combine indemnity coverage with parametric triggers to close protection gaps more efficiently. With U.S. markets holding a dominant share, insurers are increasingly deploying these data-driven products to address complex risks such as natural catastrophes and supply chain disruptions.

Stay tuned for our 12 Insurance Industry Trends Defining 2026 whitepaper coming in late January.

Are You Ready for 2026?

The year ahead will bring both challenges and significant opportunities. As insurers enter 2026, multiple areas of the industry will require transformation, reinvention, and innovation. The road forward will not be without obstacles — and without strong digital payments capabilities, insurers risk falling behind. As the leading digital payments network for the insurance industry, we’re here to help you navigate what’s next with confidence. Get in touch.

Sources:

1. Moodys – https://www.moodys.com/web/en/us/creditview/blog/demystifying-mcp.html
2. Anthropic – https://www.anthropic.com/news/model-context-protocol
3. Carrier Management – https://www.carriermanagement.com/news/2025/11/19/281410.htm
4. BCG – https://www.bcg.com/publications/2025/how-insurers-can-supercharge-strategy-with-artificial-intelligence
5. Capgemini – https://www.capgemini.com/us-en/news/press-releases/trust-and-human-ai-collaboration-set-to-define-the-next-era-of-agentic-ai-unlocking-450-billion-opportunity-by-2028/
6. 6.Capgemini – https://www.capgemini.com/insights/research-library/world-life-insurance-report/
7. Ibid.
8. JD Power – https://www.jdpower.com/business/press-releases/2025-us-auto-claims-satisfaction-study
9. Straits Research – https://straitsresearch.com/report/usage-based-insurance-ubi-market
10. J.D. Power – https://www.jdpower.com/business/press-releases/2025-us-home-insurance-study
11. LexisNexis – https://risk.lexisnexis.com/insights-resources/research/lexisnexis-risk-solutions-home-trends-report trmid=INSHME25.Home25.25272.PHGO48653&gad_source=1&gad_campaignid=23317816491&gbraid=0AAAAADgNGN4wZdrQK6sEZ0kwh4RhPnzAV&gclid=Cj0KCQiAgP_JBhD-ARIsANpEMxwFHJyayaznF2YqATFm_l6Gwhfx2fE64p1V9uXHP4MXXcpn6-Az5OwaAkAGEALw_wcB
12. Grand View Research – https://www.grandviewresearch.com/horizon/outlook/payment-orchestration-platform-market/united-states
13. Juniper Research – https://www.juniperresearch.com/press/b2b-spending-to-dominate-global-virtual-cards-market/
14. PYMNTS – https://www.pymnts.com/news/b2b-payments/2025/48percent-usage-gap-shows-why-virtual-cards-still-lag-adoption/
15. Ibid.
16. Carrier Management – https://www.carriermanagement.com/news/2025/09/23/279699.htm
17. Ibid.
18. PC360 – https://www.propertycasualty360.com/2025/12/01/insurance-execs-say-severe-convective-storms-are-their-most-costly-peril/
19. PC360 – https://www.propertycasualty360.com/2025/10/15/global-insured-cat-losses-top-100b-for-sixth-year-in-a-row/
20. Global Newswire – https://www.globenewswire.com/news-release/2025/05/01/3072182/28124/en/Parametric-Insurance-Market-Assessment-2025-2034-Industry-Set-to-Reach-51-3-Billion-by-2034-as-Climate-Disasters-and-AI-Adoption-Reshape-Risk-Models.html