With pricing power weakening and cost pressures persisting, success will depend on efficiency in the parts of the business that insurers control. Payments are the most immediate of those opportunities.
For more than a decade, commercial lines insurers protected profitability with a primary lever: rate. When loss costs rose, premiums followed. That worked in a sustained hard market. It is now insufficient.
Commercial rates have stopped rising. According to The Council of Insurance Agents & Brokers' Commercial Property/Casualty Market Index Q1/2026, average premiums across all account sizes decreased 1.2%, the first decline since Q3 2017, putting an end to a 33-quarter streak of increases. Commercial property fell 5.5%, the largest drop for any line, after declining 0.7% in the previous quarter. Only commercial auto held firm, rising 5.8% in its 59th consecutive quarter of increases. After nearly eight years of compounding rate, insurers have run out of room, according to the CIAB.1
That hard cycle for commercial lines collectively was unusually profitable, McKinsey says, and premiums increased by an average of 8% annually in the past five years.² The forward view shows those gains reversing. Deloitte, drawing on Swiss Re data, projects the U.S. P&C combined ratio worsening to 99% in 2026, from 98.5% in 2025, and 97.2% in 2024.3
The best margins of the cycle are already behind for commercial lines. Pricing is no longer a reliable offset to rising costs, and that changes how margins are managed.
Loss costs keep climbing. The National Association of Insurance Commissioners (NAIC) reports that the commercial auto liability pure-net-loss ratio improved 3.0 points to 71% in 2025, an improvement driven by continued rate increases rather than lower claims costs, which remain elevated because of social inflation.4
S&P’s 2025 US Auto Insurance Market Report tells the same story, stating that the commercial auto combined ratio fell to 104.3% in 2025, down from 107.2% in 2024.5 Deloitte notes that third-party litigation funding is now expanding beyond the United States into the United Kingdom, Australia, Canada, and parts of Asia, broadening that pressure across multiple mature markets.6
Catastrophe exposure compounds it. U.S. insured catastrophe losses from natural disasters reached roughly $100 billion in 2025, according to NAIC, with severe convective storms alone accounting for about $50 billion for the third consecutive year.7 Those losses fell mainly on personal and property lines, but the same severity reaches commercial portfolios through commercial property and reinsurance costs; wage and medical inflation push it higher still.
Most of that pressure lives in the loss ratio, the claims insurers actually pay, and it is managed through underwriting, pricing, reinsurance, and reserving. Those levers are essential, but in a softening market they are slow, partly outside the insurer’s control, and largely already pulled.
Consider where 2025’s gains actually came from. NAIC reports the industry combined ratio improved 4.0 points to 92.9%, even as the expense ratio rose 0.5 points to 25.8%, with a 4.1% increase in net premiums written outpaced by a 6.4% increase in underwriting expenses.8 In other words, the industry’s 2025’s margin improvement came from lower loss ratio, not expense ratio improvement, and was helped by lower catastrophe losses in a year without major hurricane landfall.
The other half of the combined ratio is the expense ratio, the cost of running the operation. That is where efficiency still moves the number, and it is fully within the insurer’s control. Payments sit squarely on that side of the ledger.
Most efficiency investments have focused on underwriting, distribution, and claims, but payments are equally critical. Every premium and every claim disbursement triggers reconciliation, reporting, and compliance activities, yet many insurers still rely on disconnected systems where data is transferred manually, reconciliation becomes burdensome at close, and visibility into funds flow is limited. The cost accumulates in the form of manual work, delayed transactions, and operational inefficiencies that inflate the expense ratio. And that reaches the customer.
The resulting payment delays and limited payment options erode satisfaction and retention, particularly during claim interactions, where speed matters most. Fraud further compounds the risk of financial exposure. Checks remain the most-targeted insurance payment method, and modern fraud controls are far easier to implement and scale on a unified platform than across fragmented legacy systems.
Payments modernization is a smaller, faster, and lower-risk way to improve efficiency and profitability. Payment modernization accelerates collections and disbursements, lifts customer experience, and reduces the manual effort associated with reconciliation and close. Unlike longer-term initiatives, such as AI transformation or core systems replacement, the payoff is immediate, measurable, and directly tied to operational performance. That makes payments one of the most practical margin improvement opportunities available today.
Capturing these gains requires a unified approach to payments rather than a patchwork of point solutions. By connecting the entire payment lifecycle, from premium collection through claims disbursement, insurers can lower costs, accelerate reconciliation, and gain real-time visibility into cash flow. In a margin-constrained market, that visibility is a clear competitive advantage.
Virginia Farm Bureau first collaborated with One Inc to give policyholders more choice in how they pay – credit card, ACH, and digital self-service – while also improving operational efficiency behind the scenes. Prior to implementation, policyholders had to call a service representative and provide payment credentials to complete premium payments. Today, they benefit from the convenience, flexibility, and security of self-service online premium payments using a bank account or credit card. “By utilizing the PremiumPay platform to its fullest, we are seeing annual cost savings of at least $1.8M,” said the chief risk officer for Virginia Farm Bureau Mutual Insurance Company. Read the full Virginia Farm Bureau Success Story.
When pricing power fades, margin improvement depends on operational efficiency. By modernizing payment operations, insurers can reduce costs, improve customer experiences, and strengthen financial performance, making payments a strategic advantage rather than a back-office function
Take the next step toward insurance payment digitalization. Contact One Inc today to learn how to transform your operations, position your business for sustainable growth, and deliver an unmatched return on investment. Let’s talk.