2026 Insurance Outlook: 5 Forrester Predictions and the Moves to Make Now
Forrester sees 2026 as a correction year for insurers. Customer satisfaction slipped in 2025, rate hikes fueled churn, and AI is set to reshape expense ratios and underwriting. Here's what's coming - and how to get ahead of it.
1) CX gets top billing as retention becomes the battleground
Forrester's Customer Experience Index for U.S. auto and home fell in 2025. Double-digit rate increases eroded trust and made retention harder. Carriers now view CX as a direct driver of financial performance and differentiation.
What to do- Stand up a retention war room: track renewal risk, save offers, and agent outreach in real time.
- Make rate-change communication proactive and plain-English. Set expectations before the bill lands.
- Cut friction in claims: first-contact resolution, straight-through processing where safe, and short cycle times.
- Personalize with policyholder context: usage, tenure, loss history, and life events. Reward loyalty.
- Tie frontline incentives to CX (VOC close-the-loop, complaints resolved, digital adoption), not just sales.
2) Cyber insurance grows as AI threats and data needs surge
AI is amplifying attack speed, volume, and sophistication. Forrester says cyber carriers should move beyond reimbursement and become active partners: defense services, risk tooling, and underwriting models built for AI-enabled risk.
What to do- Bundle services: MDR/EDR partnerships, phishing simulation, incident response retainers, and tabletop exercises.
- Adopt continuous underwriting with telemetry from security tools, not annual static apps.
- Clarify coverage for AI-related events (model poisoning, prompt injection, synthetic fraud) in plain policy language.
- Set data standards for security posture: MFA, backups, patch cadence, asset inventory, and privileged access.
- Offer premium credits for verifiable controls; require minimum baselines for eligibility.
Useful reference frameworks: NIST Cybersecurity Framework. For broader market context, see Forrester.
3) Expense ratios at top carriers decline as AI and automation scale
Growth slowed after a strong 2024. The response: automation at the core of claims and back office. Forrester recommends a focused AI strategy, strong data foundations, and embedding AI into core operations to pull down expense ratios.
What to do- Prioritize quick wins: FNOL triage, document ingestion, subrogation recovery, SIU scoring, and contact center assist.
- Stand up an AI playbook: use-case backlog, ROI thresholds, model governance, and human-in-the-loop checkpoints.
- Fix data first: policies, claims, billing, and third-party data mapped, deduped, and permissioned.
- Measure hard outcomes: expense ratio, claim cycle time, leakage, call handle time, and straight-through processing rates.
- Upskill teams on applied AI and automation to speed adoption and reduce change friction. If you need a starting point, see this AI automation certification.
4) Re-entry into California/Florida property markets - with novel underwriting
Cat frequency, severity, and social inflation pushed carriers out. Forrester expects a return through tech-enabled underwriting: IoT devices, smart home data, and strong incentives for mitigation and home hardening.
What to do- Partner for data: wildfire and hurricane risk scores, roof analytics, defensible space, and smart sensor telemetry.
- Incentivize mitigation: premium credits and device subsidies for sensors, roof upgrades, and home hardening.
- Offer personalized protection: parametric layers, event deductibles, and flexible limits based on verified exposure.
- Use dynamic pricing tied to real mitigation evidence, not just zip-code-level hazard.
- Balance risk with reinsurance, cat bonds, and community-level mitigation programs.
5) Micro-insurance expands 5% as the gig economy grows
Gig work is expected to top $600B in 2025 and keep climbing. More people rely on project-based income without employer benefits, driving demand for simple, flexible protection.
What to do- Build modular, usage-based coverage with on/off toggles and daily or per-project pricing.
- Simplify onboarding to minutes: instant quotes, clear exclusions, and proof of insurance in-app.
- Underwrite with platform signals (ratings, job type, equipment) and offer embedded distribution through marketplaces.
- Focus education on coverage value and edge cases (waiting periods, gaps, exclusions) in plain language.
- Enable instant claims for small losses with clean evidence capture and fast payouts.
What to do this quarter
- Pick three CX fixes that reduce churn before renewal season.
- Launch a cyber add-on with at least one bundled defense service.
- Ship two automation pilots that cut cycle time or handling minutes - measure, then scale.
- Run a feasibility sprint on high-risk property re-entry with IoT and parametric options.
- Prototype a gig-focused micro-product with embedded distribution and simple UX.
The throughline is simple: lower friction, smarter data, and visible value for customers. Do that, and the 2026 headwinds turn into margin and growth.
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