What is in store for the insurance industry in 2025? Below, attorneys from insurance law firm Clyde & Co. share their top concerns and what organizations should keep in mind heading into the new year.
Discrimination Concerns Will Drive a Cautious Approach to AI Underwriting
As use cases for artificial intelligence continue to expand across industries, insurance carriers will likely employ a more cautious approach to underwriting AI-related risks in 2025. Media conversation around AI typically centers on physical risks and potential harm to humans—concerns that are undoubtedly legitimate. From an insurance standpoint, however, the industry is increasingly focused on the risk of discrimination when AI is used to provide services. The concern arises from the potential for the code forming the basis of the AI to have inherent bias. This potential for discrimination directly impacts insurance policies such as health insurance, employment practices liability, management liability, and directors and officers coverage.
The health care services sector should be particularly vigilant to the risk of AI favoring one demographic. Another risk area is whether health care professionals will substitute their judgment for that of AI. Scrutiny of AI is, therefore, crucial to ensuring fairness and equity in health care delivery.
Similarly, as 2025 quickly approaches, organizations need to consider how AI impacts employment practices such as hiring, firing, retention and development programs. There is a growing concern that AI algorithms could harbor biases that influence decisions on employment actions and promotions. Organizations must critically assess whether these processes are administered equitably across all employees. A key focus will be ensuring fairness in AI's role within these areas.
–Marc Voses
Social Inflation Will Be Impacted by Conservative Shifts and New Legislation
In the coming year, Americans may see a potential shift in social inflation. The U.S. presidential election results reflected a more conservative national mindset that could reshape many aspects of social inflation, particularly through jury perspectives.
In recent years, jury pools have become desensitized and accustomed to nuclear verdicts, where billion-dollar awards have become the new norm. However, the emerging conservative approach of reducing spending and waste may temper these hefty verdicts, leading to more restrained award amounts.
On the administrative front, new state and federal legislation might make pursuing personal injury claims more challenging and promote basic tort reform, directly affecting social inflation. For example, states’ policies on the discoverability and admissibility of litigation financing agreements vary, creating a patchwork of regulations. If the new federal administration introduces new laws, the patchwork landscape may become more uniform
Furthermore, the insurance industry is already showing signs of adopting a tougher stance on litigation. Insurers are more willing to go to trial, showing less concern about the risks of bad faith accusations and outsized nuclear verdicts.
–Fred Fein
Federal Legislation Will Address Accountability and Testing Protocols for Autonomous Vehicles
In 2025, the landscape of claims and lawsuits related to autonomous vehicle (AV) incidents will likely evolve with the increasing presence of AVs on the roads. Level 3 AVs, which require human oversight, have been commonly observed and insurers are already seeing bodily injury lawsuits nationwide. These are related to product liability, negligence, breach of warranty and other causes of action against the manufacturers and the “drivers” of these vehicles. There is an expected shift towards more Level 4 AVs, which do not require a human driver in the vehicle within situationally controlled areas. This shift underscores the importance of monitoring the types of AV technology in use as it directly influences the nature and frequency of incidents.
Currently, the regulatory approach to AVs through a state-by-state approval system faces criticism for its complexity and inconsistency. However, the incoming administration’s potential introduction of a unified federal framework could significantly alter this landscape.
A critical component of the potential federal framework would be defining how to assign accountability following an AV incident. Determining whether insurers, AV manufacturers and software developers will share accountability is crucial. Clarifying this aspect of the law will be essential for managing liability and ensuring that all parties involved adhere to their responsibilities.
Another significant element is whether the framework will standardize the testing of AVs, especially Level 5 AVs, which are fully autonomous and do not require human intervention in any driving scenario. Currently, the allowance for testing these vehicles varies by state, creating a patchwork of regulations that can hinder the advancement and integration of this technology. A unified approach could facilitate consistent testing protocols and safety standards nationwide, accelerating the development and public acceptance of Level 5 AVs.
These considerations will be crucial in shaping the future of autonomous vehicle technology and its integration into public roadways. The potential for increased claims and lawsuits, particularly product liability cases stemming from AV failures, highlights the need for robust and clear regulatory frameworks to manage these emerging challenges effectively.
–Doug Horelick and Nanci Schanerman
Climate Litigation to Be Shaped by Stricter Regulations and Increased Legal Scrutiny
By 2025, climate litigation will likely intensify on multiple fronts, influenced by evolving legal frameworks and shifting societal expectations. International climate agreements like the Paris Climate Accord will push for more accountability. Major lawsuits may emerge targeting countries or multinational corporations failing to meet emissions reduction targets, as seen in the recent case Urgenda Foundation v. State of Netherlands or the ongoing complaints against fossil fuel companies for contributing to climate change.
Nationally, countries may adopt more ambitious environmental laws, increasing lawsuits aimed at enforcing those laws. In the United States, lawsuits like the one against the government for climate inaction or against companies for misleading the public will likely grow, especially in regions where climate policy is more aggressive. Litigation in the United States will expand as states like California continue to push for stronger regulations on emissions, while other states may resist. This divergence will result in a patchwork of legal landscapes and a rise in state-level actions and federal regulatory challenges.
Greenwashing claims may also become more prevalent, likely fueled by a more informed public and greater scrutiny of corporate environmental claims. Directors and officers may face increased scrutiny and potentially be held liable for making misleading environmental claims to investors, consumers or regulators. Companies should be cautious but persistent in their climate initiatives. Even in an environment of political pushback, credible climate action backed by solid reporting and third-party audits will be essential for long-term corporate reputation and risk management.
Finally, the potential return of a climate-skeptic administration under President Trump could derail federal climate policies, but it might spur more localized legal actions from states, cities and activist groups, further driving the demand for climate-related lawsuits.
–David Ktshozyan
PFAS Litigation to Intensify, Driven by Water Supplier Claims and Insurance Coverage Lawsuits
As manufacturers and other companies face escalating financial pressure from substantial water supplier claims, a central focus of major PFAS multidistrict litigation, there will likely be an increase in PFAS-related insurance coverage disputes in the coming year. While these disputes will primarily stem from water supplier claims, bodily injury claims brought by firefighters exposed to PFAS-containing firefighting foam and individuals who consumed contaminated water are expected to gain greater attention.
Bodily injury claims are poised to become a more significant focus as the litigation landscape evolves. The success of these claims will depend heavily on the strength of scientific evidence linking PFAS exposure to specific health conditions like cancer. Defendants and their insurers remain skeptical, questioning whether PFAS or other factors directly cause the alleged health issues. As manufacturers face potentially enormous settlement costs, scrutinizing scientific evidence will play a pivotal role in determining the trajectory of these lawsuits and the implications for PFAS litigation in the coming year.
On the regulatory front, federal regulations have generally not played a significant role in water supplier claims as they require water utilities to provide contamination-free water regardless of specific federal mandates. However, there is always the potential for the incoming administration to introduce changes that could impact how manufacturers and other companies manage and regulate their use of PFAS. Such changes could reshape the legal and operational landscape for addressing PFAS-related risks.
PFAS is poised to remain a significant source of claims and litigation for the foreseeable future, drawing parallels to the enduring challenges posed by asbestos. Having gleaned important lessons from the protracted litigation related to asbestos, insurance companies are now better equipped to withstand the financial repercussions of similar long-tail claims. Industries such as manufacturing and utilities should also draw on these experiences, emphasizing the need for proactive risk management and strategic planning in the insurance and legal sectors.
–Jamie Sanders
Statutory Reforms, Tariffs and Labor Changes May Reshape Property Insurance
In 2025, there will likely be a renewed push for statutory reforms in the commercial property insurance space in hurricane-prone states severely impacted by the 2024 Atlantic hurricane season. Florida and Louisiana recently enacted statutory reforms that will shift the legal landscape from being more favorable to insureds toward a more insurer-friendly framework. Specifically, the reforms make recovering attorneys’ fees more difficult for policyholders that file suit against their insurers for first-party losses. These changes may decrease a policyholder’s incentive to bring suit and lead to a decrease in the number of suits brought against insurers, with policyholder firms focusing their efforts on larger cases and those with a higher likelihood of recovery. These changes have led to criticism from policyholders and the policyholder’s bar.
In states that have yet to enact similar statutory reforms or whose effective date has yet to pass, there may be an uptick in the speed of filing property-related lawsuits to avoid the application of such reforms. Aware of the potential impact on their cases and fees, plaintiffs' attorneys are unlikely to delay filing and risk having to adhere to the more stringent post-reform legal standards. This surge in pre-reform filings could temporarily increase litigation in those states as attorneys move to preserve their clients’ interests under current, more favorable rules.
Tariffs on imports such as construction materials are another factor with implications for property insurance claims. Tariffs would likely drive up the cost of building materials, which could temporarily increase the costs borne by insurers for covered replacement value claims. In addition, reduction in the available construction labor supply may drive up labor costs for repairs and reconstruction. These higher costs could lead to increased insurance premiums as insurers adjust their underwriting to reflect higher costs.
–Eric Benedict