The landscape of private risk management continues to rapidly evolve. As a result, successful individuals and families continue to face unique challenges when safeguarding wealth and cherished possessions. This article explores key trends, emerging risks, and proactive strategies to consider in 2025.
KEY TRENDS
One of the most concerning trends for 2025 is the continuation of rising premiums. Coverage costs for luxury properties, vehicles, and other assets are expected to increase significantly – likely by double digits. This trend is driven by inflation, multi-million-dollar legal verdicts, increased claims frequency, and the severity of weather-related disasters.
Carriers are expected to maintain their conservative underwriting practices, and others are exiting areas prone to wildfires, hurricanes, and floods. The scarcity of available policies (aka “capacity”) drives costs upwards. It all comes down to supply and demand.
In order for carriers to mitigate the effect of large claim events, they purchase reinsurance as an additional layer of protection. We expect reinsurance prices to climb in 2025 and a portion of these costs may get passed along in your premiums.
EXPANDING RISKS
Water damage. The most common homeowners’ insurance claim is due to water damage from plumbing, appliances, freezes, pipes, and weather. For condo owners, this risk increases because damage can also come from adjacent units.
Flood losses. Flood premiums continue to increase, whether through FEMA programs or in the open market. Because homeowner policies exclude this coverage, we recommend purchasing a supplemental flood policy, whether you live in a hazard area or not, as the majority of flood claims are not from designated flood zones.
Labor and material expenses. Inflation, raw materials, supply chain delays, skilled labor shortages, and new building codes all influence the cost to rebuild or restore. In addition, these costs tend to skyrocket after a natural disaster due to short-term demand.
EMERGING RISKS
Cybersecurity. Affluent individuals are often targeted due to the lure of wealth and valuable personal information. Implementing robust cybersecurity measures, switching to wired systems instead of WIFI-based solutions, and making regular updates to technology are essential to stay ahead of criminals.
Social inflation. This term refers to the rising cost of claims due to increased litigation, plaintiff-friendly judgments, and legal fees. Juries often view successful individuals larger jury award settlements.
GOOD NEWS: TECHNOLOGY GAINS
Artificial intelligence and data analytics. Insurers are using these technologies to identify patterns, predict risks, and offer more personalized options. This means they will be able to more effectively customize your coverage and costs.
Smart home technology. Smart home protection devices such as water leak detectors, electric safety devices, sprinkler systems - as well as central station fire and burglar alarms - provide real-time alerts to local authorities and phone apps. These devices can significantly reduce the severity of losses and may even provide credits that lower your premiums.
Telematics for vehicles: These devices monitor driving behavior and provide feedback to improve safety. This technology can help reduce auto insurance premiums by demonstrating safe driving habits, especially if you have younger drivers in your household.
PROACTIVE STRATEGIES
Invest in risk mitigation measures. Purchase smart home technology to protect against losses. Fire and burglar alarms, video surveillance, water sensors, sprinkler systems, and cyber-security protection are smart investments.
Explore alternative solutions. As traditional insurance policies become more expensive and less accessible in catastrophe-prone areas, consider self-insuring through higher deductibles, specialty insurance, limiting your coverage, or purchasing buy-back policies to remedy coverage payment options.
Conduct risk assessments. Evaluations with a knowledgeable risk advisor can help identify potential vulnerabilities. This includes updating property values, reviewing liabilities, and recommending various services for your lifestyle, such as background checks, art shipping, and safeguarding valuables.
Consolidate coverage. Most insurers offer premium discounts when multiple policies are combined. This can provide significant savings while making you more appealing to a carrier.
Pay on time. If your policy cancels for late or non-payment, you will likely have to pay more to replace the coverage and may lose valuable coverage terms. Also, underwriters are starting to consider payment history when deciding whether to expand coverage or reinstate a canceled policy.
WHAT’S NEXT?
Rising costs, emerging risks, and the changing landscape of risk management require a proactive and informed approach. By investing in risk mitigation measures, exploring alternative insurance solutions, leveraging technology, and working with a knowledgeable risk advisor, you can better protect your wealth.
Staying informed and adaptable is key to navigating the complexities of insurance in the coming year. With the right strategies in place, you can safeguard your financial future and secure your legacy for generations to come.
For more information, contact Lockton Private Risk Solutions (opens a new window) for a personalized consultation.
The information provided in this article is for educational purposes only and should not be considered professional advice. Please consult with a Lockton representative for information regarding specific insurance products and services.