From cyberattacks and climate events to workforce shifts and AI disruption, in 2025, business leaders face a fast-changing landscape of risks. Business insurance is evolving to meet these new challenges, but rising premiums and more complex underwriting mean companies must be more proactive than ever. Experts say understanding this changing risk environment, adapting to digital-first tools, and avoiding common coverage mistakes are key to protecting your bottom line.
“There’s a lot going on in the world,” says James Jorgensen, principal and executive vice president of business insurance at Marsh McLennan Agency in Arizona. “And I think a lot of business leaders are wondering how they can continue to invest and grow their business and take care of their colleagues and employees. Insurance is generally a very key component to that.”
The cybersecurity wake-up call
Cyber liability coverage is no longer optional for most businesses—it’s crucial. With ransomware, phishing, and data theft on the rise, companies are investing heavily in both preventive security and insurance that can help them respond when things go wrong.
“Cyber comes up almost every single day, every single article, every single periodical,” says Jorgensen. “You buy insurance hoping to never use it, but buy it when you don’t need it, because you want to have it when you need it.”
Bad actors can come from a number of places that many tech users don’t even realize—a weird email, a pop-up on a website, virtually anywhere. Business owners are saddled with the responsibility of educating their employees but also preparing for the worst. Mastercard recently reported that 46% of small and medium-sized businesses have experienced a cyberattack.
Aaron Parker, senior vice president of commercial insurance for The MJ Companies, echoes that sentiment. “Now they go into an industry event, or they read the news, or they’ve personally been impacted. They understand and appreciate—this risk is everywhere.”
Given the frequency and severity of cyber incidents, many businesses face total data loss or find their critical systems held hostage by hackers demanding ransoms well into six figures. Insurers have taken notice and are increasingly hesitant to offer coverage for such high-stakes risks.
“Our largest claims right now are cyber,” says Jack Bennett, president and founder of Bennett & Porter Wealth Management and Insurance. “And I think in the future it will be uninsurable.”
He adds, “The difficulty for a lot of these companies is even knowing they’ve been hacked. They’re sitting in your servers, they’ve already copied all your data, and then maybe they threaten you.”
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AI-driven underwriting and automation
Artificial intelligence is shaking up how policies are quoted, priced, and even serviced. From satellite imaging for property inspections to automated quoting for small businesses, AI is making business insurance faster—but at the same time, also less personal.
“The largest trend is the integration of AI into the model for quoting and rates from the insurance companies,” says Bennett. “We’ll see this trend with all the insurance companies. AI will be able to do all of it very, very quickly.”
There’s a trade-off with every great invention, and AI underwriting is no exception.
Traditionally, business owners could call their broker and negotiate a deal. Brokers were part salesperson, part advocate, working to balance the client’s needs with the insurer’s priorities. With AI-driven underwriting, that human element disappears. Algorithms don’t bargain, and flexibility at the negotiation table turns into rigid, data-driven decision-making.
Parker notes that AI also introduces risk in how decisions are made. “Where some folks have opportunities to grow, develop, learn, they are now in an environment where they’re either being required to rely on the AI tools or risk missing context.”
Remote work and new exposures
The pandemic upended traditional work structures, and the business insurance industry is still catching up to hybrid and remote realities. This shift affects everything from workers’ compensation to cyber risk.
“We found that there was a real difference between companies that couldn’t work remotely or had to find a way to work remotely very, very quickly,” Jorgensen says. “Cyber exposures did go through the roof.”
Of the many obstacles businesses had to navigate during the pandemic, the silent killer continues to be cyberattacks. The pandemic put workers in every industry, no matter the security level, in new working environments. These new settings did not have the barriers and protections business owners and insurers had structured around traditional workspaces.
Home Wi-Fi networks and unsecured devices became gateways for bad actors, leaving businesses vulnerable in ways they hadn’t anticipated. According to the FBI, reported cybercrimes surged by 300% during this period, underscoring the scale of the threat.
“Coverage isn’t moving fast enough to address remote work,” says Bennett. “The heartbeat of America is small business owners, and they don’t have the knowledge, they don’t have the manpower, and they don’t have the capital that it takes to really do it the right way.”
Climate change, catastrophes and cost
While Arizona is relatively insulated from many major weather-related disasters, wildfire and extreme heat still pose growing risks, and climate-related costs are affecting business insurance rates across the board.
“We’re seeing significant terms and conditions changes related to weather trends,” says Parker. “Favorable terms and conditions have become far less able to be obtained over time.”
Similar to cyber liability, insurers are recognizing the unpredictability of the environment and don’t feel they can recover the funds they are spending to repair businesses that are the most affected. As a result, more and more institutions are charging more and covering less.
“You’re going to find insurance companies making adjustments,” explains Bennett. “It used to be that if you had a loss on a roof, they replaced the roof. Now there’s a deductible, or it’s ACV (actual cash value) only and not replacement cost.”
When insurers can’t take adequate rate increases, they pull out. “California is a great example,” says Bennett. “Most insurance companies don’t want to do business there. They’re pulling out because they can’t get enough on rates.”
ESG and climate-aligned coverage
Another growing trend is insurers aligning their policies and investments with Environmental, Social, and Governance (ESG) values. That can mean limiting coverage for high-emission industries.
“We’re seeing insurance carriers steer clear from things like coal power plants,” says Parker. “Where their partnership or support could go counter to their internal ESG position.”
In other words, insurers are factoring in reputational and sustainability concerns when evaluating clients. Companies tied to high-emission industries may find it harder—or more expensive—to secure coverage, as carriers prioritize climate responsibility and long-term environmental risk mitigation.
At the same time, clean energy businesses present new and evolving insurance needs. “With solar and with wind, we’ve got businesses today that have those and need to insure those from a first-party property perspective,” explains Parker.
That includes everything from insuring solar panels and wind turbines to developing tailored coverage for the manufacturers, installers, and service providers that support renewable energy infrastructure. As ESG continues to gain momentum, insurers are not only adjusting where they draw the line but also where they choose to invest and innovate.
Usage-based and parametric products
In an era of advanced data collection and real-time analytics, insurers are moving toward more personalized, performance-based models. Two major innovations gaining traction are usage-based insurance and parametric insurance, both designed to reflect actual risk more efficiently.
Usage-based insurance relies on devices or software that track driving behavior, including speed, braking habits, and mileage. These systems are being seen in commercial fleets and personal vehicles, allowing insurers to adjust premiums based on how safely someone drives rather than relying solely on static factors like age or location.
“If you’re driving safely, you’re going to be rewarded,” says Parker. “The inverse is true as well.”
Parametric insurance takes a different approach. Rather than assessing damage after the fact, these policies are triggered by specific, measurable events like wind speed, temperature, rainfall, or even seismic activity. If a defined limit is met, the policy pays out automatically, reducing delays and disputes over claims.
“Parametric is a really sexy way of building out an insurance product,” says Jorgensen. “For example, if the wind speed hits a certain speed at a certain address, then the insurance product would perform.”
The simplicity and speed of the model appeal to both the insured and insurers. It avoids long claims investigations and can offer quicker financial relief during events disruptive for businesses. In regions like Arizona, where natural catastrophe risk is lower than in coastal or storm-prone areas, there are far fewer insurance companies offering parametric plans.
“I’ve not seen that utilized in Arizona,” Jorgensen adds. “But we have clients that are based here with buildings, people, assets, facilities, in otherwise natural catastrophe-exposed areas.”
As businesses expand and climate risk increases, parametric and usage-based insurance are on deck to become powerful tools in risk management—especially for companies seeking more data-driven solutions.
Common mistakes and missed opportunities
One of the most common mistakes businesses make? Assuming that a lower premium automatically means a better deal.
“You’re buying a contract and paying for it,” warns Bennett. “If you don’t understand what’s in the contract, you don’t know what you’re getting. There’s a reason why the insurance premium is less.”
He explains how this short-sighted approach can backfire as risk levels rise. “As we continue having larger losses, you’re going to find that coverage will reduce and premiums will go up. Then inevitably, insurance companies will pull out.”
This makes education and awareness especially important for small and mid-sized businesses, many of which lack dedicated risk managers or internal insurance expertise. Remote work, for example, brought sweeping changes that many companies still haven’t addressed fully—even five years later.
“I don’t think it’s something we addressed,” says Bennett. “And I think it’s right along with everybody thinking inflation was going to be transient or working from home would be temporary. It’s not.”
In 2025, the insurance conversation is no longer just about compliance or checking a box. It’s about building a comprehensive risk strategy—one that plans for evolving threats, emerging technologies, and an increasingly volatile world.
“Insurance is such an embedded part of business continuity,” says Jorgensen. “It plays a critical role, sometimes in the worst times of need.”
Aaron Parker agrees: “The more insight and information there is available, the harder it is to obtain favorable terms and conditions.”
Navigating the business insurance landscape will require more than just good coverage for today’s business leader. It demands precision, proactive planning, and the support of knowledgeable advisors.
