2025 SDBJ Economic Trends
By Jamie Reid
With evolving market conditions, technological advancements, and various environmental and geopolitical factors at play, the dynamic insurance industry involves continual analysis and an innovative approach. C3 Insurance Chairman, Jamie Reid, provides analysis on observations, trends, and insights as they relate to particular industry landscapes; 2024 market conditions and 2025 predictions; and clear recommendations for high net worth clients. C3 also released its State of the Market and Industry Insights Report where its experts offer advice on future trends to keep your business prepared and proactive as we navigate shifts in the coming year. To access the report, visit c3insurance.com/2025trends.
Top Trends in Insurance
Insurance Outlook
The California insurance market remains in a hardening cycle, with most lines experiencing rate increases. Factors unique to California, such as wildfire risk, regulatory constraints, and a high-frequency litigation environment, have contributed to tighter underwriting standards and higher pricing. These trends are expected to persist through 2025, impacting a broad range of coverages.
Impact of Prop 103
With the change in California’s insurance laws from an “open competition” to a “prior approval” regulatory system, insurance companies are now required to submit an application for desired rate changes to the Department of Insurance (DOI). Proposition 103 restricts insurers from excessively raising rates. If rates increase more than 7% for personal lines or more than 15% for commercial lines, the Insurance Commissioner may deny or not respond to the increase.
The marketplace has been impacted because the DOI has not been approving rate increases, resulting in insurers pulling back on quoting which has created an artificial supply and demand issue.
Litigation Funding Impacting Nuclear Verdicts
Private equity companies are buying out settlement rights of injured parties. They have more capacity to finance legal expenses and therefore, drive up settlement costs by taking cases to jury trial, or at least threatening to do so.
AI Underwriting
As AI is increasingly used for underwriting initial submissions, publicly available information such as U.S. Department of Transportation (DOT) safety score or contractor state license board information or even building demographics become increasingly important as they may deny coverage prior to any human interaction.
Technology impacting employee health benefits
The projected increase in employer healthcare costs in San Diego for 2025 reflects a national trend of rising expenses. Overall, employer-sponsored healthcare costs are expected to rise by around 5.8% to 9%. Employers are actively considering changes to benefit structures, such as cost-sharing strategies and wellness incentives, to offset these rising costs and maintain affordable options for employees.
The employee experience remains one of the most important aspects on which companies can continue to focus. From pre-employment to offboarding and everything in between, understanding the impact to employees, how each process is currently running, and how to improve is critical. Employers must make sure they have the right technology and all is working in the intended manner for a positive employee experience.
Leveraging AI and other technologies will streamline processes, improve the employee experience, and ensure seamless operation between technology and HR processes.
Wellness is beginning to gain attention again after taking a back seat during COVID and post-COVID times. Making sure wellness programs embrace technology, are remotely accessible, and meet diverse needs will be important.
The focus on holistic health benefits in San Diego has led to an increase in wellness-centric programs that go beyond traditional health insurance. Companies are introducing preventive health screenings, lifestyle spending accounts, and subsidized memberships for fitness centers or technology-forward wellness platforms that can be delivered across the country.
