In 2025, commercial lines insurers are navigating a volatile landscape shaped by economic uncertainty, geopolitical instability, climate-related risk, and an uptick in class action lawsuits. These forces are driving up loss costs and squeezing margins across nearly every line of business.

While commercial rates saw consistent growth through 2023 — including an aggregate 6% rise in Q2 2024 — that momentum is waning. By mid-2025, rate increases dropped to 5.3%, continuing a downward trend. Meanwhile, legal defense costs continue to rise, with corporate spending on class action litigation in the U.S. rising by 8% in 2022 alone.

Relying on rate hikes is no longer sustainable. Insurers looking to expand their commercial portfolios must take a more strategic, data-driven approach that is grounded in long-term resilience and operational strength.

Driving Innovation in Commercial Lines

Whether responding to climate volatility, evolving litigation risks, or shifting customer expectations, carriers must plan for long-term resilience. Across the commercial lines space, insurers are prioritizing digital transformation, unified platforms, operational agility, and the development of future-ready teams.

But achieving these goals means bridging persistent gaps — not just in data and technology, but also in talent and strategy. Carriers must align advanced analytics, AI (including emerging agentic AI capabilities), and organizational skill sets to unlock value and stay competitive.

As commercial carriers make bold moves to position themselves as market leaders, a few steps can help guide an organization’s strategic planning and execution:

1. Identify the portfolio’s best and worst performing products.

Before expanding a portfolio, it is essential to evaluate which lines are generating the strongest returns and to understand the reasons behind their performance. A structured evaluation helps determine where to innovate, reinvest, or exit. One proven method is Porter’s Five Forces, which helps assess competitive intensity, customer leverage, substitutes, and barriers to entry. Carriers should consider: Is competition high? Are new entrants increasing pressure?

These insights clarify both current performance and long-term viability. For instance, a well-performing commercial auto line may benefit from internal efficiency or favorable market dynamics. In contrast, a general liability product might be struggling in a saturated market with little differentiation. Evaluating both internal strengths and external pressures enables more informed portfolio decisions.

2. Determine where gaps exist.

Expanding a commercial lines strategy starts with understanding evolving customer needs and identifying gaps in the organization’s current offerings that may limit its ability to meet them. Business clients are increasingly demanding speed, personalization, and seamless digital experiences across the entire insurance life cycle.

For example, 70% of clients now prefer an online quoting process, and 82% are more likely to buy if insurers offer instant quotes, making experiences like these critical differentiators. Prioritizing streamlining the historically siloed systems behind insurance processes can lead to faster, more accurate outcomes that yield a better internal and external experience. In underwriting, this may take the shape of a centralized underwriting workbench, for instance.

Beyond experience, insurers still need to assess external market dynamics. Ask:

• Are there a lot of suppliers influencing rate and coverage delivery?
• Is the customer’s buying power high or low, especially among large buyers?
• Are there substitutes like captives, bundled solutions, or self-insurance?

These considerations help identify whether current offerings remain competitive or require redesign. By aligning product development with both market expectations and structural dynamics, carriers can better address unmet needs and avoid strategic missteps.

3. Reevaluate what scalable compliance looks like.

Compliance is a foundational capability that must evolve alongside commercial lines expansion. As insurers enter new jurisdictions or industries, they must ensure consistency across filings, forms, agent licensing, and claims processes, all while staying responsive to regulatory changes.

To meet these demands, carriers can now adopt AI-driven compliance tools to flag outdated policy language, manage licensing, and monitor filing deadlines. AI-augmented tools can help insurers streamline their verification processes and surface regulatory risks earlier, enabling more confident expansion into complex lines of business.

4. Align KPIs with evolving lines of business.

Clear performance metrics are essential for evaluating the success of new commercial lines. While traditional KPIs for continuous improvement such as combined ratio, loss ratio, and retention remain important, operational and customer experience metrics — including quote-to-bind rates, claims cycle time, and broker or policyholder satisfaction — offer additional insight into product viability.

Many insurers are also implementing structured frameworks such as objectives and key results (OKRs) to connect strategy with execution. For example, an objective to improve profitability might include key results like a five-point improvement in combined ratio or a 20% reduction in average claims handling time. BCG reports that organizations using standardized OKRs across departments see improved alignment and outcomes in initiatives such as product rollouts and market expansion.

5. Determine where external support will be needed.

Expanding into new commercial segments often requires capabilities that may not currently exist within the organization. From underwriting emerging risks such as cyber-liability or climate exposure to navigating state-specific compliance rules, insurers can augment their existing assets with external capabilities and tools to leap forward with the latest functionality available in the industry.

In a 2025 study, 24.4% of insurers cited a lack of in-house expertise as the leading barrier to AI adoption. This gap reflects a broader challenge: Without the right talent or support, carriers risk delayed launches, mispricing, or inconsistent service. Identifying and addressing these capability gaps early allows insurers to build a more resilient, scalable approach to growth.

6. Prioritize data capabilities and governance.

It’s no secret that data and analytics can serve as major differentiators for insurance organizations who leverage them effectively. This remains true in commercial lines, where data-driven insights can give insurers real-time insights into audience factors like geography, channel, segment, and more.

Leveraging the latest data capabilities (and ensuring data governance is built into the organization’s strategy) can provide commercial insurers with diagnostic dashboards that include a predictive view and descriptive analytics, which can indicate scores or recommendations. With the right framework in place, natural language querying that draws upon both internal and external factors can help identify opportunities.

7. Identify areas to augment with agentic AI and other intelligent tools.

While insurers are still maturing in their agentic AI journey, some intelligent automation and AI agents have strong use cases that return real ROI. Intelligent document processing, which leverages optical character recognition (OCR) and AI techniques, can help classify and summarize even the longest of documents involved in underwriting submissions or claims documents.

Similarly, underwriting assistants powered by tools like LlamaIndex can provide a more accurate, natural conversation experience than less intelligent chatbots, helping guide underwriters through the decision-making process. Multi-agent systems can also help insurers analyze, validate, and evaluate submissions for a more consistent risk evaluation process.

Ready to Thrive in Commercial Lines?

As commercial risks become more complex, interconnected, and subject to accelerating legal and climate pressures, insurers must think beyond traditional growth levers. Success in today’s market isn’t just about launching more products; it’s about doing so with precision, agility, and the operational strength to sustain performance in a changing regulatory and competitive environment.

Whether expanding into underserved sectors, modernizing legacy offerings, or developing entirely new lines, growth in commercial insurance requires a clear strategy, deep understanding of market forces, and the capabilities — internal or external — to execute.

Asking the right questions up front can help insurers identify gaps, uncover opportunities, and set their team up for long-term success.

Looking to sharpen your commercial lines strategy? Check out our infographic for more information: 7 Questions to Consider for Commercial Underwriting Success.