Why Insurers Must Rethink Natural Catastrophe Claims in a Changing Climate

Global insured losses from natural catastrophes reached $84 billion in the first half of 2025, setting the stage for the fifth consecutive year of $100B+ in NatCat losses. As climate-related events such as floods, wildfires, and earthquakes increase in both frequency and intensity, insurers are being pushed to reimagine how they handle claims—not only in how they respond after a disaster, but in how they predict and prevent losses before they happen.

The stakes are especially high in regions like New South Wales, Australia, where seasonal weather extremes are worsening. There, heavy winter rains have raised the risk of intense bushfires in the coming summer. Customers are demanding more than compensation—they want empathy, clarity, and practical support from their insurers. In this environment, poor claims service is not just a reputational risk but a strategic liability. Despite advancements in technology, customer loyalty, effort scores, and satisfaction levels have seen only modest improvements in recent years.

Research shows that poor claims experiences are directly linked to customer churn. The future of claims must evolve into a smarter, proactive model—one that uses IoT, AI, and predictive analytics to mitigate damage before it occurs. Forward-looking insurers are already making this shift. From smart home tech detecting fire hazards to AI-powered tools streamlining the claims process, innovation is redefining what it means to support policyholders in times of crisis.

Insurers must move beyond a payout mentality and lead with a protection mindset. This includes investing in catastrophe resilience, redesigning customer experiences, and incentivizing preventative action. As customer expectations rise, success will depend not only on financial outcomes but also on building trust, loyalty, and long-term engagement. The challenge is clear—and so is the opportunity for transformation.