In the first half of 2024 the US Property and Casualty (P&C) sector swung from a $22 billion underwriting loss to a $5.6 billion gain and cut its combined ratio by almost seven points to 97.5%. Articles celebrated the best underwriting performance in a decade, but performance wasn’t consistent across the industry. The top performers distinguished themselves by their ability to turn uncertainty into earnings, a capability rooted in adaptive capacity. This ability, more than any single technology or tactic, put them in a league of their own.
Adaptive capacity shows up in three hard-edged metrics every COO can track on a dashboard: cost elasticity, pricing velocity, and customer engagement, measured through policyholder retention, claims cycle time, and digital servicing adoption. Nailing even one of these can protect earnings. But when all three work together, they create a flywheel that widens the profit gap each time the market jerks sideways.
Cost Elasticity
Top performers treat cost like a bungee cord, not a fixed anchor. When claim counts spike they rent extra hands, and when volumes drop the costs snaps back. The same logic now governs the back office: instead of owning servers and specialist teams year-round, carriers rent the capacity, human and compute, only for the days and times they need it.
Organisations can achieve cost elasticity by utilising cloud infrastructure (IaaS/PaaS) to dynamically scale computing and storage resources as needed. Additionally, the adoption of SaaS solutions for essential systems, including policy, billing, claims, and CRM, facilitates the alignment of expenses with actual usage through pay-as-you-go and subscription pricing models. Organizations can also benefit from consumption-based services for data, analytics, and AI experimentation, as well as flexible talent pools and on-demand squads to manage workload spikes without adding fixed headcount. Additionally, global capability centers (GCC) provide access to a broader talent market with variable capacity, while managed services structured on an outcome-based model rather than time-and-materials further enhance cost flexibility.
By migrating core systems like policy, billing, and claims to modern SaaS platforms and pairing them with managed services for DevOps, upgrades, and environment management, insurers can replace fixed hardware and license outlays with usage-based subscriptions. This shift transforms two of the industry’s heaviest cost burdens, core-system infrastructure and expert labor, into flexible levers that scale with premium volume, much like surge adjusters flex with claim counts.
Pricing Velocity
Volatility now outruns annual rate books. Weather events like thunderstorms and torrential rain, once rare, can shift loss forecasts in a single weekend, making it critical to get updated rates into regulators’ hands within days, not months. Most carriers lose that race before they even take off: every new factor means weeks of code merges on an aging core system and just as many weeks of manual red-lining on fifty-page policy forms.
While it can be difficult to rapidly change rates on admitted products because of filing and approval timelines, carriers are accelerating growth through non-admitted and E&S products, where they control product ratings and pricing approaches much more directly.
Organizations are also investing in technology that enables real-time event modeling and highly configurable rating services, so changes that used to take weeks or months under a structured SDLC can be deployed in hours via configurable product factories and agile delivery.
AI-enabled automated rate validation testing increases test coverage, shortens the testing lifecycle, and improves testing quality, tightening the feedback loop while raising confidence in each change.
On the product-wording side, Gen AI can compare dense policy terms in minutes so legal and product teams see just the lines that truly need review. By automating upgrade work and converting run costs to variable spend, insurers free up budget from big platform projects. That freed-up budget can be reinvested in pricing strategies that drive growth, rather than getting stuck in the tech backlog.
Customer Engagement
Customers expect the clarity and speed they get from the best digital experiences in their daily lives. Insurance must match that standard, especially at moments of truth such as claims, first notice of loss, repair coordination, and settlement.
Leaders design the experience to feel effortless: proactive notifications, self-service guided flows, and human help that is instantly available when needed. For claims specifically, features like photo capture, repair-shop selection, real-time status tracking, and transparent payments keep cycle times predictable even when bad weather doubles the workload.
AI can triage and straight-through-process simple claims while flagging complex ones for senior adjusters, removing bottlenecks without piling on headcount. When the experience is quick and transparent, two things happen: renewal likelihood rises (protecting earned premium) and the high-fidelity loss data captured during service flows back into pricing models, tightening the next round of rate adjustments.
That is adaptive capacity in action, from first quote to final settlement, compounding value with every interaction.
Bringing It All Home
Most insurers already have the ingredients for adaptive capacity: cloud infrastructure, AI tools, digital platforms, and managed-service partners. What separates the top performers isn’t access to technology but how effectively and consistently they put it to work:
- Elastic cost frees up capital when volumes dip.
- Fast filings help lock in margin while insights are still fresh.
- Engaged customers at moments of truth protect the relationship and close the loop for future pricing.
Where to Start
Track the basics. How many days from insight to filing? How long from first notice of loss to the first customer update? When you can see the lag, you can address it.
Choose one bottleneck to clear. Whether it's code merges, policy-wording comparisons, or claims intake, pick one area and modernize it in a focused sprint.
Put freed-up resources to work. Shifting spend from fixed costs and technical debt frees up funding for service enhancements and innovation.
These are practical steps, not moonshots, and carriers that take them now will be better positioned to respond quickly, serve customers more reliably, and make volatility work in their favor.
