Selling to Industrials
The Industrials sector operates on the backbone of precision and uptime, where even a minor delay triggers a massive ripple effect. By maximizing asset life and eliminating unplanned downtime, your tools empower clients to lead in a grueling landscape where aging infrastructure and rising input costs threaten every point of margin.
Aerospace & Defense Highlights
- Aerospace and defense contractors typically work with a small number of unique, powerful customers—often government agencies—who dominate the market. These customers are sometimes called monopsonies or monopoly buyers because they are the only or primary buyers in the industry. This dynamic creates a very different kind of contractor-customer relationship, in which the customers
– Control terms and pricing
– Drive competition between contractors through bidding processes
– Won’t work exclusively with one contractor on a program
– Sometimes set the allowed profit margin or the overall size of the deal or program
- While the companies in this industry are some of the most innovative in the world, they do not have margins as high as other innovative businesses, such as medical and technology innovators, primarily because defense contractor innovations are often co-created with or co-funded by their customers.
- This industry attracts top talent with highly specific skill sets and backgrounds, and it’s especially competitive against other tech innovators in tight labor markets.
- Instead of the traditional operating margin metric, many companies in this space use a similar metric called return on sales (ROS).
Compare your client's results to industry and S&P 500 results.
|
Aerospace |
S&P 500 |
|
|
CASH |
||
|
Cash and Cash Equivalents as a % of Sales |
20.9% |
22.7% |
|
Cash Generated from Operations as a % of Sales |
10.3% |
20.9% |
|
|
||
|
Gross Profit Margin % |
25.5% |
49.6% |
|
Operating Profit Margin % |
9.5% |
23.2% |
|
Net Profit Margin % |
5.2% |
12.9% |
|
|
||
|
Return on Assets (ROA) % |
4.1% |
8.4% |
|
Equity Ratio |
29.2% |
33.7% |
|
|
||
|
Revenue Growth Rate % |
5.8% |
6.3% |
|
Net Income Growth Rate % |
14.4% |
8.1% |
|
|
||
|
Revenue per Employee |
$0.6M |
$1.6M |
Notes:
-
Because cash amounts can vary dramatically from company to company based on a company’s overall “size,” we’ve presented the numbers as a percentage of sales or revenue: the cash metric divided by total revenue or sales and then multiplied by 100.
-
S&P 500 averages are calculated based on 3 years of annual reports as of July 2024, rounded. However, because certain financial industries, like asset management companies and diversified banks, hold large amounts of cash, they have been removed from the cash calculations.
-
Most industry or sector averages are also calculated based on 3 years of annual reports from S&P 500 companies. However, certain companies or subsectors in the S&P sometimes skew the data far from what is typical for an industry, so we have occasionally removed some companies or subsectors or changed periods in our calculations to provide a more accurate set of comparison data.
What are Health Insurance CEOs telling Wall Street right now? We analyzed the latest annual reports from five top players to identify the mission-critical priorities shaping their 2026 spending.
1. Profitability and LTV Over Raw Growth:
The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
2. Massive AI and Automation Initiatives:
Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
3. Hyper-Focus on Specific High-Cost Trends:
Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
4. Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
The Scenario:
A SaaS vendor selling an AI-driven claims tool was struggling to overcome the "we already have a large internal team for this" objection from a C-suite executive at a mid-sized health insurer.
The Strategy:
Instead of focusing on software features, the rep used the Revenue per Employee metric ($8.9M industry average). They proved that while the insurer’s revenue was growing, their headcount was growing faster—dropping their specific ratio to $7.2M (underperforming the industry).
The Pivot:
"Your business model requires high leverage; every employee needs to support nearly $9M in revenue just to protect your 3.3% net margin. Currently, your claims team spends 40% of their time on manual entry. We aren't here to replace your team; we are here to get your Revenue per Employee back above the $8.9M benchmark by automating 'low-value' touches."
The Result:
The executive shifted from seeing a "software cost" to a "margin protector." The deal closed because the vendor aligned with the executive’s hyper-focus on operational efficiency and headcount leverage.
The Scenario:
A workplace consultant was pitching a space-utilization audit to a COO facing a "return to office" dilemma. The COO was considering a generic mandate to bring everyone back just to justify lease costs, despite the risk to retention.
The Strategy:
The consultant ignored aesthetics and focused on the 3.3% Net Profit Margin. They analyzed the insurer's footprint and found three regional centers were only 40% occupied, creating a massive "administrative leakage" that was eroding the bottom line.
The Pivot:
"Your real estate overhead is a significant drag on your 3.3% margin. By rightsizing your footprint through activity-based zones, we can exit 30,000 sq. ft. of space, saving $1.2M in annual OpEx. To generate that same $1.2M in profit via new business, your sales team would have to close $36M in new premiums. We can give you that result today without a single new sale."
The Result:
The COO realized the audit wasn't a design project—it was a capital allocation strategy. They greenlit the study because the cost was negligible compared to the $36M in "equivalent premium growth" it uncovered.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
Manufacturing Highlights
- Manufacturing includes companies involved in the mechanical, physical, or chemical transformation of materials, substances, or components into new products. The manufacturing sector includes a vast array of subsectors, including the manufacturing of food and beverages, textiles, apparel, chemicals, plastics, metals, electronics, furniture, and more.
- Manufacturing companies face many challenges due to the rapid advancement of technology and the changing demands of sustainability, customer relations, and reshoring. The sector has also been shifting its source of revenue from business-to-business (B2B) sales toward direct-to-consumer (B2C) sales as technology allows manufacturers to more easily engage directly with customers.
- Companies in this industry make major investments of cash and liquid assets, called capital expenditures, into more fixed, long-term assets to keep manufacturing facilities up-to-date, efficient, and productive. They weigh market demand and ideal facility locations (to control transportation costs) to maximize asset utilization.
- They focus on minimizing downtime and reducing expenses from any inefficient, outdated processes to maximize their return on investment—and stay viable in a competitive industry.
- Some key measures for manufacturing include throughput, cycle time, contribution margin, and demand forecasting.
Compare your client's results to industry and S&P 500 results.
|
Manufacturing |
S&P 500 |
|
|
CASH |
||
|
Cash and Cash Equivalents as a % of Sales |
14.5% |
22.7% |
|
Cash Generated from Operations as a % of Sales |
16.5% |
20.9% |
|
|
||
|
Gross Profit Margin % |
39.5% |
49.6% |
|
Operating Profit Margin % |
18.1% |
23.2% |
|
Net Profit Margin % |
13.5% |
12.9% |
|
|
||
|
Return on Assets (ROA) % |
9.2% |
8.4% |
|
Equity Ratio |
40.3% |
33.7% |
|
|
||
|
Revenue Growth Rate % |
5.2% |
6.3% |
|
Net Income Growth Rate % |
7.7% |
8.1% |
|
|
||
|
Revenue per Employee |
$0.6M |
$1.6M |
Notes:
-
Because cash amounts can vary dramatically from company to company based on a company’s overall “size,” we’ve presented the numbers as a percentage of sales or revenue: the cash metric divided by total revenue or sales and then multiplied by 100.
-
S&P 500 averages are calculated based on 3 years of annual reports as of July 2024, rounded. However, because certain financial industries, like asset management companies and diversified banks, hold large amounts of cash, they have been removed from the cash calculations.
-
Most industry or sector averages are also calculated based on 3 years of annual reports from S&P 500 companies. However, certain companies or subsectors in the S&P sometimes skew the data far from what is typical for an industry, so we have occasionally removed some companies or subsectors or changed periods in our calculations to provide a more accurate set of comparison data.
What are Health Insurance CEOs telling Wall Street right now? We analyzed the latest annual reports from five top players to identify the mission-critical priorities shaping their 2026 spending.
1. Profitability and LTV Over Raw Growth:
The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
2. Massive AI and Automation Initiatives:
Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
3. Hyper-Focus on Specific High-Cost Trends:
Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
4. Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
The Scenario:
A SaaS vendor selling an AI-driven claims tool was struggling to overcome the "we already have a large internal team for this" objection from a C-suite executive at a mid-sized health insurer.
The Strategy:
Instead of focusing on software features, the rep used the Revenue per Employee metric ($8.9M industry average). They proved that while the insurer’s revenue was growing, their headcount was growing faster—dropping their specific ratio to $7.2M (underperforming the industry).
The Pivot:
"Your business model requires high leverage; every employee needs to support nearly $9M in revenue just to protect your 3.3% net margin. Currently, your claims team spends 40% of their time on manual entry. We aren't here to replace your team; we are here to get your Revenue per Employee back above the $8.9M benchmark by automating 'low-value' touches."
The Result:
The executive shifted from seeing a "software cost" to a "margin protector." The deal closed because the vendor aligned with the executive’s hyper-focus on operational efficiency and headcount leverage.
The Scenario:
A workplace consultant was pitching a space-utilization audit to a COO facing a "return to office" dilemma. The COO was considering a generic mandate to bring everyone back just to justify lease costs, despite the risk to retention.
The Strategy:
The consultant ignored aesthetics and focused on the 3.3% Net Profit Margin. They analyzed the insurer's footprint and found three regional centers were only 40% occupied, creating a massive "administrative leakage" that was eroding the bottom line.
The Pivot:
"Your real estate overhead is a significant drag on your 3.3% margin. By rightsizing your footprint through activity-based zones, we can exit 30,000 sq. ft. of space, saving $1.2M in annual OpEx. To generate that same $1.2M in profit via new business, your sales team would have to close $36M in new premiums. We can give you that result today without a single new sale."
The Result:
The COO realized the audit wasn't a design project—it was a capital allocation strategy. They greenlit the study because the cost was negligible compared to the $36M in "equivalent premium growth" it uncovered.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
Waste Disposal Highlights
- Waste disposal companies earn revenue from waste collection, disposal services, and increasingly, recycling and waste-to-energy (WTE) programs. Contracts with local governments, industrial clients, and commercial businesses often drive long-term revenue streams.
- While the steady demand for waste management leads to stable cash flow, profit margins vary depending on service type (higher for hazardous waste, lower for residential collection) and geographic reach. Recycling operations often have tighter margins due to fluctuating commodity prices.
- Waste disposal requires significant investments in assets—equipment, maintenance, and landfill development and management.
- The industry relies on a large base of employees, including drivers, equipment operators, and landfill workers. Labor shortages and wage inflation can impact profitability.
- Key metrics include tons of waste processed, percentage of waste diverted into recycling programs, fleet efficiency, and landfill utilization rate (a measure of remaining landfill lifespan, critical for long-term planning).
Compare your client's results to industry and S&P 500 results.
|
Waste Disposal Sector Avg. |
S&P 500 |
|
|
CASH |
||
|
Cash and Cash Equivalents as a % of Sales |
0.5% |
22.7% |
|
Cash Generated from Operations as a % of Sales |
24.4% |
20.9% |
|
|
||
|
Gross Profit Margin % |
39.2% |
49.6% |
|
Operating Profit Margin % |
28.7% |
23.2% |
|
Net Profit Margin % |
10.8% |
12.9% |
|
|
||
|
Return on Assets (ROA) % |
5.8% |
8.4% |
|
Equity Ratio |
30.2% |
33.7% |
|
|
||
|
Revenue Growth Rate % |
7.1% |
6.3% |
|
Net Income Growth Rate % |
9.3% |
8.1% |
|
|
||
|
Revenue per Employee |
$0.8M |
$1.6M |
Notes:
-
Because cash amounts can vary dramatically from company to company based on a company’s overall “size,” we’ve presented the numbers as a percentage of sales or revenue: the cash metric divided by total revenue or sales and then multiplied by 100.
-
S&P 500 averages are calculated based on 3 years of annual reports as of July 2024, rounded. However, because certain financial industries, like asset management companies and diversified banks, hold large amounts of cash, they have been removed from the cash calculations.
-
Most industry or sector averages are also calculated based on 3 years of annual reports from S&P 500 companies. However, certain companies or subsectors in the S&P sometimes skew the data far from what is typical for an industry, so we have occasionally removed some companies or subsectors or changed periods in our calculations to provide a more accurate set of comparison data.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.
What are Industrials and Logistics CEOs telling Wall Street right now? We analyzed the 2026 strategic outlooks for leaders in aerospace, heavy equipment, and global shipping to identify the mission-critical priorities shaping their spending.
1. Resilience and Quality Over Speed-to-Market:
The mantra has shifted from "more" to "better." Following high-profile supply chain and manufacturing lapses, companies are sacrificing short-term volume to rebuild safe margins. In aerospace and heavy manufacturing, capital is being reallocated away from aggressive new launches toward zero-defect production and rigorous quality oversight. The goal is to avoid the catastrophic costs of recalls or delivery halts that erode enterprise value.
2. The Move to Predictive Logistics:
In global shipping, efficiency is being redefined by AI-driven network optimization. Major carriers are deploying advanced algorithms to dynamically reroute fleets in real-time, anticipating weather, port congestion, and geopolitical shifts before they happen. By shifting from reactive to predictive operations, these firms are targeting billions in savings by reducing fuel burn and maximizing the utilization of every plane, truck, and ship in their network.
3. Electrification and Autonomous Worksite Systems:
Heavy equipment manufacturers are transitioning from selling iron to selling uptime. 2026 marks a massive spike in R&D for autonomous worksites—where machines communicate to optimize digging, hauling, and lifting without human intervention. This shift is designed to solve the chronic shortage of skilled operators while lowering the total cost of ownership through battery-electric powertrains that slash maintenance and energy expenses.
4. Supply Chain Self-Sufficiency:
Industrials are aggressively vertically integrating or "near-shoring" to insulate themselves from global volatility. Strategic spending is focused on sovereign supply chains—owning more of the raw material processing and component manufacturing closer to home. The mandate is to ensure that a disruption on the other side of the world can no longer paralyze a domestic assembly line.
The Scenario:
A salesperson for a predictive maintenance sensor company pitched to a Fleet Manager at a global logistics firm. The manager was content with their current "scheduled maintenance" routine, believing that as long as they changed the oil every 10,000 miles, they were doing fine.
The Strategy:
The salesperson ignored the technical specs of the sensors and focused on Asset Utilization. They proved that scheduled maintenance was actually causing unnecessary downtime, while unexpected failures were still costing the company $5,000 per hour in lost delivery revenue.
The Pivot:
"Your current schedule is actually costing you more than it saves. You’re pulling trucks off the road that are perfectly fine, yet you’re still seeing two unplanned breakdowns a month per hub. We’re here to protect your bottom line by keeping your fleet running. Our system lets you run a vehicle right up to its actual limit and only service it when a failure is imminent. If we can keep just two more trucks on the road for four extra hours a week, you aren't just saving on repair bills—you're adding $2M in annual capacity to your existing fleet without buying a single new vehicle."
The Result:
The Fleet Manager stopped seeing a "hardware cost" and started seeing Capacity Expansion. The deal closed because it turned a maintenance expense into a tool for revenue growth.
The Scenario:
A logistics consultant was pitching a warehouse automation audit to a CFO at a heavy machinery manufacturer. The CFO was hesitant, arguing that their current "human-led" picking process was already low-cost and that "expensive robots" wouldn't save enough on payroll to justify the price.
The Strategy:
The consultant pivoted away from labor costs entirely and focused on Inventory Speed. They realized the real drain on the 6% profit margin wasn't the workers’ wages—it was the billions of dollars in parts sitting stagnant on shelves for months "just in case." This trapped cash was "dead capital" that couldn't be reinvested in the business.
The Pivot:
"Your warehouse isn't just full of parts; it's full of trapped cash. Right now, your inventory sits for an average of 90 days, which is a massive drag on your profit. By automating your picking and using predictive ordering, we can cut that hold time to 45 days. That liberates $50M in cash currently gathering dust on your shelves. To get that same $50M in cash flow through new equipment sales, your team would have to close $800M in new orders. We can give you that capital today by simply making your inventory move faster."
The Result:
The CFO realized the audit wasn't a "tech project"—it was a Capital Allocation Strategy. They greenlit the study because it turned their warehouse from a storage locker into a high-velocity cash engine, providing the same financial boost as a massive sales win without needing to change their staffing levels.
- Profitability and LTV Over Raw Growth: The era of growth at all costs is over. Insurers are intentionally shedding unprofitable members and exiting certain geographies to protect their bottom lines. Humana has explicitly shifted its strategy away from "loss leader plans," focusing instead on maximizing customer lifetime value (LTV) and retaining high-quality membership. Commercial growth is similarly measured, with companies like Elevance and UnitedHealth prioritizing margin integrity over raw volume.
- Massive AI and Automation Initiatives: Artificial intelligence is being aggressively deployed to counter rising administrative and medical costs. UnitedHealth Group anticipates nearly $1 billion in AI-enabled operating cost reductions in 2026 alone, using it to handle over 80% of member calls and streamline advocacy. Elevance is also making targeted investments to embed AI-enabled capabilities that simplify the member experience and speed up prior authorizations.
- Hyper-Focus on Specific High-Cost Trends: Rather than fighting general medical inflation, insurers are targeting specific spikes in utilization. Centene noted that behavioral health is driving roughly 50% of their excess medical trend, with home health and high-cost specialty drugs acting as secondary pressure points. Solutions that can effectively manage complex populations or utilize advanced algorithms to detect fraud, waste, and abuse in these areas are highly attractive.
- Pharmacy Benefit Transformation: The pharmacy benefit manager (PBM) space is undergoing a massive structural shift. Cigna and UnitedHealth are heavily promoting new, transparent, "rebate-free" pricing models that pass savings directly to clients and consumers. Furthermore, insurers are heavily leaning into the adoption of lower-cost biosimilars to generate billions in savings over the next few years.