A new survey has highlighted that the global insurance protection gap is expected to deepen by 2030, driven by mounting challenges related to long-term earnings sustainability, emerging risks, and affordability. Bain & Company’s report, Bridging the Protection Gap: Affordability, Access, and Risk Prevention, suggests that protection gaps will continue to widen across all insurance lines as insurers grapple with rate-driven growth that is increasingly unsustainable.
The report identifies key issues impacting the industry, including the difficulty of matching price to risk profitably. This is exacerbated by the growing frequency of natural disasters, rising cyber threats, unaffordable property premiums, and the diminishing appeal of life insurance, particularly among younger generations. According to Bain, by 2030, only 25% to 33% of damages from natural disasters will be covered by insurance, while mortality coverage may fall to less than half.
Insurance Industry Faces Critical Crossroads
Sean O’Neill, head of Bain’s global insurance practice, stated that insurers are at a critical juncture. “While the past few years have seen rate increases in the property and casualty sector and interest-rate-driven annuity sales in the life sector, the sustainability of these trends is in question,” O’Neill said. “Capital and balance sheets remain reasonably strong, but profitability pressures are mounting, and insurers must take proactive measures now to navigate these emerging challenges.”
The report indicates that investors are growing skeptical about the future growth prospects of U.S. insurers, especially in the property and casualty (P&C) sectors. In contrast, there is more optimism around life insurers in emerging markets. U.S. life insurers, in particular, face the challenge of “negative white space” in their valuations, reflecting concerns about declining profitability and potential losses lurking in current business portfolios. P&C insurers are similarly concerned about the sustainability of recent rate hikes and the potential for rising claims.
Rising Cyber Risks a Major Threat
One of the most pressing concerns for insurers is the surge in cyber risks. With an increasingly digital and data-driven world, global ransomware damage is expected to exceed $250 billion over the next six years. Bain warns that individual insurers will struggle to address the full scale of this risk, emphasizing the need for coordinated industry action.
Opportunities Amidst Challenges
Despite these challenges, Bain’s survey also highlights significant opportunities for insurers, particularly in leveraging recent technological advancements. The rapid growth of unstructured data and the rise of artificial intelligence (AI) are transforming the industry. Insurers who can harness this data are poised to enhance affordability and accessibility. Bain forecasts that AI-driven improvements could lead to a 10%–15% revenue increase, 30% reduction in operating expenses, and a 30%–50% reduction in P&C costs.
As the protection gap continues to widen and risks evolve, insurers must adapt quickly to capitalize on new opportunities and mitigate emerging threats in order to remain financially viable and competitive in the coming years.
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