Insurance Gaps to Widen by 2030, Bain & Co. Warns
Insurance Gaps to Widen by 2030, Bain & Co. Warns
Bain & Company reports insurance gaps will widen by 2030 due to rising risks, unsustainable rate growth, and increasing cyber threats.
Global insurance protection gaps are projected to expand across all business lines by 2030, driven by unsustainable rate-based growth, according to a newly released study from Bain & Company.
The report, titled Bridging the Protection Gap: Affordability, Access, and Risk Prevention, highlights the industry's struggle to balance pricing with risk. Factors such as increased natural disasters, rising cyber threats, unaffordable property premiums, and diminishing relevance of life insurance among younger populations contribute to the growing disparity. By 2030, insurance is expected to cover only 25 per cent to 33 per cent of natural disaster damages, while mortality coverage could drop below 50 per cent, Bain’s findings indicate.
Insurance firms, buoyed by temporary market conditions, now face critical crossroads, said Sean O’Neill, head of Bain’s Global Insurance practice. The property and casualty segment has seen rate hikes, while interest-rate-driven annuity sales have bolstered the life insurance sector. Despite stable capital reserves, challenges persist, placing profitability under strain across multiple insurance segments. O’Neill stressed the importance of immediate strategic adjustments to navigate these challenges effectively.
Investor sentiment regarding insurance growth prospects remains mixed. Bain’s research suggests that US-based life insurers face skepticism over long-term earnings potential, as market valuations reflect concerns about profitability declines and hidden risks in existing policies. Property and casualty insurers also grapple with similar pressures, with doubts over the sustainability of recent pricing surges amid potential rises in claims.
Cybersecurity threats present an urgent concern for insurers as digitalization accelerates. Global ransomware damages are projected to exceed $250 billion within six years. Bain warns that individual insurers cannot mitigate these risks alone. Instead, public-private partnerships and expanded risk-sharing mechanisms, including increased participation from reinsurers and alternative capital providers, will be required to strengthen cyber resilience.
"Risk prevention must become a strategic priority for the insurance industry," said Andrew Schwedel, partner at Bain’s Insurance practice. He emphasized the need for broader collaboration to manage catastrophic cyber risks effectively.
Despite ongoing challenges, the insurance industry stands to benefit from technological innovations. AI and the surge in unstructured data are transforming operations, offering new avenues for insurers to enhance access and affordability. Bain estimates that AI-driven improvements could lead to a 10%–15% increase in revenue, 30 per cent operational cost savings, and a 30 per cent –50 per cent reduction in property and casualty claims inefficiencies.
Additional report insights explore the evolving impact of climate solutions on insurance risk models, the rise of electric and autonomous vehicles in reshaping liability frameworks, and strategies for addressing the widening retirement income gap.
