A newly released report by Bain & Company, Bridging the Protection Gap: Affordability, Access, and Risk Prevention, outlines the evolving dynamics of the global insurance industry. Authored by Sean O’Neill, Andrew Schwedel, Daniel Jones, and Tanja Brettel, the report explores how insurers are navigating rising costs, shifting customer expectations, and emerging risks while positioning for future resilience.
Growth Pressures and Market Headwinds
Recent growth in the insurance sector — particularly in property and casualty (P&C) and life insurance — has largely stemmed from premium rate increases and favorable interest rates. However, Bain emphasizes that this momentum is unlikely to continue. Profitability in key areas such as personal auto and property lines has come under strain due to increasing claims costs and regulatory pricing constraints. At the same time, life insurance products are losing relevance, especially among younger consumers.
A significant concern is the widening protection gap: by 2030, only one-quarter to one-third of damages from natural disasters are expected to be insured. Life insurance coverage is projected to remain below 50% for mortality risks. Addressing these gaps will require solutions focused on both affordability and consumer engagement.
Six Strategic Themes for Insurers
The report identifies six core themes that insurers must address to overcome current challenges and deliver long-term value:
1. Responding to Shifting Customer Priorities
Affordability remains a major barrier in P&C insurance, particularly in regions affected by climate-related disasters. In many U.S. states, premiums have climbed sharply while regulatory restrictions prevent price adjustments that reflect rising risks. In life insurance, demographic trends and changing savings behavior are reshaping demand, requiring more flexible and portable products aligned with today’s workforce.
2. Tackling Emerging Risks Through Prevention and Innovation
The frequency and severity of natural disasters, cyberattacks, and new transportation technologies are reshaping risk models. Innovations like smart home systems, telematics, and wearable health tech offer insurers opportunities to reduce claims through prevention. However, public-private partnerships will be essential to manage systemic risks such as climate events and cyber threats.
3. Reimagining Customer Engagement
Digital channels and embedded insurance are changing how consumers research and purchase coverage. Insurers are experimenting with partnerships and social media strategies to reach target audiences, particularly younger consumers better. In life insurance, more effective targeting and streamlined customer journeys are critical to boosting engagement and conversion rates.
4. Leveraging AI and Unstructured Data
The insurance industry is undergoing a transformation driven by artificial intelligence and a surge in unstructured data—from call logs to dashcam videos. Bain anticipates significant gains in affordability, access, and operational efficiency through widespread AI adoption. However, realizing this potential requires rethinking traditional workflows and investing in new capabilities.
5. Preparing for the Retirement Cliff
An aging workforce threatens to disrupt key insurance functions such as underwriting and claims. The report stresses the importance of accelerated training, AI tools for productivity, and reskilling to offset looming retirements. Insurers must adapt job roles to reflect an increasingly data- and AI-driven environment.
6. Expanding Use of Alternative Capital
Alternative capital solutions—such as insurance-linked securities and collateralized reinsurance—are gaining traction as insurers seek to manage capital more efficiently. Bain notes that while regulators generally support these instruments, private capital alone may not be sufficient for addressing extreme events. Deeper collaboration with governments remains crucial.
Looking Ahead: A Call for Proactive Transformation
Bain concludes that insurers are at a strategic inflection point. The firms that modernize their products, adopt AI at scale, and retool their workforce will be better positioned for sustainable growth. These efforts, if successful, will not only improve insurer performance but also enhance societal resilience in the face of growing risk.
Get the latest insurance market updates and discover exclusive program opportunities at ProgramBusiness.com.