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Insurance Protection Gaps to Widen, Warns Bain Report

Banking and Insurance

Business Honor
04 April, 2025

Bain & Company report highlights growing insurance protection gaps and calls for strategic adjustments, innovation, and partnerships.

A recent Bain & Company report identifies dire trends in the global insurance sector, with protection gaps increasing in all lines of business over the period from 2030. The report, Bridging the Protection Gap: Affordability, Access, and Risk Prevention, acknowledges the industry's continued struggle to price risk effectively, fueled by increasing natural disasters, cyber exposures, and unaffordable rates.

According to Bain's projections, natural disaster loss coverage will only be 25% to 33% by 2030, and life mortality coverage will be less than 50%. While cyclical market trends lead to some lines of the insurance business, e.g., property and casualty, experiencing an uptrend, the insurance industry as a whole faces rising profitability issues.

Investment sentiment about the long-term profitability of insurance firms is divided, particularly for life insurers. US life insurers are beset by doubt, as market valuations are skeptical regarding diminishing profitability and latent risk inherent in current policies. Property and casualty insurers are also beset by doubt, as recent rate hikes may prove unsustainable in the face of increasing claims.

The research also refers to the speed-up of digitalization in the insurance industry, bringing new risks. Estimated global ransomware losses are more than $250 billion over six years and pose a significant challenge to insurers. Bain advocates for a move towards public-private partnerships and more risk-sharing models, such as more participation by reinsurers and alternative capital providers, to improve cyber resilience.

In spite of all of this, the report suggests that there exists the potential for technological innovation, including AI, to be able to generate operations and profitability. For Bain, optimization using AI can make possible a 10-15% increase in revenues, a 30% decrease in operating costs, and 30-50% less claims inefficiencies, giving insurers a means of weathering these stormy times and remaining financially robust.