Global Insurance Report 2025: The Pursuit of Growth PDF

Insurance Practice Global Insurance Report 2025: The pursuit of growth November 2024 This publication is not intended to be used as the basis for trading in the shares of any company or for undertaking any other complex or significant financial transaction without consulting appropriate...

Insurance Practice Global Insurance Report 2025: The pursuit of growth November 2024 This publication is not intended to be used as the basis for trading in the shares of any company or for undertaking any other complex or significant financial transaction without consulting appropriate professional advisers. No part of this publication may be copied or redistributed in any form without the prior written consent of McKinsey & Company. Copyright © 2024 McKinsey & Company. All rights reserved. Cover image: © Eugene Mymrin/Getty Images All interior images: @ Getty Images Global Insurance Report 2025: The pursuit of growth Finding profitable growth is an imperative for the world’s personal and commercial property and casualty insurers, while life carriers must adjust to changing consumer needs. For an industry focused on mitigating risk and providing protection, the world’s insurers are enduring a particularly volatile age. The macroeconomic picture is mixed, with inflation stubbornly high and interest rates uncertain. Consumer confidence remains shaky, even though the economic growth cycle appears to have bottomed out. Geopolitical instability remains a perceived threat to global growth, and trade patterns are shifting amid signs of protectionism. Yet McKinsey’s Global Insurance Report 2025—published in three chapters covering personal lines P&C, commercial P&C, and life—finds significant ground for optimism. In offering granular insights and clear recommendations for how leading insurers can drive performance, the reports identify opportunities for capturing profitable growth as they navigate this shifting landscape. Personal P&C: Opportunities amid challenges While personal lines (P&C) insurance premiums grew by 9.5 percent in 2022–23 to $1.1 trillion—outpacing nominal global GDP by half a percentage point1 —gross written premiums as a share of nominal GDP remained below prepandemic levels and the coverage gap between mature and emerging economies widened. Industry growth in developed markets was largely driven by rate increases, indicating limited expansion into new risks, while insurance affordability emerged as a significant topic in some markets including the United States because of rising underlying asset prices, the cost of repairs and frequency of damage (especially in areas exposed to physical risk), and rising reinsurance costs. Amid these challenges, we see a chance for carriers to innovate, expand coverage, and increase the industry’s relevance. Several economies in Latin America and Asia are potential pockets of growth and may enter economic conditions that will enable greater insurance coverage and relevance. The aging global population and evolving customer purchasing patterns present opportunities for carriers to rethink their capabilities and offerings. Distribution is getting closer to the customer as players embed the purchase of insurance into broader purchases of goods and services. New mobility models will force carriers to rethink their approach to distribution, pricing, product design, and claims processing. Amid the continued rise of physical risk, carriers will need to invest in new capabilities to help manage, mitigate, and transfer the risk related to natural disasters. Last, evolving technology—particularly AI and generative AI—will enable carriers to rethink and innovate the end-to-end value chain. 1 Global 2023 GDP and premiums were calculated assuming fixed 2022 exchange rates (to convert GDP and premiums from local currencies to US dollars) for the purposes of measuring increases in insurance relevance without any effects from exchange rate fluctuations; we do this for both local insurance premiums and GDP because we are interested in the local share of premiums relative to GPD, which is not affected by currency fluctuations. Global Insurance Report 2025: The pursuit of growth iii Commercial P&C: Finding growth beyond rate increases Global commercial P&C insurance lines continued to deliver strong growth despite more recent evidence of softening conditions. Premiums increased by an average of 8 percent annually in the past five years, while the average combined ratio for the industry trended downward to an estimated 91 percent in 2023.2 Almost all of this growth was driven by higher premiums, and insurers must now focus on how they capture consistent, profitable growth amid the shifting market landscape. Although where insurers operate is important, the majority of their financial performance is driven by how they operate. This dynamic applies across both soft- and hard-cycle years and applies generally, although factors such as regional differences may lead to exceptions. 3 While effective portfolio strategy should not be disregarded, execution matters even more, and insurers should double down on their capabilities in their core lines of business to achieve profitable growth. Life: Embracing a changing landscape It has been a year of unpredictable mixed signals, uncertainty, and surprising upsides for the life and retirement insurance industry. While unexpectedly resilient macroeconomic conditions provided tailwinds— global GDP growing in real terms, 4 inflation steadily decreasing, 5 and equity markets turning positive6 —not all product lines and geographies benefited. And while there were bright spots, the industry overall is struggling for relevance. Yet there are significant opportunities amid the challenges. The life insurance market is being reshaped by the aging global “silver” population of people aged 65 or older and the concentration of wealth among Generation X7 and retirees. And while changing social norms and ways of living—such as fewer marriages, lower fertility rates, and more dual-income households—are challenging the traditional life insurance model, it presents an opportunity for more flexible policies catering to nontraditional family structures. 2 Global Insurance Database, AM Best, June 2024; McKinsey Global Insurance Pools, Markets database. 3 Analysis calculates an artificially weighted combined ratio for 24 global commercial lines insurers based on industry business line weights. It uses an industry-weighted business line mix while maintaining each insurer’s combined ratio performance in individual business lines. The relative outperformance or underperformance of these artificially weighted combined ratios is then compared to that of the realized combined ratios. This comparison is used to assess the impact of the “how” versus “where” to play decision. Based on Pro Database, S&P Capital IQ, May 2024; Global Insurance Database, June 2024; company annual reports. 4 World economic outlook, International Monetary Fund (IMF), April 2024. 5 Ibid. 6 MSCI World Index, MSCI, accessed October 2024. 7 Generation X is defined as people born from the early 1960s to 1980. Global Insurance Report 2025: The pursuit of growth iv Contents 1 Finding profitable personal lines 2 Searching for profitable growth in 3 Growth and relevance in life growth commercial lines and beyond 1 25 44 Global Insurance Report 2025: The pursuit of growth v Global Insurance Report 2025: Finding profitable personal lines growth The personal property and casualty insurance industry grew in 2023, fueled by rate increases. The opportunity now is to innovate, expand coverage, and increase the industry’s relevance. This report is a collaborative effort by Alex Kimura, Deniz Cultu, Elixabete Larrea Tamayo, Grier Tumas Dienstag, and José Miguel Novo Sánchez, with Bernat Serra Montolí, Francesco Martini, and Sebastian Kohls, representing views from McKinsey’s Insurance Practice. Eyebrow Title on two lines Lorem ipsum dolor sit amet, consectetur adipiscing elit nullam rutrum tempus. Month Year Table of Introduction3 The personal lines P&C industry opportunity 4 contents Growth has been fueled by rate increases, with limited expansion into new risks 5 Industry profitability should stabilize, shifting the focus to profitable growth  7 Insurance affordability: Rising coverage costs may become more widespread 7 Scale wins in auto markets; home presents more granular, geographic opportunities  9 Trends affecting personal lines 11 New mobility models will force carriers to rethink their approach 11 Investing in new capabilities to cope with natural disasters 13 Select emerging markets are on the verge of expanding relevance, creating opportunities for granular growth 15 Demographic changes present opportunities for innovation and growth 17 Distribution is changing to get closer to the customer as players embed the purchase of insurance into broader purchases of goods and services 18 Gen AI is fueling wholesale reimagination of the value chain  19 Next steps: Three archetypes to find and enable growth 20 Core, at-scale players concentrated on insuring traditional coverage 20 Innovators expanding coverage through specialized products 20 Targeted players differentiated through marketing, distribution, and servicing 20 Conclusion24 Global Insurance Report 2025: The pursuit of growth 2 Introduction The personal lines property and casualty (P&C) industry writes about a quarter of the world’s insurance premiums. It protects people and their loved ones wherever they are, every day. Yet that means the disruption consumers have faced globally in recent years—from a global pandemic to rising costs, the increasing frequency and severity of natural disasters, and the changing nature of how we live and work—is also shared by the industry. And that presents both challenges and opportunities. While the growth of personal lines (P&C) insurance accelerated in 2023, the industry’s relevance—measured by gross written premiums as a share of nominal GDP—remained below prepandemic levels, and the coverage gap between mature and emerging economies widened. Industry growth in developed markets was driven largely driven by rate increases, indicating limited expansion into new risks. Additionally, insurance affordability has become a significantly relevant topic: the rising cost of home coverage outpaced income growth in select regions, including the United States. That is a function of underlying asset prices rising, increasing total insurable value; the cost of repairs and frequency of damage rising, especially in areas exposed to physical risk; and rising reinsurance costs. Because many regions are exposed to the same underlying drivers, rising premiums could expand to other regions. However, these challenges also represent a chance for carriers to innovate, expand coverage, and increase the industry’s relevance. We are positive about the industry’s outlook as it pivots toward sustained, profitable growth. We see recent profitability challenges easing as inflation stabilizes and carriers in many regions reach rate adequacy, while net investment income continue to rise, supported by higher interest rates. That is not to suggest the big trends disrupting the industry will disappear; they may even intensify. Mobility trends—from electric vehicles to the promise of autonomous vehicles (AVs)—are changing auto insurance and have the potential to disrupt the sector. Natural disasters are more frequent, severe, and volatile, and risks associated with them may expand the gap between what is protected and what is not. At the same time, several economies in Latin America and Asia are potential pockets of growth because their macroeconomic indicators are at (or are approaching) the point where insurance coverage can leapfrog, given the right tailwinds. The aging global population and evolving customer purchasing patterns present opportunities for carriers to rethink their capabilities and offerings, while evolving technology—particularly AI and generative AI (gen AI)—and distribution can be used to further spur innovation. Global Insurance Report 2025: The pursuit of growth 3 1 The personal lines P&C industry opportunity Personal P&C insurance represented about $1.1 trillion in gross written premiums in 2023, about a quarter of the insurance industry’s total premiums.1 Premium growth of 9.5 percent in 2022–23 outpaced nominal global GDP by half a percentage point,2 marking a reversal from the period from 2019 to 2022, when premiums grew by 3.2 percent per year and lagged behind GDP by 13 percentage points over three years. This expansion was mainly driven by carriers pushing for rate adequacy after high inflation and accelerated loss trends between 2021 and 2023. Yet, even with growth in 2023, the relevance3 of personal lines has not yet returned to prepandemic levels: personal lines represented 1.0 percent of global GDP, compared with 1.2 percent in 2019. In addition, auto and home insurance accounted for more than 93 percent of premium growth in 2023 (compared with 88 percent in the period from 2019 to 2022), highlighting limited expansion into new risks. Simultaneously, the gap between mature and emerging economies has widened. While in mature markets personal lines premiums remained at 1.5 percent of GDP between 2019 and 2023, in emerging economies, that same share fell from 0.7 percent in 2019 to 0.5 percent in 2023, suggesting a widening gap in risk coverage. Rising relevance in both mature and emerging markets represents an opportunity for carriers as they pivot to focus on profitable growth. We are positive about the industry’s outlook: premiums in the United States, for example, are expected to grow by 11 percent annually through 2025 as combined ratios decrease by more than eight percentage points. 4 Even with growth in 2023, the relevance of personal lines has not yet returned to prepandemic levels: personal lines represented 1.0 percent of global GDP, compared with 1.2 percent in 2019. 1 Excluding health. 2 Global 2023 GDP and premiums were calculated assuming fixed 2022 exchange rates (to convert GDP and premiums from local currencies to US dollars) for the purposes of measuring increases in insurance relevance without any effects from exchange rate fluctuations; we do this for both local insurance premiums and GDP because we are interested in the local share of premiums relative to GDP, which is not affected by currency fluctuations. 3 As measured by gross written premiums as a share of nominal GDP. 4 Total industry forecast 2024 Q2, Conning, 2024. Global Insurance Report 2025: The pursuit of growth 4 Growth has been fueled by rate increases, with limited expansion into new risks North America, the world’s biggest personal lines market, experienced the most growth in 2023, expanding by 14 percent and outpacing nominal GDP growth by about eight percentage points. Premium growth was largely driven by rate increases (for example, rates in the US auto market jumped 16 percent compared to premium growth of 11 percent), reflecting carriers’ attempts to restore premium adequacy after several years of challenged profitability due to increased claims costs. This indicates that covered exposures likely contracted. Rate increases also drove premium growth in other mature markets such as developed Asia and Western Europe. 5 Examples include the growth of auto and home rates by 25 and 13 percent, respectively, in the United Kingdom; by 5 and 15 percent, respectively, in Italy; and by nearly 13 percent for both in Australia. Thus, consistent with North America, many other mature markets did not expand coverage to new customers or new risks. In emerging economies across Asia, Eastern Europe, Latin America, and the Middle East and Africa, personal lines market growth in the 2022–23 period lagged behind GDP by five percentage points, and average 2023 relevance remained below 0.5 percent of GDP—just a third of the 1.5 percent in developed economies. Some markets experienced growth in relevance, though: premiums in Malaysia, South Africa, and Thailand outpaced GDP growth by more than two percentage points. Similarly, in Mexico and Chile, for example, auto premiums grew faster than rates by more than 12 percentage points in 2023. Finally, growth in product lines diverged. In mature markets, growth was primarily fueled by auto and home. Yet accident and liabilities grew faster than auto and home in some regions, such as accident in Latin America and liabilities in emerging Asia (Exhibit 1). In emerging economies across Asia, Eastern Europe, Latin America, and the Middle East and Africa, personal lines market growth in the 2022–23 period lagged behind GDP by five percentage points. 5 Throughout this report, North America consists of Canada and the United States; developed Asia consists of Australia, Hong Kong SAR, Japan, New Zealand, Singapore, South Korea, and Taiwan China; Western Europe consists of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom; Latin America consists of Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Trinidad and Tobago; the Middle East and Africa consists of Bahrain, Egypt, Iran, Jordan, Kenya, Morocco, Nigeria, Saudi Arabia, South Africa, Tunisia, Türkiye, and the United Arab Emirates; Eastern Europe consists of Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, and Ukraine; and emerging Asia consists of China, India, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Global Insurance Report 2025: The pursuit of growth 5 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 1 Exhibit 1 of 7 Personal lines growth accelerated in 2023, yet the coverage gap between mature and emerging economies has widened. Global revenues by personal property and casualty (P&C) insurance product and region,¹ gross direct domestic premiums written (GDDPW), $ billion² Difference between 2022–23 growth in 2023 GDDPW Relevance rate (GDDPW as a share premiums and GDP in percentage points (p.p.) X.X% of nominal GDP, 2023) Premium growth vs GDP 7 p.p. Mature Emerging Total North Western Developed Emerging Latin Middle East Eastern Total market America³ Europe Asia Asia America and Africa Europe 344 116 63 124 17 19 23 709 Motor 8.1 –1.2 –0.7 0.3 –15.1 –9.9 –2.7 1.0 Fire and 167 65 19 3 5 6 5 271 property 7.0 1.2 –2.6 –0.3 –16.5 –5.6 4.2 1.8 n/a 6 2 0 1 0 1 10 Liability n/a –1.4 –1.7 3.3 –13.4 –27.5 2.5 –3.8 3 25 37 8 2 3 3 81 Accident –0.7 –2.1 –0.9 2.7 –6.3 –11.3 –16.2 –4.2 n/a 31 10 3 1 1 2 48 Other P&C n/a –1.2 –0.8 2.6 –11.5 –33.9 7.4 –4.1 514 243 130 139 26 34 31 1,118 Total 7.7 –0.7 –1.1 0.5 –14.6 –10.8 –2.6 0.5 1.7% 1.2% 1.3% 0.5% 0.4% 0.3% 0.7% 1.0% Note: Figures may not sum to totals, because of rounding. 1 North America: Canada and US; Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Liechtenstein, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and UK; emerging Asia: China, India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam; developed Asia: Australia, Hong Kong SAR, Japan, New Zealand, Singapore, South Korea, and Taiwan China; Latin America: Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Trinidad and Tobago; Middle East and Africa: Bahrain, Egypt, Iran, Jordan, Kenya, Morocco, Nigeria, South Africa, Tunisia, Türkiye, Saudi Arabia, and UAE; Eastern Europe: Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, and Ukraine. 2 Global 2023 GDP and premiums were calculated assuming fixed 2022 exchange rates (to convert GDP and premiums from local currencies to US dollars) for the purposes of measuring insurance relevance, without any effects from exchange rate fluctuations; we do this for both local insurance premiums and GDP because we are interested in the local share of premiums relative to GDP, which is not affected by currency fluctuations. 3 North American liability and other P&C are classified as commercial lines. Source: Oxford Economics; McKinsey Global Insurance Pools; McKinsey Value Intelligence Platform McKinsey & Company Global Insurance Report 2025: The pursuit of growth 6 Industry profitability should stabilize, shifting the focus to profitable growth Combined ratios deteriorated for most of the industry in the 2022–23 period due to inflation coupled with delays in achieving rate adequacy.6 Nonetheless, combined ratios in 2024 are recovering as inflation normalizes and rate increases take hold, pivoting the industry toward profitable, sustainable growth. Profitability challenges were acute across markets as inflation increased. Net combined ratios grew between 2021 and 2023, most notably in the United Kingdom (where combined ratios7 and inflation increased by 16 percentage points and 17 percent, respectively), the United States (five percentage points and 12 percent, respectively), and Australia (three percentage points and 13 percent, respectively). With inflation slowing through 2023, profitability has shown a more promising trajectory. The average loss ratio in the United States in the first half of 2024 was 11 percentage points lower than in the comparable period a year earlier. Capital markets appear to expect this improvement to sustain, as suggested by personal lines’ stock prices outperforming the broader S&P 500 in the first half of 2024. 8 Insurance affordability: Rising coverage costs may become more widespread While insurance cost in many markets have been stable for the past four years when measured by average premium per policy relative to disposable household income (Exhibit 2), headline rate increases have made insurance feel more expensive for many consumers—especially in the context of price increases for other essentials. And, in some markets, the perception that insurance costs have increased faster than incomes reflects reality: the cost of US home insurance grew from 1.0 percent of household income in 2019 to 1.2 percent in 2023, for example, while a 0.1-percentage-point increase also occurred in Australia home insurance. Three related effects are driving up the cost of coverage in these markets: — Underlying asset prices have risen and increased total insurable value. Median home prices in the United States have increased by 35 percent since 2019, for example, driving up total insurable value while household incomes remained relatively flat. Similarly, housing prices in Australia have increased 35 percent since 2019.9 — Cost of repairs and frequency of damage have risen especially fast in areas increasingly exposed to physical risk. In Florida and California, for example, average home premiums per policy have increased by more than 31 percent since 2019, compared with a 17 percent increase across the United States. Correlatedly, these states experienced significant increases in physical risk, driven by natural disasters (more details in the following section). — Reinsurance costs have risen and terms and conditions have become stricter, making insuring risk more costly for carriers. This is exemplified by the 100 percent increase in US home reinsurance prices between 2018 and 2023, making it more expensive for carriers to offer coverage. While we expect asset prices (and total insurable value) to normalize relative to income, climate change and resulting increases in physical risk will continue to pressure affordability in select markets. This has the potential to expand to other regions. The challenge for the industry is to find ways to continue offering affordable insurance. 6 Assumes combined ratios behave similarly across personal and commercial lines in select markets where combined ratios specific to personal lines are not reported. 7 Referenced changes in net combined ratio in the United Kingdom are between 2021 and 2022. 8 Based on McKinsey analysis of data from FactSet and Insurance Insider US. 9 “Total value of dwellings,” Australian Bureau of Statistics, September 10, 2024. Global Insurance Report 2025: The pursuit of growth 7 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 2 Exhibit 2 of 7 Affordability has remained stable globally, but home premiums as a share of household income increased in the United States and Australia. Average home premiums as a share of average disposable household income, % 2019–23, change,¹ 1.4 percentage points 1.2 0.20 US 0 1.0 Japan 0.10 0.8 Australia –0.05 UK 0.6 –0.05 Spain France 0.4 0 Germany Italy 0.05 0.2 0 0 2019 2020 2021 2022 2023 Average auto premiums as a share of average disposable household income, % 2019–23, change,¹ 1.4 percentage points 1.2 0.05 US –0.05 1.0 France 0 0.8 UK –0.10 Spain 0.6 Japan –0.15 Italy 0.4 –0.10 Australia Germany 0.05 0.2 –0.10 0 2019 2020 2021 2022 2023 Note: 2022 values used as estimates for 2023 in countries for which 2023 policy counts are not yet reported. 1 Rounded to the nearest 0.05 percentage point. Source: Oxford Economics and relevant government publications for each country, accessed June 2024 McKinsey & Company Global Insurance Report 2025: The pursuit of growth 8 Scale wins in auto markets; home presents more granular, geographic opportunities Auto insurance globally rewards scale, enabling top carriers within each market to capture the most growth and profits. That continued in most regions in the period from 2022 to 2023. The top five auto carriers in the United States captured 63 percent of premium growth and 72 percent of pretax income, for example, reaching about 55 percent market share. In Asia, Latin America, and most of Europe, the top five carriers have similarly captured the most growth and profits. Even in the few countries where smaller carriers captured a greater share of premium growth—such as Canada and France—the top five captured the greatest share of income (Exhibit 3). Yet opportunities for new and smaller carriers are emerging; as demographics, economics, distribution channels, and the mobility ecosystem evolve, new players and incumbents may find avenues for growth (for more, see chapter 2, “Trends affecting personal lines”). The homeowners insurance market is more fragmented in some economies. For example, in Germany, carriers outside the top ten captured 42 percent of premium growth and 32 percent of pretax income the past four years. In the United States, carriers outside the largest ten sustained market share of more than 35 percent, although the largest five carriers captured more income. While scale is certainly important when it comes to homeowners insurance, this market presents more opportunities for carriers to differentiate within a specific customer segment. Carriers large and small have been able to capture growth by innovating in risk coverage and focusing on specific geographies. Especially as climates change, smaller, focused carriers can continue to capture growth by way of the historical patterns of many home insurance perils, geographic-specific insights and expertise to underwrite home insurance, and the relationship-driven nature of the business. Opportunities for new and smaller carriers are emerging; as demographics, economics, distribution channels, and the mobility ecosystem evolve, new players and incumbents may find avenues for growth. Global Insurance Report 2025: The pursuit of growth 9 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 3 Exhibit 3 of 7 Auto insurance is a more concentrated market, while home insurance offers greater opportunities for growth and competition. Top 5 carrier share of 2019–23 Top 5 carrier 2023 X.X% Top 5 carrier share of 2019–23 premium growth,¹ % market share, % cumulative, pretax income Region Country Auto Home 63 47 US 72% 100% North 55 48 America 12 45 Canada 86% N/A 60 55 116 66 Colombia N/A² 87% 60 59 Latin Chile 77 49 116% 91% America 83 65 66 47 Mexico 68% 89% 69 43 97 40 Germany 59% 0% 50 39 51 44 Spain 77% 69% 63 44 Europe 21 53 France 149% 67% 38 37 196 84% 85 81% Italy 68 66 94 88% 67 N/A Japan 90 78 104 N/A 85 N/A Asia-Pacific South Korea 89 77 99 N/A 90 N/A China 79 83 65 71 Middle East Israel 57 118% 72 78% Note: Shares labeled greater than 100% indicate that the top 5 carriers captured premium growth or income while industry premium growth or income declined. Shares are labeled N/A if data is unavailable. Shares are labeled as 100% if the top 5 carriers captured income while industry incomes declined. Data includes commercial and personal lines auto and property if data for only personal lines is not reported. 1 Top 5 carriers determined based on average yearly premiums from 2019 to 2023 for each product line. 2 Labeled as N/A because top carriers exhibited negative profitability. Source: A.M. Best Company; Australian Prudential Regulation Authority; China Insurance Yearbook; Dirección General de Seguros y Fondos de Pensiones; General Insurance Association of Japan; Gesamtverband der Versicherer; Infobila; MSA Research; S&P Capital IQ; SNL Global Banking Dataset; South Korea Financial Supervisory Service; Superintendência de Seguros Privados; McKinsey Global Insurance Pools; McKinsey analysis McKinsey & Company Global Insurance Report 2025: The pursuit of growth 10 2 Trends affecting personal lines Emerging mobility models, the increasing frequency and severity of natural disasters, and other disruptions are forcing carriers to rethink their approach to providing coverage. Growing relevance in emerging markets and growing value pools to serve an aging population provide opportunities to capture new growth. Evolved distribution and artificial intelligence may also spur innovation, helping the industry shift toward sustained, profitable growth. New mobility models will force carriers to rethink their approach Innovation is changing both the vehicles on our roads and how they are driven. Advanced driver-assistance systems (ADAS) are already nearly universal, featured in most cars sold across the globe in 2023.10 Though the additional cost of these features increases average severity, ADAS enable carriers to develop new and more personalized methods of risk assessment and pricing (by using more data), to reduce claims frequency (by cocreating solutions with auto manufacturers to reduce accidents), and to innovate products (such as usage-based insurance). In 2023, overall sales of electric vehicles (EVs) grew rapidly, jumping by 35 percent (to nearly 14 million units) globally in 2023 compared with 2022.11 This rapid growth has slowed in 2024. For example, the share of EVs in the United States shrank in Q1 2024 before recovering in the second and third quarters. The EU saw similar declines in the summer of 2024.12 Yet we expect EVs to mature and represent approximately 15 percent of vehicles in operation globally in 2030 and 30 percent by 2035, with the largest growth in China, followed by Europe and the United States. This adoption may increase average claim size in the short term given that, in developed markets, components in EVs cost 70 percent more than those in conventional vehicles.13 Partial automation in vehicles is also expanding: we expect vehicles equipped with initial and partial driving automation capabilities, in which drivers must be available to take the wheel, to represent approximately 35 percent of vehicles in operation by 2030 and more than 50 percent by 2035.14 As the mix of vehicles on roads changes, so do people’s mobility preferences. The market sizes of shared transport (such as ride-hailing) and micromobility (such as e-bicycles) are expected to double by 2030 in developed economies, continuing to evolve risk pools as drivers, modes of transportation, and number of miles driven all shift. We expect this evolution to have significant implications for the structure of personal auto insurance markets. We expect an increasing share of commercial lines as segments such as car sharing or ride hailing continue to grow and as consumers opt for flexible ownership models. We expect further disruption from EVs, which have different frequency and severity profiles. Last, the evolution of ADAS will also open up new opportunities regarding risk assessment and behavior modification. These trends will create a new 10 Molly Boigon, “Report: Some ADAS features are in more than 90% of new vehicles,” Automotive News, October 2, 2024. 11 “Global EV outlook 2024: Trends in electric cars,” International Energy Agency, April 2024. 12 “U.S. EV sales hit another record in Q3 2024: ‘10% share within reach,’” Inside EVs, October 13, 2024; “U.S. share of electric and hybrid vehicle sales increased in the second quarter of 2024,” US Energy Information Administration, August 26, 2024. 13 Based on 2023 average cost per vehicle (estimated for each component within a vehicle) in developed markets of Europe, Japan, North America, and South Korea. Other regions (for example, China) typically have lower cost differences between EVs and conventional vehicles, and such cost differences are expected to decrease going forward. 14 Ibid. Global Insurance Report 2025: The pursuit of growth 11 market distinct from the traditional auto market that will require new underwriting capabilities and product adaptations, provide additional data, decrease claims frequency while increasing severity, and evolve current distribution channels. In addition, the line between commercial and personal insurance will blur as ride sharing and the use of AVs grow. Ride sharing transfers responsibility from individual drivers to professional organizations, and AVs will shift responsibility from humans to machines. Carriers traditionally insuring personal lines will face a challenge: expanding to commercial lines and underwriting larger organizations, OEMs, and system providers. Finally, at some point, premiums for conventional auto personal lines coverage may decline as fully automated vehicles are adopted. This timeline is unclear, given significant factors such as regulatory considerations, technical challenges, and user reluctance. These shifts create both opportunities and imperatives for change. Actions carriers can take include forming partnerships with OEMs and EV providers to access a broader client base and data, innovating EV and AV risk assessment and coverage, and developing products and ecosystems specific to new vehicles. We expect an increasing share of commercial lines as segments such as car sharing or ride hailing continue to grow and as consumers opt for flexible ownership models. Global Insurance Report 2025: The pursuit of growth 12 Investing in new capabilities that can help in managing natural disasters Natural disasters and associated economic losses15 have significantly increased in the past two decades as climate patterns have shifted.16 Volatility from natural disasters has also increased: for instance, the standard deviation of economic losses nearly doubled in Europe and the Americas between the period from 2000 to 2015 and the period from 2016 to 2023. Together, these shifts have made prediction and pricing increasingly difficult. Coverage of losses continues to be insufficient. From 2016 to 2023, nearly 70 percent of global losses from natural disasters were not insured, equaling up to about $260 billion in uninsured losses in a given year (Exhibit 4).17 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 4 Exhibit 4 of 7 Globally, natural disasters and their associated economic losses have risen 10 and 36 percent, respectively. 2000–15 Disaster events and losses 2016–23 Increasing Decreasing Region Average yearly Difference, Average yearly Difference, Average yearly share natural disaster % natural disaster % of insured losses, % events,¹ number economic losses, total economic losses, $ billion 2016–23 56 100 US 52 64 55 85 164 Americas 74 10 21 97 22 (Non-US) 67 41 112 44 EMEA 12 51 26 125 66 146 116 APAC 3 4 14 151 112 387 281 Global 10 36 34 427 383 Note: Losses adjusted for inflation (in 2023 dollars). 1 An event must meet at least one of the following criteria to be classified as a natural disaster in Aon’s Catastrophe Insight Database: economic loss of $50 million, insured loss of $25 million, 10 fatalities, 50 injured, 2,000 structures damaged or claims filed. Source: Aon Climate and Catastrophe Insight McKinsey & Company 15 While data outlining the direct number of economic losses associated with personal lines is not available, we expect personal lines—and especially homeowners insurance—to behave consistent with the market. 16 2024 climate and catastrophe insight, Aon, 2024. An event must meet at least one of the following criteria to be classified as a natural disaster in Aon’s Catastrophe Insight Database: economic loss of $50 million or greater; insured loss of $25 million or greater; fatalities of ten or more people; injuries of 50 or more people; or 2,000 or more structures damaged or claims filed. 17 Losses adjusted for inflation (in 2023 dollars). Global Insurance Report 2025: The pursuit of growth 13 While this was an improvement compared with the 75 percent of uninsured losses from 2000 to 2015, it seems clear the industry is not providing sufficient levels of risk transfer under current models. Specific regions face acute challenges. For instance, the five-year average cost associated with billion- dollar natural disasters increased in Florida from $1 billion in 200018 to nearly $26 billion in 2023, compared with a fivefold increase across the United States (from $24 billion to $123 billion).19 A similar increase in average losses from natural disasters—mainly floods—was observed in northern Italy,20 relative to the rest of the country. Risks from natural disasters will likely keep rising, increasing the protection gap. For instance, the first half of 2024 was the second costliest on record for insured losses from severe thunderstorms and was 87 percent higher than the ten-year average.21 Increases of up to 20 percent in average annual losses are expected in the United States during the next decade, with the effect of natural disasters predicted to jump more than tenfold in specific counties (for example, some within Idaho, New York, and Washington).22 Across regions, the industry response is taking shape, including carriers and public–private models. Some carriers have increased underwriting sophistication by partnering with other players and improving data and analytics capabilities to understand risks more granularly. Some carriers have directly supported policyholders through risk-mitigating efforts (such as home walk-throughs and in-home monitoring devices to identify and reduce vulnerabilities), while others have adjusted products and tightened terms and conditions to reflect changing risks and affordability needs (such as by offering separate roof coverage). As a last resort, some carriers have refocused their geographic appetite. Additionally, countries are debating and experimenting with different public–private models to address the natural disaster challenge. In some countries, mandatory models have emerged—for example, government- offered flood insurance is a requirement in France. In other countries, such as the United States, flood insurance is optional for owners without a mortgage. Carriers may look to tailor their approach to public– private models depending on the country and business line in which they operate. From 2016 to 2023, nearly 70 percent of global losses from natural disasters were not insured, equaling up to about $260 billion of uninsured losses in a given year. 18 Florida did not experience billion-dollar natural disasters in select years. 19 “United States billion-dollar disaster events 1980-2024 (CPI-adjusted),” National Centers for Environmental Information, accessed October 17, 2024. 20 Includes Emilia-Romagna, Friuli-Venezia Giulia, Lombardia, Trentino-Alto Adige, and Veneto. 21 “Severe thunderstorms drive insured losses to USD 60 billion in first half of 2024, Swiss Re Institute estimates,” Swiss Re, August 7, 2024. 22 Based on McKinsey Climate Analytics. Global Insurance Report 2025: The pursuit of growth 14 Select emerging markets are on the verge of expanding relevance, creating opportunities for granular growth Personal lines’ relevance is correlated with GDP per capita: as countries develop and economics improve, customers are more willing and have greater means to purchase insurance, which creates opportunities to increase relevance. Markets with GDP per capita of less than $10,000 typically have relevance levels below 0.5 percent, while mature markets with GDP per capita greater than $30,000 usually reach relevance levels above 1.0 percent. Countries with GDP per capita of $10,000 to $30,000 are in a potential “high growth” region—that is, they are poised for increases in relevance, driven by growth in GDP per capita (Exhibit 5).23 Notable countries in the high-growth zone that present opportunities for local and international carriers include Brazil, Chile, Malaysia, Mexico, Poland, and Türkiye. Similarly, China is within the high-growth zone because its population makes it one of the largest personal lines markets (worth about $110 billion) and it has a growing GDP per capita.24 Other attractive opportunities consist of markets currently outside the high-growth zone but with rapidly accelerating GDP per capita. These include Colombia, Indonesia, and the Philippines, where GDP per capita is expected to grow by 3 percent or more annually through 2033. While this alone may not push these economies into the high-growth zone, their timeline could rapidly accelerate through other evolving factors, such as growth in insurance education, population, and external investment. It is important to note that, even if relevance remains constant, countries with large populations and rapid GDP growth also present growth opportunities. India has, for instance, the potential to be a major market, given favorable demographics and economics, higher literacy rates, and nearly $30 billion of yearly foreign direct investment. Notable countries in the high-growth zone that present opportunities for local and international carriers include Brazil, Chile, Malaysia, Mexico, Poland, and Türkiye. 23 Based on examples from France, the United Kingdom, and the United States. Other factors—such as political stability and level of bancarization—also affect market maturity and insurance’s relevance. Underlying data is from the US Census Bureau International Database and from the Oxford Economics Country Economic Forecasts Brochure. 24 China GDP based on “GDP per capita, current prices,” International Monetary Fund, accessed October 11, 2024. Global Insurance Report 2025: The pursuit of growth 15 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 5 Exhibit 5 of 7 Select emerging markets are on the verge of expanding relevance, creating opportunities for granular growth. 2023 personal lines premium-to-GDP ratio relative to GDP per capita,1 Projected 2023–33 real GDP per capita growth² 4% Not available Size of bubble relative to personal lines premiums 3.0 Longer-term growth potential High-growth region Relevant or mature South Korea 2.5 2023 premium-to- GDP relevance, % 2.0 Canada France United States 1.5 Denmark South Spain Africa Germany Austria Switzerland Italy Australia Slovenia Belgium Morocco Japan New Zealand Colombia 1.0 United Bulgaria Poland Kingdom Taiwan China Portugal Chile Israel Hungary China Greece Slovakia 0.5 Türkiye Brazil Malaysia Vietnam Ukraine Romania India Peru Mexico Philippines Indonesia 1,000 Egypt 10,000 30,000 100,000 2023 GDP per capita (log scale) 1 Countries with personal line premiums of less than $0.5 billion excluded from graph. 2 Based on market consensus and US Census Bureau real GDP projections. Source: Oxford Economics; US Census Bureau International Database McKinsey & Company Global Insurance Report 2025: The pursuit of growth 16 Demographic changes present opportunities for innovation and growth Two major demographic-related shifts present opportunities for innovation and growth. First, the share of the world’s population aged 65 or older is projected to grow from 12 percent in 2023 to 15 percent by 2033, reaching more than 20 percent in North America, Western Europe, developed Asia, and China (Exhibit 6).25 Older customers tend to present a different risk profile and insurance needs. For auto insurance, older customers tend to have lower accident frequency but higher accident severity and medical claim payouts (for instance, the fatality rate of older drivers in the United States is 1.5 to 4.0 times higher than that of younger drivers).26 Shifts in risk exposure as populations age present an opportunity for carriers to master product enhancements (for example, personal accident, in-home assistance, or multiyear policies, given the older population’s decreased use of cars and lower likelihood to switch homes), risk pricing and underwriting (such as advanced segmentation), and distribution to cater to the aging population. The second shift relates to the purchasing habits of consumers. In mature markets, major purchases of homes and autos are occurring later in life: in Germany and the United States, for example, the age of first-time homebuyers has increased by about three years in the past decade. As consumers’ life journeys increasingly vary, carriers have an opportunity to evolve brand loyalty by providing a broad set of personalized solutions (through both proprietary channels and brokerage) across a customer’s lifetime— Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 6 Exhibit 6 of 7 By 2033, the proportion of population aged 65 or older is projected to exceed 20 percent in developed markets and reach 15 percent globally. Share of total population aged ≥65, % Share of total population aged ≥65, % Region¹ 2023 2033E Country (not exhaustive) 2023 2033E North America 18 21 United States 18 21 Western Europe 21 25 Canada 21 25 Emerging Asia 10 14 Italy 23 28 Developed Asia 24 28 Spain 21 26 Latin America and the Caribbean 10 13 Germany 23 29 Middle East and Africa 6 7 Switzerland 20 25 World 12 15 France 22 25 United Kingdom 19 22 China 14 20 Japan 29 32 South Korea 18 27 1 North America: Canada and US; Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Liechtenstein, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and UK; emerging Asia: China, India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam; developed Asia: Australia, Hong Kong SAR, Japan, New Zealand, Singapore, South Korea, and Taiwan China; Latin America and the Caribbean: Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Trinidad and Tobago; Middle East and Africa: Bahrain, Egypt, Iran, Jordan, Kenya, Morocco, Nigeria, South Africa, Tunisia, Türkiye, Saudi Arabia, and UAE; Eastern Europe: Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, and Ukraine. Source: Oxford Economics McKinsey & Company 25 “International Database: Population by age,” US Census Bureau, accessed October 11, 2024. 26 Based on a July 2024 article from the Insurance Institute for Highway Safety (IIHS) measuring the number of passenger vehicle driver fatalities per 1,000 drivers involved in police-reported crashes by driver age and comparing ages 65 and older to ages 50 and younger. See “Older drivers,” IIHS, updated July 2024. Global Insurance Report 2025: The pursuit of growth 17 such as beginning with renters’ insurance tailored to young adults; then offering car, accident, and travel insurance year over year; and finally, proposing home insurance to middle-aged consumers. Similarly, select emerging markets present granular opportunities for carriers to grow and expand personal lines insurance beyond auto and home by tailoring it to specific needs. This growth is already under way: liability, accident, and other P&C insurance grew 11 percent, 9 percent, and 9 percent, respectively, in emerging markets between 2022 and 2023—compared with 4 percent growth in mature markets. A similar trend holds true within individual countries such as Egypt, India, and Mexico. Distribution is changing to get closer to the customer as players embed the purchase of insurance into broader purchases of goods and services Distribution channels keep evolving. New carriers and incumbents alike are leveraging customers’ trust, time, and proximity to sell insurance, as well as providing seamless experiences when and how customers need them. Embedded insurance—sold at the point of sale for a product or service—is not a new development: for years, electronics retailers have bundled warranty coverage and banks have distributed life products. Yet embedded insurance is evolving across industries, such as telcos and supermarkets, through the emergence of players that are building ecosystems of services and products that include insurance linked to original products. Embedded insurance has advanced most quickly in Asia, where a supportive regulatory environment, faster adoption of EVs and AVs, and unique platform dynamics have facilitated a robust growth landscape for carriers. We estimate Asia’s nonlife embedded insurance market will be worth about $170 billion by 2030.27 Some players are expanding beyond embedded insurance to provide a full range of solutions. This progression is like that of bancassurance, which has been among the fastest-growing channels globally and now represents about 9 percent of nonlife premiums in Europe and as much as 25 percent of the market in Latin American countries such as Chile.28 Bancassurance’s progression started with life insurance linked to credit, expanded to home insurance linked to mortgages, and now includes a comprehensive suite of stand- alone insurance products coupled with banking services. Similarly, retailers in Europe and Latin America are using their large physical footprints, frequent customer interactions, and new customer data to inform pricing and distribute a full suite of products coupled with traditional retail services. In addition to expanding products, players including banks, retailers, and traditional carriers are turning to digital channels as customers grow accustomed to purchasing online. In Europe, this has primarily taken place through bancassurance, where nonlife digital channels doubled to 28 percent in 2022 compared with 14 percent in 2017. In Australia and the United States, digital sales have expanded beyond banks (for example, reaching 31 percent of premiums in Australia in 2023, compared with 16 percent in 2019). 27 “Why Asian insurers are ideally positioned for embedded market gains,” McKinsey, July 17, 2023. 28 Based on data from McKinsey bancassurance forums held in Latin America on August 31, 2023, and in Europe on November 15–16, 2023. Global Insurance Report 2025: The pursuit of growth 18 These developments all bring insurance closer to the customer, when and how they need it, in a trusted environment. While distribution will not change overnight, competition is expected to intensify—with implications for carriers. First, the role of the traditional agent will need to evolve to provide more value to customers to maintain relevance in most segments, particularly in traditional auto and home lines. This includes offering more-comprehensive risk-based assessments on existing home insurance coverage gaps, education on technologies to aid risk prevention (such as connected devices), and more-comprehensive domain expertise (such as cybersecurity). Further, cracking the code with the right partnerships (for instance, distribution partnerships with retailers or OEMs) will become critical for carriers to navigate nontraditional channels. These partnerships could create winner-takes-most environments with products such as EVs while simultaneously allowing carriers to access granular data and a wider customer base. Gen AI is fueling wholesale reimagination of the value chain Advanced data and analytics capabilities in support of pricing sophistication and underwriting excellence are becoming table stakes for leading carriers across the globe. Carriers are doubling down on gen AI to reimagine the value chain end to end, developing lean organizations, establishing effective operations, and offering personalized experiences to customers. In sales and distribution, for example, gen AI–powered copilots for agents and other salespeople can provide real-time, step-by-step recommendations to agents based on a customer’s unique details. In pricing and underwriting, gen AI can extract insights from rate filings to inform new class plan features or even enable further granularity in segmentation from existing models (for example, personalizing offerings by individual, or a so-called “segmentation of one”). In claims, gen AI can improve accuracy of decision making by providing a “second set of eyes” and supporting adjusters in prioritizing workflows or significantly reducing the time typically spent reviewing documents. With customer service, gen AI– powered chatbots can help provide real-time coaching to help representatives answer policy questions, reducing call handling time. As carriers advance gen AI capabilities, the race for talent and data will intensify, given cross-industry competition for data scientists and engineers. Winning this race has direct implications for carriers in the near term, given that opportunities are available for capture. Global Insurance Report 2025: The pursuit of growth 19 3 Next steps: Three archetypes to find and enable growth Individual carriers are already making deliberate choices and shifting their business models in response to the industry’s performance. While strategies will vary by region, we see three major carrier archetypes emerging, each with clear-cut areas of distinctiveness and short-term versus long-term strategies. Core, at-scale players concentrated on insuring traditional coverage Leading carriers will look to use their national scale, broad distribution network, and brand strength. As competition increases (through widening distribution channels, technological innovation, and more), these carriers will be required to ensure best-in-class technical excellence. Rewards will flow to those focusing on underwriting excellence to quickly adapt to underlying shifts in risks (such as making swift rate and nonrate actions and informing agile shifts in underwriting strategies through claims feedback loops) and offering highly productive customer service (such as by increasing automation in claims processes) while preserving a human touch where it is most valued. These carriers will still adapt products and distribution in response to the evolving market landscape (for instance, mobility trends and natural disasters) (Exhibit 7a). Innovators expanding coverage through specialized products These carriers will evolve specialized products sold through newer channels and insure new risks that remain unmet by the industry (for example, EVs or home exposures in high-risk areas). Although it is complicated, those who develop specialized products and insure new risks—through careful risk selection coupled with the right capabilities—may capitalize on industry needs and unlock profitable coverage. This will require a clearly defined strategy that experiments and learns in the short term—through product adaptations (such as usage-based insurance or white-labeling) and channel adaptations (such as an embedded and evolved role of agents)—and that scales to holistic coverage in the long term through comprehensive solutions and evolved channel coverage (partnership-based, proprietary, and more) (Exhibit 7b). Targeted players differentiated through marketing, distribution, and servicing These carriers will lean on their strong brand and networks in traditional product segments to address customer needs and offer best-in-class customer service within a specific geography, through a specific channel, or to a specific segment. Doing so requires a superior, targeted value proposition. In the short term, this implies tailoring existing products (for instance, microinsurance for a specific region or customer segment), forming partnerships and entering new channels (such as retail or digital), and investing in specific data and talent to strengthen underwriting. In the long term, it implies pursuing more-complex product sets across a customer’s lifetime, establishing a multichannel approach tailored to a specific geography, improving underwriting data, and offering best-in-class claims services as a differentiator (Exhibit 7c). These three archetypes are not mutually exclusive—in fact, future winners in the market will likely be those that leverage their existing position in the core to expand into adjacencies while strategically selecting niches in which to innovate. Doing so requires a comprehensive growth system. Global Insurance Report 2025: The pursuit of growth 20 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 7a Exhibit 7a of 7 Where to go from here to enable growth: Three main archetypes will likely emerge in the industry. Required area Not a required area of distinctiveness of distinctiveness Strategic intent Core, at-scale company Targeted player Innovator that expands concentrated on insuring differentiated through coverage through traditional coverage marketing, distribution, specialized products and servicing Brand and marketing Product development Distribution Risk assessment and underwriting Claims and customer servicing Productivity, technology, and operations A. Details for core, at-scale companies Brand and marketing Leverage and double down on an at-scale, recognized brand Product development Experiment with product adaptations (eg, multiyear policies) and refine products as landscape evolves (mobility shifts, etc) Distribution Strengthen existing channels, consider partnerships (eg, retail), and adapt channel strategy as the landscape evolves (eg, M&A) Risk assessment and Ensure best-in-class underwriting excellence to adapt to shifts in risks underwriting (using granular geographic risk data to assess property risk, etc) Claims and customer Ensure highly efficient operations by informing agile shifts through claims servicing feedback loop and implementing risk prevention and automation Productivity, technology, Strategically rethink the entirety of the insurance value chain, leveraging and operations advanced data and analytics and AI and generative AI (gen AI); form strategic partnerships (eg, with emerging insurtechs with gen AI solutions); and build culture and processes that allow for quick deployment of future AI and gen AI solutions McKinsey & Company Global Insurance Report 2025: The pursuit of growth 21 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 7b Exhibit 7b of 7 Where to go from here to enable growth: Three main archetypes will likely emerge in the industry. Required area Not a required area of distinctiveness of distinctiveness Strategic intent Core, at-scale player Targeted player Innovator that expands concentrated on insuring differentiated through coverage through traditional coverage marketing, distribution, specialized products and servicing Brand and marketing Product development Distribution Risk assessment and underwriting Claims and customer servicing Productivity, technology, and operations B. Details for innovators Brand and marketing Clearly define and evolve brand over time Product development Define focus area and experiment with new products and features (eg, usage-based, bundling) Double down on the focus area through holistic solutions (eg, comprehensive mobility coverage) Distribution Experiment with new distribution (eg, embedded) while evolving role of agents and forming ecosystems (eg, auto insurance, purchase, and maintenance) Risk assessment and Invest in data to price new risks (eg, ADAS¹ for auto, geospatial analysis for underwriting climate risk) Rethink risk assessment entirely (eg, embed with other purchase experiences) Claims and customer Emphasize agile, rapid claims feedback loop by collecting and learning from servicing new claims data (eg, latest climate risks, electric- and autonomous-vehicle data) Productivity, technology, Strategically rethink the entirety of the insurance value chain, leveraging and operations advanced data and analytics and AI and generative AI (gen AI); form strategic partnerships (eg, with emerging insurtechs with gen AI solutions); and build culture and processes that allow for quick deployment of future AI and gen AI solutions 1 Advanced driver-assistance system. McKinsey & Company Global Insurance Report 2025: The pursuit of growth 22 Web 2024 MCK242181 GIR 2024 PC Personal Exhibit 7c Exhibit 7c of 7 Where to go from here to enable growth: Three main archetypes will likely emerge in the industry. Required area Not a required area of distinctiveness of distinctiveness Strategic intent Core, at-scale player Targeted player Innovator that expands concentrated on insuring differentiated through coverage through traditional coverage marketing, distribution, specialized products and servicing Brand and marketing Product development Distribution Risk assessment and underwriting Claims and customer servicing Productivity, technology, and operations C. Details for regional companies Brand and marketing Develop a well-recognized brand through clear value proposition, marketing, and advertising Product development Tailor existing products to region, segment, or channel (eg, microinsurance) Rethink coverage through embedded products and more-complex adaptations (eg, on-and-off coverage) across a customer’s entire lifetime Distribution Form partnerships in or develop new channels specific to customer or region, (eg, bancassurance) Double down on access to proprietary insights Risk assessment and Invest in data and expertise specific to region, customer segment, or underwriting channel (eg, data on population aged 65 or older, electric- or autonomous- vehicle projections in a specific market) Claims and customer Offer best-in-class customer experience with claims servicing as a servicing differentiator (eg, white glove service for high-net-worth segment) Productivity, technology, Strategically rethink the entirety of the insurance value chain, leveraging and operations advanced data and analytics and AI and generative AI (gen AI); form strate- gic partnerships (eg, with emerging insurtechs with gen AI solutions); and build culture and processes that allow for quick deployment of future AI and gen AI solutions McKinsey & Company Global Insurance Report 2025: The pursuit of growth 23 Conclusion To identify, plan for, and make the most of opportunities in the evolving market landscape, carriers can implement systems that approach growth comprehensively (through consistent tools, language, and tracking and reporting), promote unconstrained ideation (centered on customer needs and new knowledge and expertise), build long-term capabilities (such as by integrating the growth system approach into existing client-facing and internal processes), instill value assurance (through a single source of truth, as well as through transparency and rigor in planning and performance), and shift leadership mindsets and culture (for example, by creating a “business builder” mindset). We believe that the industry’s outlook is positive and that, going forward, players will seek to innovate and expand coverage in the pursuit of profitable growth, increasing the industry’s relevance as a result. Alex Kimura is a partner in McKinsey’s Singapore office; Deniz Cultu is a partner in the Minneapolis office; Elixabete Larrea Tamayo is a senior partner in the Boston office, where Grier Tumas Dienstag is a partner; José Miguel Novo Sánchez is a partner in the Madrid office, of which Bernat Serra Montolí is an alumnus; Francesco Martini is a consultant in the Chicago office; and Sebastian Kohls is an associate partner in the New York office. The authors wish to thank Amy Enrione, Angat Sandhu, Ani Kelkar, Christopher Craddock, Cristina Martos, Daniel Garza, Doug McElhaney, Eleonora Sharef, Jaime Morales, Nataliya Fedorenko, Salomon Spak, Shitij Gupta, Sirus Ramezani, Stefan Pöhler, Suneet Jain, and Zach Bruick for their contributions to this report. Global Insurance Report 2025: The pursuit of growth 24 Global Insurance Report 2025: Searching for profitable growth in commercial lines Profitable growth is increasingly hard to find. Commercial property and casualty insurers need to be deliberate about where and how they compete. This article is a collaborative effort by Holger Wilms, James Polyblank, Shannon Varney, and Susanne Ebert, with Asim Bokhari, Nick Diganci, Jeff Danielson, and Stuti Khaitan, representing views from McKinsey’s Insurance Practice. Table of Introduction27 Finding growth beyond rate increases 28 contents Is demand for commercial insurance growing? Not fast enough, as protection gaps widen. 30 Profitability can be elusive 31 The challenge: Capturing and sustaining profitable growth 33 How insurers play drives performance more than where they play 34 Four key drivers of superior commercial P&C performance 36 Leaders have clear strategies to capture profitable growth 36 Insurers must have distinctive capabilities where  36 they choose to compete Models requiring limited underwriting involvement continue to grow 37 Investors want clear growth strategies from insurers 37 Top performers invest in modernizing underwriting 38 Generative AI has wide applicability  39 Competition for talent is intensifying 39 Insurers must navigate a changing distribution landscape 39 Insurer–broker relations will become even more important 40 Insurers should manage the quality of their distribution networks 40 Digital connectivity is transforming the purchase of insurance  40 Leaders manage administration expenses through 41 operational efficiencies Declines in expense ratio may not be enough 41 Foundational capabilities must be in place to enable efficiencies 42 Conclusion43 Introduction In an industry that revolves around reducing uncertainty for customers, commercial P&C insurers are themselves confronting macroeconomic uncertainty across multiple fronts. — Inflation has remained stickier than expected in many economies, and in regions where it persists, customers are likely to retain more risk than usual, creating pressure on growth. — While interest rates are beginning to decline in some markets, uncertainty remains as central banks revise timetables for monetary easing,1 directly affecting insurers’ ability to project investment returns. — Consumer confidence is shaky even though the economic growth cycle appears to have bottomed out across most economies, including those most relevant for the commercial lines industry.2 — Geopolitical instability and the associated possibilities of supply chain disruptions3 are among the top perceived threats to global growth and can have wide-ranging implications for commercial insurers in the coming years, especially in certain lines, such as marine cargo and business interruption. — Trade patterns are shifting, with signs of protectionism on the horizon: the number of new global trade restrictions has steadily increased, from about 650 in 2017 to more than 3,000 in 2023.4 This macroeconomic environment calls for cautious optimism about the prospect of continued economic expansion, balanced by the potential for periods of slow to no growth, given the market’s turbulence. But commercial P&C also faces other headwinds.5 Climate risks are increasing, especially as a result of severe convective storms: last year was the warmest on record, and scientists estimate there is a one-in- three chance that 2024 will be even hotter.6 Additionally, corporate legal defense spending on class action lawsuits in the United States increased by 8 percent in 2022 and by 5 percent in 2021.7 This leads to higher claims costs and ultimately has a negative impact on affordability across the industry. While turbulence in the market is expected to prevail in coming years, insurers cannot rely on continually rising premiums, or a continuation of today’s hard cycle, to drive growth. That’s why it’s a critical time for them to reassess how they will capture growth profitably as they navigate this shifting landscape. 1 Global Economics Intelligence: Global Summary Report, McKinsey, June 2024. 2 Ibid. 3 “Economic conditions outlook, June 2024,” McKinsey, June 2024. 4 “Geopolitics and the geometry of global trade,” McKinsey Global Institute, January 17, 2024. 5 Global Insurance Report 2023: Expanding commercial P&C’s market relevance, McKinsey, February 16, 2023. 6 “2023 was the world’s warmest year on record, by far,” National Oceanic and Atmospheric Administration, January 12, 2024. 7 “Social inflation remains a thorn in the side of casualty insurers,” AM Best, May 2024. Global Insurance Report 2025: The pursuit of growth 27 1 Finding growth beyond rate increases Global commercial property and casualty (P&C) insurance lines continued to deliver strong growth despite more recent evidence of softening conditions. Premiums increased by an average of 8 percent annually during the past five years, while the average combined ratio for the industry trended downward to an estimated 91 percent in 2023 (Exhibit 1).8 Web MCK242180 GIR 2024 PC Commercial Exhibit 1 Exhibit 1 of 6 Despite recent macroeconomic turbulence, commercial line premiums continue to grow year over year. Global primary commercial lines property and casualty (P&C) insurance premiums, $ billion1 Motor xx Global primary commercial Specialty and other2 lines P&C, net combined operating ratio (COR)4 Property 958 Accident and liability3 901 8% p.a.5 822 163 153 746 715 141 4% p.a.5 664 166 131 156 130 121 144 527 132 130 254 89 117 230 205 80 185 170 156 141 361 375 299 333 269 286 218 2012 2018 2019 2020 2021 2022 2023E 101% 101% 99% 102% 94% 91% 91% Soft cycle Hard cycle Note: 2023 premiums based on preliminary estimates. 2023 net COR based on reporte