Uncover the Opportunities and Challenges in Personal Insurance
Personal Lines Property and Casualty Insurance: A Quarter of Global Premiums
The personal lines property and casualty (P&C) industry holds a significant position, writing about a quarter of the world's insurance premiums. It provides essential protection wherever people are. However, recent global disruptions like the pandemic, rising costs, and natural disasters have also impacted this industry. These challenges present both difficulties and possibilities.In 2022-23, personal lines P&C insurance premiums grew by 9.5 percent to $1.1 trillion, outpacing nominal global GDP by half a percentage point. But its relevance, measured by gross written premiums as a share of nominal GDP, remained below prepandemic levels. The coverage gap between mature and emerging economies also widened.
In developed markets, industry growth was mainly driven by rate increases, suggesting limited expansion into new risks. This indicates the need for carriers to innovate and expand coverage.
The Personal Lines P&C Industry Opportunity
While premiums are growing, insurance affordability has become a significant concern. In some regions like the United States, the rising cost of home coverage has outpaced income growth. This is due to factors such as rising asset prices, increased repair costs, and more frequent damage, especially in high-risk areas. And as many regions face similar issues, rising premiums could spread.We believe these challenges offer an opportunity for carriers to innovate and increase the industry's relevance. For example, in the United States, we expect premiums to grow by 11 percent annually through 2025 as combined ratios decrease by more than eight percentage points.
A Changing Landscape with Challenges and Opportunities
The big trends disrupting the industry are not going away; they may even intensify. Mobility trends, from electric vehicles to autonomous vehicles, are changing auto insurance and have the potential to disrupt the sector. Natural disasters are becoming more frequent, severe, and volatile, expanding the gap between what is protected and what isn't.Some economies in Latin America and Asia have the potential for growth and may enter conditions that allow for greater insurance coverage. The aging global population and evolving customer purchasing patterns present opportunities for carriers to rethink their offerings. And evolving technology, especially AI and generative AI, can further spur innovation.
Three Archetypes to Find and Enable Growth
Individual carriers are making choices and shifting their business models. We see three major carrier archetypes emerging.Core, at-scale players focus on insuring traditional coverage. Leading carriers use their national scale, broad distribution network, and brand strength. As competition increases through various means, they need to ensure technical excellence.
Innovators expand coverage through specialized products. They sell specialized products through newer channels and insure new risks that the industry has not yet addressed, such as EVs or high-risk home exposures.
Targeted players differentiate through marketing, distribution, and servicing. They rely on their strong brand and networks in traditional product segments to meet customer needs and offer excellent customer service in a specific geography, through a specific channel, or to a specific segment.
These archetypes are not mutually exclusive. Future winners will likely leverage their core position to expand into adjacent areas while innovating in specific niches. This requires a comprehensive growth system. Overall, the industry's outlook is positive, and players will seek to innovate and expand coverage for profitable growth.