Profitable 2025 Masks Challenges for Global Insurers, Says Bain & Company

Global insurance companies had a strong 2025 with improved profitability and premium growth but new research from Bain & Company warns insurers to “enjoy it while you can.”

“Insurers should enjoy today’s momentum – but they should not mistake it for structural advantage,” Andrew Schwedel, partner in the financial service practice at consulting firm Bain & Company. “The industry’s next phase of value creation will depend on whether insurers can lower the cost of risk, by preventing losses, expanding access to advice and coverage, improving productivity with AI, and using capital more efficiently. Those that do will be better positioned to improve affordability, close protection gaps, and create more durable value.”

A new report from Bain, “Strong Momentum in Insurance, but Structural Challenges Remain” said industry results are “largely cyclical,” and “not indicative of long-term health.” Profits resulted from rate increases and a benign year for catastrophe losses.

Bain identified The industry faces three major challenges: difficulties around affordability and availability, returns from investments in artificial intelligence, and fragmenting value chains.

Property/casualty coverage has become less affordable, and customer loyalty is suffering in some regions. Bain noted the levels of switching providers in the U.S. home and auto insurance market policies has increased in recent years.

“Insurers are accelerating their investments in AI, largely focused on productivity and cost reduction. But while direct written premiums doubled over the past decade, expense ratios dropped by only 1 percentage point,” Bain said. “One possible leading indicator of change may be a nearly 50% decline in hiring since 2022, which has touched all functions.”

In meantime, AI has been thought of as a threat to distribution but, despite this, Bain said investors continue to view distributors favorably vs. carriers. The firm added that a “large profit pool is accreting around technology service providers for core systems, AI, and data,” which will continue to outgrow the insurance industry. This group of companies will likely continue to outgrow the insurance industry as AI augments and then, in some cases, replaces labor and traditional IT assets.

Bain advised that lowering the cost of risk will be critical for insurers seeking to increase relevance and expand the market, and in the report it explored several ways to do so: claims, distribution, operating expenses, and capital.