Global insurers enjoyed more strong premium growth and improved profitability last year, but the gains are cyclical and risk disguising longer-term structural weaknesses, according to Bain & Company.

The consultancy’s annual Global Insurance Report shows premium income reached an estimated $US7.1 trillion ($10.16 trillion) last year, up from $US6.7 trillion ($9.59 trillion) in 2024 and almost double 2010’s $US3.6 trillion.

While property and casualty profitability also improved following premium rate increases and a relatively benign catastrophe year, the industry’s recent momentum is largely temporary rather than evidence of a stronger long-term outlook, Bain says.

“Insurers should enjoy today’s momentum – but they should not mistake it for structural advantage,” report lead author and Bain partner Andrew Schwedel said.

Bain says general insurance affordability has deteriorated following several years of premium increases, particularly in home and motor. In life insurance, fewer consumers have access to financial advisers, despite growing demand for protection products.

Insurance penetration remains low or under pressure in key markets, and insurance value chains are becoming more fragmented.

The report also questions whether the industry’s investments in technology have delivered meaningful productivity gains. But it says AI could do so by supporting advisers, automating administrative tasks and streamlining claims handling.

Although written premium has doubled over the past decade, expense ratios have fallen by only 1 percentage point, suggesting digital investment has yet to generate significant operating leverage.

The report says insurers should increasingly focus on lowering the cost of risk rather than simply transferring it.

Bain estimates technologies including automatic emergency braking in cars, smart home monitoring, residential sprinklers and storm-resilient building techniques could reduce claims costs by 10%-20%.

Mr Schwedel said: “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.”