Design Highlights
- Traditional insurance products, like term and whole life, are losing market share to indexed universal life (IUL) options, indicating a shift in consumer preference.
- Cyber insurance rates have declined for eight consecutive quarters, raising concerns over the market’s viability and traditional insurers’ adaptability.
- The significant protection gap between economic and insured losses highlights the inadequacies of traditional insurance in addressing modern risks.
- Insurers face challenges from unpredictable loss events, prompting a shift towards alternative solutions like excess and surplus (E&S) lines and AI-driven risk assessment.
- Rising costs and budget constraints are forcing consumers to reconsider traditional coverage, pushing the industry toward innovative and tech-enabled insurance solutions.
Is traditional insurance on its last legs? The numbers suggest that might be the case. In Q1 2025, U.S. commercial insurance rates took a dive, dropping by 1% overall. Property rates plummeted by a staggering 9%.
Globally, the trend wasn’t much better. Composite commercial lines rates fell 3% for the third consecutive quarter, a sharp contrast to the seven-year growth leading up to this. Talk about a plot twist! Meanwhile, casualty lines are the oddball, seeing rate hikes in the U.S., while financial and professional lines globally dropped by 6%. What gives?
Cyber insurance, once the darling of the industry, saw its rates decline for the eighth straight quarter, dropping 4%. At this rate, one might wonder if “cyber” is synonymous with “not worth it.”
Cyber insurance, once a hot commodity, has seen its rates plummet for eight straight quarters—“not worth it” might be the new norm.
And let’s not forget about property rates in Q3 2025—double-digit reductions across the U.S., U.K., Europe, Korea, and Australia. Clearly, something’s brewing, and it’s not just competition. U.S. property rate decline significantly contributed to global property insurance reduction of 6%.
On the life insurance front, things are slightly different. Premiums are expected to grow by 3-7% in 2025 due to lower interest rates. However, traditional term and whole life are losing their share. They grew in absolute numbers but shrank as a portion of the total pie. Notably, life insurance premium growth averaged 3% annually over the past decade.
Indexed universal life (IUL) is the cool kid on the block, while traditional options are left wondering what went wrong. It’s a classic case of survival of the fittest.
Then there’s the protection gap. Global economic losses tower at $2,349 billion, while insured losses barely scratch half that at $944 billion. A whopping 60% gap!
Natural disasters show staggering gaps of 46-85%. And rising premiums? They’re forcing coverage cuts. With health insurance costs projected to rise 8% to 9% in 2025 for employers, the squeeze on coverage budgets is intensifying across all insurance sectors. So much for being protected when disaster strikes.
The industry faces a reality check. Capacity is fragmented as insurers limit exposure amid unpredictable losses.
Pricing is softening, but it’s called a “pricing correction,” not a sign of recovery. And let’s be real—no signs of easing loss severity or frequency in property and casualty.
