In 2023, around a quarter of the the insurance industry’s total premiums came from personal P&C insurance as the segment’s gross written premiums (GWP) represented around $1.1 trillion, with growth outpacing nominal global GDP in the period, according to McKinsey & Company.
Analysis by the strategy and management consulting firm reveals that personal P&C insurance premiums growth of 9.5% in 2022-2023 outpaced nominal global GDP by half a percentage point, which is reversal from the 2019-2022 trend when premiums grew 3.2% per year and lagged 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,” says McKinsey.
But despite the recent growth, the analysis shows that the relevance of personal lines insurance is yet to return to pre-pandemic levels. In 2023, personal lines represented 1% of global GDP, compared with 1.2% in 2019. Further, auto and home insurance accounted for over 93% of premium growth in 2023 compared with 88% in the period from 2019 to 2022, which highlights 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,” explains McKinsey.
However, relevance is rising in mature and emerging markets, according to McKinsey, which represents an opportunity for insurers as they 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,” says the firm.
In mature market, the growth witnessed in 2023 was fuelled by rate increases, with analysts noting little expansion into 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 actually lagged behind GDP by five percentage points.
“Finally, growth in product lines diverged. In mature markets, growth was primarily fuelled 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,” says McKinsey.
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