Joy Agwunobi 

The personal property and casualty (P&C) insurance industry recorded notable growth in 2023, driven largely by rate increases across developed markets. Yet, global consulting firm McKinsey & Company says the real opportunity for insurers now lies in expanding coverage to untapped markets and designing innovative products that reflect the evolving risks of modern life.

The insight, drawn from McKinsey’s newly released Global Insurance Report 2025, offers a deep dive into the personal lines P&C segment, one of three key areas analysed in the comprehensive study. The segment, which accounts for roughly a quarter of global insurance premiums, encompasses everyday protection products such as home, motor, and personal liability insurance.

McKinsey’s analysis highlights both resilience and vulnerability in this critical line of business. It shows that while personal lines insurers remain essential in safeguarding individuals and households against risk, the sector is under increasing pressure from economic volatility, rising repair and reinsurance costs, climate-related disasters, and shifting patterns in mobility and technology.

Industry growth outpaces GDP but relevance lags

According to McKinsey, global personal lines P&C premiums grew by 9.5 percent between 2022 and 2023, reaching $1.1 trillion in total, a performance that outpaced nominal global GDP growth by half a percentage point. Despite this, the report finds that the industry’s overall relevance, measured by gross written premiums as a share of GDP, remains below pre-pandemic levels.

The growth recorded in developed markets, McKinsey notes, was primarily the result of higher pricing rather than increased access or innovation. In other words, insurers achieved revenue gains through rate adjustments, not by reaching new customer segments or introducing new forms of protection.

This pattern, the report warns, risks widening the insurance coverage gap between developed and emerging economies. While mature markets continue to see pricing-driven growth, insurance penetration in many emerging regions including parts of Africa, Asia, and Latin America,remains low, leaving millions exposed to unprotected risks.

Affordability becomes a central concern

One of the most pressing themes in McKinsey’s analysis is insurance affordability. In several regions, particularly the United States, the cost of home insurance has been rising faster than income levels, putting pressure on consumers and threatening to push more households out of the market.

This trend, according to the report, is being driven by several interconnected factors. Rising property values have significantly increased the total “insurable value” of homes, pushing up the cost of coverage. At the same time, repair and reconstruction expenses have surged, fueled by persistent inflation and disruptions in global supply chains. Adding to this pressure, the growing frequency and severity of natural disasters have led to higher claim payouts and rising reinsurance costs, further straining affordability for homeowners.

McKinsey cautions that since many countries face similar underlying risks from climate change to inflationary cost pressures  the wave of rising premiums could soon spread across borders.

Still, the firm views these challenges not as deterrents but as a call to innovate. “We believe these challenges represent a chance for carriers to innovate, expand coverage, and increase the industry’s relevance,” the report says, adding that insurers that pivot strategically could achieve sustained, profitable growth in the coming years.

McKinsey’s report situates today’s P&C dynamics within a landscape of deep structural change. It identifies five major forces reshaping the industry from the transition to electric and autonomous vehicles to the mounting physical and financial toll of climate change.

Among the most disruptive forces reshaping the insurance industry are mobility shifts such as the electrification of transport and the anticipated arrival of autonomous vehicles, developments expected to redefine how auto risks are underwritten and priced.

Climate volatility is another key disruptor, as the increasing frequency and severity of natural disasters continue to widen the gap between insured and uninsured losses.

Economic transitions in emerging markets particularly across Latin America and Asia are also reshaping the landscape, with improved financial systems and growing consumer awareness creating new opportunities for insurance growth.

Demographic shifts are further influencing demand, as aging populations drive interest in new forms of protection and care-related products.

Finally, technological innovation, especially the rise of artificial intelligence (AI) and generative AI (GenAI), is transforming how insurers design products, process claims, distribute policies, and model risk.

McKinsey suggests that these changes, though challenging, will likely expand the range of insurable risks and open opportunities for new entrants and innovators across global and regional markets.

Three Strategic Archetypes Defining the Future

The report also categorises insurers into three emerging strategic archetypes, highlighting how different players are positioning themselves for future growth.

The first group, described as core, at-scale players, comprises large and established insurers that remain focused on traditional personal coverage areas such as auto and home insurance. These companies leverage their national scale, brand strength, and extensive distribution networks to maintain market leadership. However, McKinsey notes that as technological innovation and multi-channel competition intensify, these carriers will need to uphold best-in-class technical excellence to stay competitive.

The second archetype, innovators expanding through specialised products, includes more agile insurers that are venturing into new and underinsured risk areas. This segment focuses on emerging categories such as electric vehicles (EVs), climate-exposed properties, and other evolving risks. Such insurers often use digital platforms and strategic partnerships to deliver embedded or usage-based insurance models, reducing reliance on traditional distribution agents.

Finally, the report identifies targeted, customer-centric players, insurers that operate within specific market niches or geographic regions. These companies differentiate themselves through marketing, distribution, and superior customer experience. Their success, McKinsey explains, depends on a strong understanding of local markets, deep relationships with customers, and a consistent focus on service excellence within their chosen domains.

McKinsey emphasises that these archetypes are not mutually exclusive. Future winners, the firm predicts, will be those that combine the strengths of all three models, maintaining a strong core business while innovating around new risk categories and building distinctive customer relationships.

Outlook

Despite global headwinds from affordability pressures to the growing costs of climate risk,McKinsey remains optimistic about the personal P&C industry’s future. The firm argues that insurers have a historic opportunity to expand their relevance by closing protection gaps, adopting new technologies, and creating products that align with how people live and work today.

The report concludes that the next phase of growth will not come simply from higher rates, but from innovation, inclusion, and adaptability.

“We maintain the industry’s outlook is positive.Going forward, players will seek to innovate and expand coverage in the pursuit of profitable growth,increasing the industry’s relevance as a result,” McKinsey notes

A Global imperative with local implications

For emerging markets like Nigeria, where insurance penetration remains below 1 percent of GDP, McKinsey’s findings carry a clear message: growth in the global P&C sector is shifting from rate-based expansion to inclusion-driven innovation.

According to industry experts, if local insurers can harness technology to design affordable micro and parametric products, extend distribution through digital platforms, and leverage data analytics for customer segmentation, they could not only tap into new revenue streams but also strengthen financial resilience across households and communities.

As McKinsey’s report makes clear, the personal P&C industry stands at a crossroads between the familiar comfort of traditional products and the untapped potential of new risks and markets. The insurers that will thrive are those willing to adapt, innovate, and redefine what “protection” means in an era of constant disruption.