McKinsey’s Direct Insurance Forum brings together companies from the insurance industry and beyond. This year, the annual event took place in early June in Barcelona, a burgeoning technology hub. In previous years, attendees primarily had an insurance background, but this year’s guest list included more leaders with backgrounds in engineering and technology, telecommunications, and healthcare, all considering the changes and opportunities in insurance through distinct lenses.
Naturally, the volatility of the macroenvironment is top of mind for every industry—and insurance is no exception—but direct insurers are also experiencing a promising moment of growth. Discussions highlighted pertinent themes in the context of this dichotomy, including this period of growth, the areas that are still experiencing gaps in insurance coverage, and the implications of and opportunities stemming from advancements in AI—namely higher operational efficiency, hyper-personalization, and competitiveness, among others.
After a period of instability, direct insurance seeks growth
After a period of stabilization, economic policy uncertainty rose sharply following the 2024 US election. Despite this pervasive uncertainty across industries, the direct insurance sector demonstrated resilience, achieving growth over the past year and showing recovery in most key global regions—particularly in absolute terms but also growing in shares (an increase of one percentage point across regions between 2023 and 2024), reaching levels of 19 percent in Europe, 17 percent in North America, and 11 percent in core Asia–Pacific markets in nonlife. Price comparison websites (PCWs) played a significant role in this growth. They maintained a stable market share across Europe but have regained momentum in key markets such as Germany since 2022. In Germany, aggregators now account for 25 percent of total direct motor premiums, which is a three-percentage-point increase from 2022.
Leading investors continue to show interest in the direct insurance industry and have adopted a more targeted approach in their investments. Consolidation activities persisted in the PCW segment over the past year as more insurtech investments aimed to integrate technological advancements from disruptors into larger direct insurers.
For direct insurers, profitability challenges have been a prominent issue—although, in 2023, one-third of the top direct insurers in Europe managed to do better than most other insurers in terms of profitable growth. As insurers strive to recover profits and sustain growth momentum, they should explore opportunities to enhance their digital marketing efforts and integrate advanced technologies, such as AI, into their operations.
Insurers are most concerned with customer ownership, persisting insurance gaps, and the implications of AI
Throughout the event, three topics repeatedly came up as top considerations for insurers. The first topic was customer ownership. In general, insurers sought to answer the question of whether the intermediary, the PCW, or the insurer was responsible for attracting and retaining customers and how to go about cross-selling and fostering better relationships with customers. (This consideration naturally holds less importance for direct insurers, which don’t sell through intermediaries.) The second topic was addressing insurance gaps and considering how certain types of insurance can help to cover new and emerging risks. The third—and perhaps most pressing—topic was the use of AI in direct insurance. In the past 20 years, digital technologies have changed the insurance landscape, but the transformation has been slower than many had predicted. For example, a lot of traditional intermediaries are still in place despite significant advancements. In fact, according to McKinsey analysis, only 20 percent of insurers’ gross written premiums come from direct-channel sales, meaning most are sold through traditionally intermediated channels.
Now, AI is changing the game. At the event, insurers pondered whether this advanced technology could accelerate the digital transition and displace traditional insurance intermediaries (agents and brokers) as well as digital intermediaries (such as price comparison websites). AI could offer to the individual customer a new conversational interface that solves problems holistically rather than “just selling an insurance product.”
AI will be a growth accelerator for insurers in the coming years
Beyond asking how AI will transform the industry, insurers also want to know how to use this powerful technology to their advantage. If used effectively, AI can help companies grow by making services more efficient and immediate for the customer. At the same time, AI can lower prices, allowing insurers to improve profitability while keeping a lid on their costs. Over the past few years, insurance has become more expensive mostly because of inflation, which doesn’t indicate real, sustainable growth. AI can help insurers improve their cost position and better address customer requests.
Some insurance start-ups are changing the game by building companies with AI at their core. For example, one European AI–first managing general agent (MGA) sold more than 100,000 policies with only six employees. Such examples show a new dimension to AI as a growth accelerator—and the advent of new innovative and lean MGA players that push forward innovations alongside major incumbents in the market.
Direct insurers and other participants in the broader ecosystem have demonstrated resilience in previous challenging economic environments. They are well positioned to embrace changes driven by AI thanks to their easy access to centralized digital pools of client data. This privileged access can help insurers build more creative, automated, efficient, and effective solutions for customers and help them address future challenges with more confidence.
Rui Neves is a senior partner in McKinsey’s Lisbon office, Simon Kaesler is a senior partner in the Frankfurt office, Ulrike Deetjen is a partner in the Stuttgart office, Cristina Martos is a senior expert in the Barcelona office, Pietro Richelli is an associate partner in the London office, and Shitij Gupta is a senior expert in the Gurugram office.
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