Global insurance premiums could reach $10trn by 2030, according to management consulting firm Bain & Company’s new report, Insurance 2030: As Risks Mount, Insurers Aim to Augment Protection with Prevention.

The report highlights the evolving risk landscape for insurers, showing risks declining or flatlining in mature areas such as personal auto and mortality, expanding in new areas such as cybercrime and digital assets, and growing more severe in others, including climate change and infectious disease.

Bain & Co says these changes “are propelling the insurance industry to take on a new role, moving from seeking reimbursements for damages to incentivising behaviours to reduce overall risk”.

On the one hand, the firm says road travel is safer than ever, with deaths resulting from motor vehicle accidents in the US declining by about 70% during the past four decades. But on the other, climate change is expected to result in a roughly tenfold increase in economic losses during the next three decades. The report notes that during 2020 alone, the US experienced a record number of wildfires and a record number of storms during hurricane season.

The report reveals that risk and protection are shifting geographically toward countries with faster economic growth. The research shows China will drive well over a quarter of global premium growth through 2030. However, it notes that few multinational insurers can participate in China’s insurance markets, due to intense competition and regulations that favour domestic firms.

“The consequences for an underprotected world with low insurance penetration may be severe, particularly in emerging markets,” commented Andrew Schwedel, who leads Bain & Co’s macro trends group. “Thanks to improved technology and data, insurance companies now have the chance – and perhaps even the duty – to shift the industry’s central purpose from loss reimbursement to loss control over the next decade.”

On the technology side, tools such as automation or the internet of things can be used to directly partner with customers to identify, prevent and mitigate each risk event, says Bain & Co, adding that its research shows that these technologies can also reduce operational costs by as much as 50% through increased efficiency, and reduce claims payouts by up to 20% by mitigating risks.

“Since technology and data analytics allow insurers to make unprecedented gains in understanding, preventing and mitigating risks, they are also likely to increase the pressure on bad risks, resulting in sharply higher prices, outright unavailability of coverage or increased regulation. Insurers see three main consequences of this trend: some risks to property exposures, such as wildfires in California, become too expensive to cover; extreme segmentation and underwriting price discrimination weakens the subsidies at the core of risk pooling; and public pressure intensifies on out-of-favour sectors, such as carbon-intensive energy producers,” says Bain & Co.

The report suggests insurers should be looking at how they interact with customers to prevent and mitigate risks, noting that going beyond risk transfer to risk mitigation and prevention will be critical for insurers, customers and regulators in a riskier world. The report also says insurers should consider how aggressively they explore alternative capital options, pointing out that alternative sources of capital will increasingly become available to insurers, particularly as a form of reinsurance in catastrophe bonds and other lines