The report indicates the ongoing challenges in managing rising medical costs while addressing growing demand for healthcare services, particularly in areas like mental health and advanced medical technologies.

According to the British-American insurance, brokerage and risk management firm, several factors are driving this sustained increase. These include:

Advancements in medical technology and pharmaceuticals are significantly contributing to rising healthcare expenses. About 69% of insurers globally identified new technologies as the primary factor behind cost increases, reflecting the pressure to develop more efficient and sustainable healthcare solutions.

Public healthcare systems worldwide are under strain due to limited resources and high demand. This has led many individuals to rely on private providers, further escalating costs. The issue is particularly acute in Europe, where 75% of insurers report that the decline in public healthcare systems is a major contributor to rising medical expenses.

Demand for healthcare remains high following the Covid-19 pandemic, with utilization levels continuing to climb. Mental health services are a key area of concern, with insurers predicting a 15% or higher increase in costs per person over the next three years. Claims for mental and behavioral disorders are also the fastest-growing category globally, especially in Europe, where 70% of insurers report significant increases.

Pharmacy costs are expected to grow, driven by advancements in pharmaceuticals. Nearly half of insurers anticipate moderate growth in this area, while 21% predict substantial increases of 15% or more. This trend is particularly evident in the Middle East, Africa, and the Americas, where advancements in pharmaceuticals are seen as a significant cost driver.

Behavioral factors among providers and employees also play a role in rising costs. Overuse or misuse of medical services, often resulting from excessive recommendations by practitioners, is a growing concern. Globally, 72% of insurers identified this issue as a major contributor to increased expenses, up from 59% in 2023.

The growing availability of telehealth and virtual care services has expanded access to healthcare but has also added to overall costs. In 2024, nearly half of insurers globally introduced new telehealth and wellbeing offerings, a significant increase from the previous year.

Cost trends vary across regions

Regionally, medical cost trends vary. In North America, the growth rate is projected to rise from 8.1% in 2024 to 8.7% in 2025. Asia Pacific is expected to see an increase from 11.9% to 12.3%, while the Middle East and Africa will likely experience the most significant growth, from 10.4% to 12.1%. In contrast, trends in Europe and Latin America have begun to cool but are expected to remain elevated in the long term.

Looking ahead, 64% of insurers globally anticipate higher medical costs over the next three years. This projection is even more pronounced in Asia Pacific, where 76% of insurers expect continued increases. Additionally, two-thirds of insurers predict rising demand for healthcare services, with Europe showing the strongest expectations for growth in demand.