The long-held belief that “bigger is better” in insurance mergers and acquisitions is rapidly losing ground. New research from ACORD suggests that scale-driven deals, once the dominant rationale for consolidation, are now more likely to destroy value than create it.
Historically, insurers pursued M&A to grow scale, spread fixed costs, and improve operational efficiency. However, ACORD’s data showed that scale-and-scope transactions delivered an average negative return of -13.6%.
“The biggest reason is that achieving scale efficiencies in insurance is harder than it looks,” said Dave Sterner (pictured), senior vice president of research and development at ACORD. “Companies often overestimate the benefits and underestimate the complexity, particularly around integrating systems, data, and operations.”
The latest edition of Carrier Mergers & Acquisitions: Drivers, Implications & Outcomes analyzed nearly 500 global carrier transactions across 84 countries between July 2023 and December 2025. While 68% of deals generated value for shareholders, a significant 32% eroded it, often due to flawed execution rather than flawed strategy.
Insurance carriers frequently operate on fragmented legacy systems and disparate data structures. When combined, Sterner said, these complexities can undermine the very efficiencies scale is meant to deliver. He noted that scale-driven deals tend to “amplify what already exists, including inherent limitations,” rather than transform the business.
Sterner identified two key pressure points in M&A. First is pre-deal alignment: whether the acquisition is clearly tied to the company’s strategic objectives and internal capabilities. Second is post-merger integration, where value can slowly “leak out” through operational disruptions.
“We find that value destruction usually doesn’t happen all at once,” Sterner said. “It leaks out over time. When companies are trying to integrate two different businesses, they can take their eye off day-to-day operations. That can lead to customer service disruptions, slower turnaround times, and similar issues.
“At the same time, there may be multiple initiatives happening across the organization, so M&A is not the only area of focus. Resources get stretched in multiple directions, things slow down, and important details can get missed. So, it really comes down to planning upfront and execution after the deal closes.”
In some cases, poor integration can have long-term consequences. “There are deals where a company acquires a capability, for example, but never fully integrates it. It then becomes a drain on earnings over time, and eventually the company has to spin or run it off,” Sterner said.
“But on the positive side, some organizations make multiple acquisitions and become very good at it. They execute well, they plan effectively, and they build successfully through acquisition. That can have a long-term positive effect on value creation”
Meanwhile, technology has proven to be a double-edged sword in modern M&A. Insurers are accelerating digital transformation and adopting AI-driven tools, which have made integration more complex.
Sterner highlighted the importance of standardized data to remove friction. “It makes it easier to merge platforms, data models, and data warehouses, which are all major parts of the integration process,” he said.
As scale loses favor, insurers are pivoting toward more targeted acquisition strategies.
Diversification has emerged as the most common motivation, accounting for 41% of deals and generating strong returns of +13.7%. Meanwhile, capability-driven acquisitions, though less frequent, produced the highest returns at +27.7%.
This shift reflects a more deliberate approach to M&A, with carriers seeking specific outcomes such as entering new lines of business, acquiring specialized expertise, or balancing risk exposure.
“We’re seeing a lot more intent behind deals,” Sterner said. “Companies are aligning acquisitions much more closely with their long-term strategy.”
Macroeconomic pressures are reinforcing this trend. Rising interest rates, inflation, and geopolitical uncertainty have increased the cost of capital, making insurers more selective. At the same time, industry consolidation has reduced the pool of attractive targets.
The result is fewer deals overall, but significantly larger ones. Average disclosed deal sizes surged to $1.1 billion in 2025, up from roughly $455 million over the previous decade.
While the study focuses on carriers, its implications extend across the insurance distribution chain, particularly for brokers and agents.
On one level, the lessons are directly applicable, said Sterner. Agencies pursuing their own acquisition strategies can benefit from clear strategic alignment, disciplined execution, and careful integration planning.
But perhaps more importantly, brokers and agents are often on the front lines of carrier M&A. For intermediaries, a scale-driven carrier merger may signal potential operational delays, while a capability-focused acquisition could enhance product offerings or service quality.
“They’re usually the first to feel the impact,” Sterner said. “Whether it’s service disruptions, changes in underwriting appetite, or shifts in relationships, those effects show up quickly in the distribution channel.
“It is important for agents and brokers to understand the carrier landscape, because they are often the stakeholders who feel the effects of an acquisition firsthand, sometimes sooner than anyone else. Understanding the motivations behind those deals, and some of the challenges that may come with them, is vitally important for them as well.”
