Divided societies driving world toward ‘social instability’, risk report says

The growing divide between society’s rich and poor is setting the stage for increased global social instability, according to a new comprehensive risk report. This economic inequality has been identified as the most severe risk facing the world over the next two years, overtaking concerns about misinformation and disinformation that topped the list in previous assessments.

Experts and industry leaders surveyed for the report warn that societal polarization, coupled with rising cost of living pressures, are creating a perfect storm of conditions that could lead to widespread unrest. The findings highlight how economic challenges are increasingly being viewed as catalysts for social and political disruption on a global scale.

“Economic inequality has reached critical levels in many regions, creating social tensions that could erupt into protests, political instability, and in some cases, violence,” said one risk analyst familiar with the report. “We’re seeing warning signs across both developed and emerging economies.”

The report identifies several contributing factors to this growing inequality, including the lingering economic effects of the COVID-19 pandemic, inflation that has outpaced wage growth for many workers, and the uneven distribution of benefits from technological advancement and globalization.

In advanced economies, middle-class households have faced particular pressure as housing costs soar and essential services become less affordable. Meanwhile, in developing regions, limited access to education, healthcare, and financial services has prevented many from escaping poverty despite overall economic growth.

Insurance industry executives note that these trends have significant implications for risk management strategies. Companies increasingly need to consider social instability as a material business risk that could affect operations, supply chains, and market conditions.

“What we’re seeing is a shift in how businesses approach risk assessment,” explained a senior insurance sector executive. “Social and political factors that once might have been considered secondary concerns are now front and center in risk planning.”

The geographical spread of this risk is notable, with inequality-driven instability concerns affecting countries across various economic development levels. Western democracies face challenges from growing populist movements, while emerging economies contend with youth unemployment and limited economic mobility.

Climate change further complicates the picture, as its impacts often disproportionately affect vulnerable populations, potentially exacerbating existing inequalities. The report suggests that climate-related disruptions to agriculture, water resources, and habitable land could intensify social tensions in affected regions.

Digital connectivity plays a dual role in this landscape. While technology can empower marginalized groups and create economic opportunities, it also enables faster organization of protests and can amplify divisive rhetoric that deepens societal polarization.

Policy experts emphasize that addressing these challenges requires coordinated action from governments, businesses, and civil society. Potential interventions include strengthening social safety nets, investing in education and skills development, and ensuring that economic growth benefits are more equitably distributed.

“The window for preventive action is narrowing,” warned a policy researcher cited in the report. “Without meaningful interventions to address inequality, we could see a cascading series of social disruptions with far-reaching economic consequences.”

For the insurance industry specifically, the findings highlight the need for more sophisticated risk modeling that incorporates social factors and their potential business impacts. Some insurers are already developing products designed to help businesses manage risks associated with social instability.

Financial markets have also begun pricing in these risks, with investors increasingly considering social stability factors in their assessment of countries and regions for investment.

The report concludes that while technological innovation, climate action, and economic growth remain important global priorities, addressing inequality and social cohesion must be viewed as equally urgent to ensure sustainable development and political stability.

As one expert summarized: “Economic inequality isn’t just a social justice issue—it’s now recognized as a fundamental risk to global stability and prosperity that requires urgent attention from decision-makers in both public and private sectors.”