Life insurance will need to evolve from income-replacement and family-oriented protection products to wealth planning and personal-care funding solutions, according to a new paper from Swiss Re.
The reinsurer’s latest Sigma report finds that ageing populations, declining birth rates and the growing concentration of wealth among seniors mean that by 2050, a high-income 65-year-old in advanced markets could expect to live another 23 years.
This longer retirement, combined with a shift away from guaranteed pension returns, means that while many retirees will have substantial savings, their income is not assured – increasing the risk they outlive their nest egg.
“The impact of the silver economy on insurers will accelerate, leading to a new phase of innovation,” said Paul Murray, CEO of Swiss Re Life & Health Reinsurance.
“We are seeing a generation that is larger, living longer, and arriving at retirement wealthier than ever before.
…the industry has an opportunity to redefine its relevance to over-65s…
“With new approaches to product design and delivery, the industry has an opportunity to redefine its relevance to over-65s.”
The report projects that in advanced markets there will be 35% more people aged 65 and over by 2050 compared to 2025.
To meet the demands of the so-called silver economy, insurers will need to shift their focus from the accumulation phase of consumers’ lives to the decumulation phase – when savings are drawn down to fund retirement.
“In the post-retirement decumulation phase, the emphasis shifts to converting savings into income streams, for example through government or employer-funded pensions and annuities,” states the report.
“In addition, there is a need to secure access to personal care services, such as medical treatment and aged-care facilities.”
Health
Cancer protection for older policyholders is another urgent need, according to Swiss Re.
“The median age of cancer diagnosis is 67, yet most critical illness policies expire before retirement, leaving a protection gap just when the risk is highest,” state the report’s authors.
Thailand and Korea are cited as markets where insurers have launched cancer-specific products for seniors, bundled with health or annuity cover.
“These policies ensure older households are not left to bear both the financial and medical burden of cancer alone.”
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