June 13, 2017
The life insurance sector can increase its role in protecting the savings of older and retired people smoothing the decumulation phase and providing care and support for unexpected health shocks, according to a report from a major reinsurer.
The report – Who pays for ageing? from Swiss Re – stated that insurance only had around 5% of the ageing wallet and had been mainly focused on selling annuities and long term life/risk products and was not the “go to” provider for ageing needs despite being well established in a number of markets around the world.
“The insurance portion is primarily annuities, whole life mortality insurance and medical products in some markets. Despite several attempts to create a substantial market demand for traditional long-term care insurance, that solution still remains largely a niche product,” the report stated.
“Insurance can smooth the decumulation phase, helping to protect against outliving one’s savings, unexpected health shocks, care needs and wider family issues.”
It added that unless insurers and reinsurers considered new strategies they were unlikely to gain access to the burgeoning market of older and retired people as growth in annuities was restrained by prolonged low interest rates.
The report stated that insurers and reinsurers needed to continue to provide solutions that mitigated costs and compensated people when things don’t go according to plan but to make it relevant and applicable to an ageing market.
“Insurance can smooth the decumulation phase, helping to protect against outliving one’s savings, unexpected health shocks, care needs and wider family issues,” the report stated adding that “…the life and health industry’s current solutions only partially address these opportunities.”
The report stated the life insurance and reinsurance sectors had primarily focused on the needs of working age individuals where lower health risks make claims less likely and products are more affordable but would have to address the longevity of a wider part of the population who will want to protect their income and health
“By addressing the need for greater resilience of the over 65s, the industry could access an underserved market. While the number of traditional insurance customers (those age 30-49) in the developed world will fall by about 40 million, the over 65 population will grow by 116 million between 2015 and 2050. That’s a 50% increase, and a market ripe for opportunity.”