Life insurance providers need more products and support to take greater account of increasingly aging populations, according to Swiss Re projections.
The reinsurer said insurers need to move from income replacement and family-oriented risk protection products to cancer protection, wealth planning and personal-care funding solutions for older people.
The firm’s latest report showed ageing populations, falling birth rates and the growing concentration of wealth among seniors were transforming the types of financial protection people will need in the future, with 27% of people in advanced markets projected to be over 65 years by 2050.
Swiss Re found that in advanced markets, there will be 35% more individuals aged 65 or older by 2050 compared to 2025. Countries like Japan and South Korea are already at the forefront of ageing, with more than 30% of citizens over 65 today.
An urgent need the report highlighted was cancer protection for older policyholders. The median age of cancer diagnosis is 67, yet most critical illness policies expire before retirement, leaving a protection gap just when the risk becomes highest, it warned.
In Thailand and Korea, companies have launched cancer-specific covers targeted at seniors, bundled with broader health or annuity products.
These policies ensure that older households are not left to bear both the financial and medical burden of cancer alone, the reinsurer added.
Accumulation to decumulation
But the report also found at the same time, wealth was also tilting decisively toward older generations.
In the US, for example, households aged 55 and above hold nearly US$120trn in assets, equal to four times the national GDP, underscoring both their financial strength and the scale of the longevity challenge.
To meet the requirements of the Silver Economy, the report concludes insurers will need to shift their focus from the accumulation phase of consumers’ lifespans to the decumulation phase.
The report explains that in the accumulation phase, typically spanning working years, people grow wealth and protect dependents through products such as term life, whole life and universal life.
These solutions guard against the financial shock of premature death or disability and support younger generations as they build wealth for the future.
In the post-retirement decumulation phase, the emphasis shifts to converting savings into income streams, for example through both government and employer-funded pensions, as well as annuities. In addition, there is a need to secure access to personal care services, such as medical services and nursing homes.
Longer retirement
By 2050, a high-income 65-year-old retiring in advanced markets could expect to live a further 23 years, the reinsurer said.
This longer retirement, combined with a shift away from guaranteed returns on pension products, meant retirees will have substantial savings but no guaranteed income, increasing the risk they outlive their savings.
Various types of annuities exist to cover this increased longevity risk. However, a broader range of options may be needed to alleviate longevity risk. For example, longevity risk-sharing pools can address mortality, longevity, and health risks simultaneously, it added.
Swiss Re said the number of people aged over 80 in Europe would grow by 80% by 2050, while in North America it will surge by more than 120%.
This will strain long-term care services, which already account for more than 2% of GDP in advanced economies. With private nursing home costs in the US averaging US$111,000 per year, mechanisms to fund care will need to be found.
Complex long-term care underwriting
The report highlighted that underwriting long-term care can be complex given the product’s long-duration nature and parameter uncertainty.
Current successful approaches aim at either supplementing state provision or bundling long-term care with critical illness and life covers.
In France, for example, products which supplement government provision have proven popular.
The long-term care market has grown to 1.4 million policyholders and more than €500m in annual premiums. Products are tailored to affordability, with distribution supported by bancassurance networks and digital channels.
Paul Murray, CEO at Swiss Re Life and Health Reinsurance, said: “The impact of the silver economy on insurers will accelerate, leading to a new phase of innovation.
“We are seeing a generation that is larger, living longer, and arriving at retirement wealthier than we have seen before. With new approaches to product design and delivery, the insurance industry has the opportunity to redefine its relevance to over 65s.”
Jérôme Jean Haegeli, group chief economist at Swiss Re, added: “Longer lifespans will affect both the risk and asset side of the insurance business.
“As populations age and people begin to draw down savings, inflation and long-term interest rates may rise, supporting stronger investment returns and profitability for insurers.”