Life insurers not prepared for future demographic changes

Life insurers are poorly prepared for changing demographics, and the inevitable wealth shift that will occur as a result, according to Capgemini

Life insurers are ill-prepared for the biggest inter-generational wealth transfer in the history of insurance, according to new research.

The World Life Insurance Report 2023, published by the Capgemini Research Institute, claims that policyholders aged over 65 own 40% of insurers’ assets under management (AUM), which, for the 40 largest life insurance providers, totals US$7.8tn. But these assets are set to be transferred to beneficiaries by 2040, posing a problem for insurers.

According to the UN, a third of the global population will be over 50 by the middle of the century – but many senior citizens lack a financial plan for their future. According to Capgemini’s new report, 60% of those aged 65 or older have not sought professional financial advice about their retirement, or about transferring their wealth to loved ones.

Indeed, many people approaching retirement are being forced to shoulder more of their financial burden for “ageing well”, as Capgemini puts it. Despite the obvious need for life insurance, there are still some obstacles holding insurers back.

Life insurers lack ability to innovate

Three-quarters of consumers surveyed want innovative life insurance products to support them in their old age, yet barely a quarter (27%) of insurers have the product development capabilities needed to meet the demand. Policyholders believe that limited awareness (39%) and a lack of trust (29%) are holding the sector back.

“These demographic shifts, coupled with the greatest wealth transfer to take place in the coming years, threaten the life insurance industry as it competes to serve the needs of an ageing population,” says Samantha Chow, Global Leader for the Life, Annuity and Benefits Sector at Capgemini.

“To help policyholders age well, carriers must find a way to appeal to the evolving needs of consumers by creating a personalised and tailored experience through more innovative product design. Ecosystem partnerships, such as engaging with firms that specialise in serving seniors, can help insurers orchestrate value-added services and close their capabilities gap in key areas.

“Those that prioritise early engagement with clients and their beneficiaries will generate trust and safeguard their assets.”

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