In 2050 I will be 70, just one of 1.5 billion over-65s: almost three times today's number. What a triumph of medicine, public health and human progress!
But ageing societies also bring considerable challenges. Health-related risks increase as people get older: from the inevitable like bone mass decline, to the less predictable like dementia and cognitive impairments. Longer lives also bring higher health and care costs, and a greater need for more income amid an uncertain environment.
Swiss Re has produced the "Who pays for ageing?" report, to help broaden the discussion and encourage the development of solutions to these financial needs. The report looks at the total costs to support our senior population, where the money comes from, and how insurers can play a stronger role in funding solutions.
Who pays for ageing?
At a high level, senior's needs typically follow three main aspirations:
• Live secure (income)
• Live well (access to health and care)
• Bequeath something to the next generation (provide inheritance)
Swiss Re estimates that each year it takes USD 11 trillion to fund these needs for the over-65s (in purchasing power parity). Our analysis shows that a mere 5 percent share of this total wallet comes from insurance solutions. The rest is from the state and family (70%) and individual and private savings (25%).
Given today's state budget pressures and shrinking family sizes, the two lion's share sources also have the most challenging outlook. Though small in comparison, private savings are increasingly important in the decumulation phase for older adults. For example, across mature markets, the 65+ generation makes up 23% of the adult population but owns 41% of net private wealth.
Where can insurers help?
Historically, the re/insurance industry has focused on working age individuals where the pooling effects provide greater diversification and claims are less likely. Today should we be looking at more products that smooth consumers' risks and largely kick in during the decumulation stage?
Our Ageing Wallet analysis reveals where insurers can become a larger part of the
funding solution, and an important line of defence against the financial
risks of ageing.
I'm not concerned about those grey hairs that are appearing, but I really want to find ways to make sure older people (which one day include you and me) can be financially protected against those peak risks and points of vulnerability. Read our report on swissre.com/ageing and let's act, for the benefit of our seniors and of our children.
Category: Funding longer lives