Currently showing: Funding longer lives

26 Apr 17 06:53

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 and let's act, for the benefit of our seniors and of our children.

Category: Funding longer lives


Alicia Montoya - 26 Apr 2017, 8:48 p.m.

Thanks, Domenico. I must say, those figures are pretty scary.

And here are two more factors worth accounting for as well: Many millennials don't own anything (we prefer to share and pay for usage) and many won't have children (so that family cushion is non existent in mine and a growing number of cases).

And to top it all off: For me, the concept of insurance is foreign and unattractive at best, and outright unpleasant and angering at worst.

There are good news too, though: I earn a good living and could be persuaded to pay to secure a good myself a better future.

For me the issue is the products themselves, as well as their distribution: Insurance covers do not speak to me in any way, not in what they cover (and don't - argh), not in how they cover it, not in the way they're delivered. They're written by lawyers for lawyers in a language only accessible to them and the processes are slow, obscure and painful.

So, where do we go from here? How do we engage people like me in the process? For me the answer is clear: Design new products that respond to my specific needs, and engage me along the whole process to help me better understand and therefore mitigate risks. Talk to me, be open with me, bring value to me. Don't expect me to go to your website and decipher 20 pages of gobbledegook. Work with me on this openly, transparently, collaboratively.

Domenico Savarese - 27 Apr 2017, 9:04 a.m.

Thanks Alicia.

When we saw the results, we felt even more motivated to share with our industry but also with other sectors and policymakers.
We look at the trends you mention plus others in the report, and believe they are a strong call to action to ensure that public and private players take the time to develop relevant solutions.

Not an easy one to tackle by any means, but I am convinced the path to resilience in ageing society must start from tangible solutions to specific needs.
Customer centricity figures strongly in our approach and knowledge being developed!

Urs Leimbacher - 28 Apr 2017, 9:14 a.m.

Thanks for sharing these insights, Domenico. I like your explanation about the 3 dimensions of seniors' needs and the proportions indicated. It goes without saying that this points to a huge potential of growth for private insurers in providing risk transfer solutions in support of living longer while staying healthy and well.
It's great to see Swiss Re ahead of the pack here - both in putting the finger on the challenge and in pointing to solutions. We're smarter together!

Domenico Savarese - 3 May 2017, 4:58 p.m.

Thanks Urs.

Acknowledging the 3 categories of needs is the starting point, as they are actually just the tip of the iceberg. The proof of the pudding will be in our ability to investigate and address the variety of people's needs.

A great starting point is Swiss Re's research in several global countries, of course!

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