Swiss Re, the reinsurance company based in Zurich, reports that demographic changes are set to transform the life insurance industry over the coming decades.
According to Swiss Re, the combination of longer life expectancy, lower birth rates and increasing wealth among older generations is shifting the focus of life insurance.
The traditional model, centred on income replacement and family protection, will need to evolve towards products that help individuals manage their accumulated wealth, maintain income in retirement and meet the costs of health and personal care.
“The impact of the Silver Economy on insurers will accelerate, leading to a new phase of innovation,” commented Paul Murray, CEO Swiss Re Life & Health Reinsurance.
“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.”
Swiss Re’s research finds that ageing is advancing rapidly across much of the world. In advanced economies, the number of people aged 65 and over is projected to increase by around 35 per cent between 2025 and 2050. Countries such as Japan and South Korea already have more than 30 per cent of their populations within this age group. Wealth is also becoming increasingly concentrated among older households.
In the United States, those aged 55 and above hold almost USD 120 trillion in assets, roughly four times the country’s GDP. Swiss Re suggests that this demonstrates both the financial strength of this demographic and the complexity of managing longevity risk.
Jérôme Jean Haegeli, Swiss Re’s Group Chief Economist, said: “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.”
The sigma study explains that insurers must adapt their strategies as customers move from the stage of accumulating wealth during their working years to managing and drawing on that wealth after retirement.
During working life, people typically use insurance to protect dependants and guard against income loss through products such as term life or whole-of-life cover. After retirement, the focus turns to securing a reliable income and ensuring access to care.
Swiss Re points out that with many retirees now living well into their eighties, and with fewer pension products offering guaranteed returns, there is growing demand for solutions such as annuities or pooled longevity products that provide sustained income and protection against the risk of outliving one’s savings.
Swiss Re also identifies long-term care as a critical issue for the coming decades. By 2050, the number of people aged 80 and over in Europe is expected to rise by around 80 per cent, and by more than 120 per cent in North America.
This will increase pressure on public care systems, which already account for more than two per cent of GDP in many advanced economies. With private nursing home care in the United States costing an average of about USD 111,000 per year, Swiss Re warns that new ways to fund care will be essential.
The company notes that combining long-term care cover with life or critical illness insurance has proved effective in markets such as France, where policies complement government provision. The French market now has about 1.4 million policyholders and annual premiums exceeding EUR 500 million, supported by bancassurance networks and digital channels.
Swiss Re further highlights the need to close protection gaps for older individuals, particularly concerning cancer coverage.
The median age of cancer diagnosis is 67, yet many critical illness policies end before that age. The company points to initiatives in Thailand and Korea, where insurers have introduced cancer-specific protection for older policyholders, often combined with health or annuity products, to prevent retirees from facing both financial and medical hardship at the same time.
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