Governments increasingly withdrawing support for retirees and ageing populations is a worrying global trend, but presents an emerging opportunity for the insurance industry to fill the gap, new research from reinsurer Swiss Re shows.
The 'ageing wallet' study of the US, UK, Japan, China and Australia's pension systems shows governments bear the cost (60%) of funding income, healthcare and inheritance for people aged 65 and over. This is followed by a reliance on savings (25%) and the help of family (10%).
Insurance on the other hand, has only a fractional share (5%) of the ageing wallet - but it has the potential to be an effective line of defence against ageing risks these countries are facing, the report said.
Swiss Re head life and health products Russell Higginbotham told Financial Standard insurance and reinsurance have a significant role to play in this emerging sector of ageing.
Macro trends show populations are getting older and support from the states are declining, Higginbotham said, but insurance's ability to support successful ageing is part of a wider ecosystem.
"What we're doing is investing in that sector, raising the profile of the topic with our clients, communities and governments, and more broadly, engaging with different stakeholders around the topic," he said.
Insurance can smooth the decummulation phase for instance, helping to protect against outliving savings, unexpected health shocks, care needs and wider family issues.
Currently, the industry is generally focused on selling products like annuities and attempting to create a market for traditional long-term care insurance.
But with the help of technology, Higginbotham said insurance can move away from a "heavy upfront process" of entering a long-term contract, for example. Many customers then find the insurer will not regularly engage with them unless a claim is being made.
The future of the industry will mean insurers forming stronger relationships with customers, helping them improve their health - and reward them for that - thereby improving mortality, which is a win for both parties, Higginbotham said.