Meeting the moment: How insurers can seize opportunities to help people age well

Q&A with Samantha Chow, Global Life, Annuity and Benefits Sector Leader at Capgemini

Today, there are more individuals aged 50 and above than at any other point in human history. As the population ages, governments face limited capacity to support the increasing number of older individuals. In the U.S. alone, there's a substantial USD 1.4 trillion in unfunded liabilities across public pension funds as of 2022.

Many countries, including France, Netherlands, Germany, Argentina, and Malaysia, are considering raising the retirement age, a move often met with widespread disapproval. In Singapore, social security spending surged by 161% from 2010 to 2022 due to the aging population. Economic instability will shift the financial responsibility of retirement from governments to individuals, widening the retirement protection gap.

Many older adults often lack a financial plan for aging. Capgemini’s 2023 Voice of the Customer survey of 6,500+ policyholders in 20 global markets found 60% of those above the age of 65 haven't sought professional advice for retirement or wealth transfer.

Consumers are more concerned by the need to fund their retirement and are ready to invest in various insurance products and other financial services. However, they face several barriers. In our latest World Life Insurance Report 2023 , 39% of consumers pointed to product complexity and limited awareness as their primary challenges, with 28% identifying a lack of trust as a significant obstacle.

We sit down with Samantha Chow , Global Life, Annuity, and Benefits Sector Leader at Capgemini, to understand this shift and how insurers can begin to seize tomorrow’s opportunity today.

1.?Tell us about more about what this opportunity means for insurers?

With more consumers seeking support to help them age well, global markets expect dramatic growth. Across life insurance, including annuities, the industry is projected to increase by 49% to USD 4.2 trillion. Long-term care services are expected to rise by 86% from 2021 to reach USD 1.8 trillion, and financial advisory services are forecasted to experience a 71% growth from 2020 to reach USD 136 billion.

This rising demand is good news for a sector losing its relevance over the last few decades. Insurers are simply not top of mind for consumers. They are not seeking financial planning advice from insurers, but rather relying on banks (25%), independent financial advisors (24%), and government officials (19%). Only 13% look up to their insurance agents for financial planning advice. We see this as an untapped opportunity and insurers who will engage customers through the right mix of channels will certainly benefit.

Offering products that are both flexible and customizable will align with customer expectations and assist them in navigating an unpredictable macroeconomic landscape, even amidst rising interest rates. Many customers express a preference for straightforward offerings that are easily comprehensible, accessible, and tailored to their unique needs. Furthermore, companies that prioritize investment in new-age technology will discover smoother integration with ecosystem partners.

Also, our survey highlights that 61% of agents and brokers consider customer acquisition to be a highly challenging task. More robust digital capabilities have the potential to help insurers engage orphan customers – those who are not actively supported by agents – constituting approximately 40% of all US life insurance policies. Plus, it can curtail attrition rates at advisory firms, where surviving spouses and children are commonly lost as customers at rates ranging from 50% to 80% following wealth distribution.

2.?What can insurers do to deepen their engagement with aging customers and build trusted, long-term relationships?

The financial services industry has focused on – and competed most intensely for – high-net-worth individuals and families. Yet, our research indicates a better opportunity to boost customer centricity amongst affluent and mass-affluent wealth segments. To tap into this key segment, insurers must prioritize offering solutions aligned to their needs and be able to provide tangible value.

Nearly 70% of this segment expects transparency in policy terms and conditions, while 57% seek regular, personalized engagement. However, only 28% of insurers prioritize customer-centricity through hyper-personalization.

It's important for insurers to approach this with compassion and understanding. To begin, let's focus on developing comprehensive aging-well solutions. This means crafting personalized offerings that truly address the evolving needs of our aging population. By empowering our intermediaries with digital tools, we're not just boosting productivity, but also showing our commitment to providing accessible and tailored support for our valued policyholders and their beneficiaries.

Now, let's address risk assessment. Leveraging data to swiftly navigate medical and financial assessments is a powerful way to identify the right solutions promptly. This, in turn, ensures we can provide timely support through policy issuance.

It's imperative that we broaden our engagement efforts. Remember, we shouldn't only reach out when faced with loss. Instead, let's introduce value-added services and ecosystems to create more touchpoints with policyholders. This approach fosters earlier connections with beneficiaries, offering them ongoing support beyond a single payout.

Lastly, let's place a strong emphasis on enhancing the claims experience. Offering flexible payout options, such as partial or multiple installments, demonstrates our commitment to meeting the unique needs of our aging customers. We must also prioritize empathy among our claims professionals, arming them with the skills and insights needed to provide invaluable recommendations. This way, we're not just processing claims, but truly supporting individuals through what can be a difficult time in their lives.

3.?How can insurers implement strategies to fortify trust across generations, ensuring the protection of assets and unlocking opportunities for future growth?

The industry faces a major shift with the largest-ever intergenerational wealth transfer underway. Currently, policyholders aged 65+ hold 40% of insurers' assets (USD 7.8 trillion for the top 40 global life insurers). By 2040, these assets will move to beneficiaries, posing a significant risk. 71% of this wealth will go to those aged 50+. The stakes are high. Strengthening ties with aging policyholders and beneficiaries has never been more urgent.

The future trajectory for insurers involves a shift from narrowly defined products covering individual risks towards providing all-encompassing aging-well value propositions with adaptable payout options.

To cater to different generations, agents and financial advisors must tailor interactions using digital channels and interactive tools. Establishing early engagement with beneficiaries and policyholders through age-appropriate holistic wellness programs and specialized care solutions can fortify trust, reaffirm their relevance, and ultimately, safeguard their assets under management.

Many carriers and agents tend to emphasize the value of life insurance at the time of one's passing, rather than highlighting its potential to enhance one's life in the present. This approach doesn't resonate with what younger generations want to hear. Success will come down to those who can articulate how individuals can derive benefits from “life” insurance, while they're alive, and not just putting money in a pot to pass on to someone.