Increased longevity will have implications for the life insurance industry in Australia and globally, according to an annual report from Capgemini. 

The proportion of the population globally aged 50 and older is projected to double from 1990 to 2050, and at the same time declining government support and higher healthcare costs mean individuals must shoulder more of the financial responsibility for ageing well. 

As a result, the retirement protection gap is projected to quadruple by 2050 to $US400 trillion ($632 trillion) in markets with the largest and most established pension systems, the World Life Insurance Report 2023 says. 

“Yet consumers face barriers to adopting life insurance, including product complexity and limited awareness, and this contributes to insurers’ struggles with slow growth and limited relevance. 

“Life insurers have a clear and compelling opportunity to spark growth by developing comprehensive ageing-well solutions that support customers’ desire to live long, healthy, and happy lives.”

In Australia about 60% of respondents aged 65 and above surveyed say they have not sought financial advice to prepare for retirement or plan their wealth transfer. 

While Australian insurers are relatively less affected by macroeconomic headwinds as compared to their global peers, the industry faces similar challenges, the report says. 

Major reasons that hinder Australian customers from buying insurance are product complexities (40%) and limited awareness (41%). 

“The demographic shift coupled with the greatest wealth transfer to take place in the coming years threaten the life insurance industry, as it competes to serve the needs of an ageing population,” Global Leader for Life, Annuity and Benefits Sector Samantha Chow said. 

“To help policyholders age well, carriers must find a way to appeal to the evolving needs of consumers by creating a personalised and tailored experience through more innovative product design. 

“Those that prioritise early engagement with clients and their beneficiaries will generate trust and safeguard their assets.” 

The report says demographic shifts and macroeconomic trends, such as strained government capacity and volatile inflation rates, are driving demand for life insurance including annuities, long-term care services, and financial advice. 

Life insurance, including annuities, is on track to grow 49% from 2020 to $US4.2 trillion ($6.6 trillion) by 2030 and financial advisory 71% to $US136 billion ($215 billion) over the same period. 

“Consumers are more concerned by the pressing need to fund their retirement and are ready to invest in various insurance products and other financial services,” the report says. 

“Rising demand is good news for a sector with little growth during the last few decades.” 

Click here to download the report.