Life insurers discussed the key challenges in developing longevity solutions at an annual Australian Prudential Regulation Authority roundtable last month.

Insufficient demand, caused by factors such as limited awareness and misconceptions about longevity products, is the key issue, according to an APRA summary of the talks.

Distribution, product design, prudential regulation and lack of data are other hurdles facing life insurers.

“There was general consensus that an increase in the demand for longevity solutions is necessary for insurers to be incentivised to develop a business case to invest in and accurately and sustainably price risks,” the APRA summary said.

The summary says Australians are retiring in growing numbers, and with higher account balances.

“The need for innovative retirement offerings that help to address longevity risk for relevant cohorts presents a real opportunity for the life insurance industry.

“APRA encourages insurers to continue to work closely with superannuation trustees to help members better understand longevity risk and the role of longevity solutions in mitigating that risk.”

Treasury recently consulted on how the super system can support people as they live longer.

Its consultation paper said the take-up of lifetime income products remains low, and the market is underdeveloped.

Of the 15 trustees surveyed, seven were providing retirement products with longevity protection, while six were considering developing or offering a new longevity product, the paper said.

Participants at the APRA roundtable said one challenge is insurers’ hesitation to innovate and introduce new products in the absence of adequate support mechanisms if the products do not achieve scale to be sustainable.

“APRA noted that although there is no ‘silver bullet’ to addressing the demand challenge, life insurers are an important stakeholder in the retirement ecosystem and can play a key role in leaning into the challenge,” the summary said.

APRA member Suzanne Smith, executive director Sean Carmody and GM Nancy Ma hosted the roundtable, which was attended by 21 life insurance CEOs and other executives, plus representatives from Treasury, the Australian Securities and Investments Commission and the Council of Australian Life Insurers.