Sydney, Oct 19: In a groundbreaking report released today by the Capgemini Research Institute, the global life insurance sector is facing a transformative challenge.
Entitled “World Life Insurance Report 2023,” the report underscores the impending shift of wealth from aging policyholders to their heirs, along with a substantial outflow of assets under management.
As the world’s population ages and a historic inter-generational wealth transfer approaches, insurers must reshape their strategies to accommodate changing demographics and evolving customer needs.
Aging Policyholders and the Wealth Transfer
Presently, individuals aged 65 and above hold a significant 40 percent of insurers’ assets under management, with a total value of USD 7.8 trillion encompassing the 40 largest global life insurance companies.
The report forecasts that these assets will be handed over to beneficiaries by 2040.
This transition, driven by the aging population, marks a pivotal moment for the life insurance industry.
According to United Nations projections, by 2050, approximately 33 percent of the world’s population will be over 50 years of age.
However, a substantial number of senior citizens lack a financial plan for their retirement and the subsequent wealth transfer. The report underscores that 60 percent of individuals aged 65 or older have not sought professional financial advice to prepare for their post-retirement years and wealth transfer.
Obstacles to Adoption and Industry Challenges
Numerous factors contribute to the challenges faced by both insurers and consumers. Economic uncertainties, diminishing government support, and rising healthcare costs have intensified the need for life insurance.
Yet, consumers face hurdles in adopting these products.
The report identifies complexity and a lack of awareness as the most significant obstacles, with a lack of trust following closely behind.
Samantha Chow, Global Leader for Life, Annuity, and Benefits Sector at Capgemini, underscores the necessity for innovation and personalized experiences.
She suggests that insurers must adapt to the evolving needs of consumers by engaging in ecosystem partnerships with organizations specializing in services for seniors. Moreover, early engagement with clients and beneficiaries is essential to building trust and securing assets.
New Partnerships and the Affluent Consumer Segment
The report recommends that life insurers shift their focus toward affluent and mass-affluent consumers who collectively possess 39 percent of global wealth and account for roughly 20 percent of the aging population.
This demographic segment displays a significant demand for aging-well solutions, with over 75 percent expressing a desire for innovative life products.
However, just 27 percent of insurers possess the advanced product development capabilities required to serve this demographic.
The report emphasizes the significance of ecosystem partnerships to help insurers bridge this gap by offering a diverse array of value-added services, from wellness programs to assisted living solutions.
Transforming the Customer Lifecycle
To overcome these challenges and achieve growth, insurers must transform their approach from being product-centric to customer-centric.
The report outlines a journey that focuses on enhancing the customer onboarding process, boosting policyholder and beneficiary engagement, and converting claims into opportunities for revenue generation.
Insurers are encouraged to centralize customer data to create a unified view and digitally empower agents through the use of artificial intelligence. Nevertheless, the report notes that only 21 percent of insurers currently possess advanced data analytics capabilities, with even fewer (19 percent) taking advantage of advanced technologies to streamline operations and make data-driven decisions.
By simplifying and personalizing the onboarding process, improving the claims experience, and modernizing their technology infrastructure, insurers can foster stronger customer relationships, instill trust across generations, and protect the substantial assets poised for transfer in the near future.
In conclusion, the life insurance industry finds itself at a pivotal crossroads as it adapts to demographic shifts and prepares for the largest inter-generational wealth transfer in history.
Innovation, personalized experiences, and strategic partnerships are the keys to meeting the evolving needs of consumers and ensuring the industry’s sustained success.
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