Is the life insurance industry prepared for the upcoming demographic challenge?
A recent report from Capgemini Research Institute sounds the alarm for the global life insurance industry. It reveals its lack of readiness for a monumental shift in the next two decades.
The World Life Insurance Report 2023 highlights an impending outflow of assets under management (AUM). What lies ahead is the largest inter-generational wealth transfer in history.
The report sheds light on the upcoming demographic challenge. The United Nations are projecting that 33% of the world’s population will be over 50 by 2050.
Policyholders aged over 65 currently own 40% of insurers’ AUM and they are set to transfer a staggering $7.8 trillion to beneficiaries by 2040.
However, 60% of individuals aged 65 or older have not sought professional financial advice for retirement or wealth transfer. This poses a significant threat to the industry.
Insurers must find a way to protect their assets as well as boost their growth.
What challenges does the aging population pose for the life insurance industry?
The burden of aging well shifts to individuals due to economic challenges, declining governmental support, and rising healthcare costs. The need for life insurance therefore grows.
However, the industry faces obstacles that hinder product adoption. Policyholders cite complexity and limited awareness (39%) as major hurdles, followed by a lack of trust (29%).
The biggest challenge for life insurance companies is to remain relevant and to appeal to the needs of consumers.
Samantha Chow, Capgemini’s global leader for the life, annuity, and benefits sector, emphasizes that the demographic shift and the impending wealth transfer threaten the industry.
To address these challenges, insurers must appeal to evolving consumer needs through innovative product design.

How can the life insurance industry navigate the $7.8 trillion wealth transfer?
The report advocates a transformative journey for life insurance companies. It emphasizes a shift from the current product-centric approach to a customer-centric operating model.
To remain relevant, the report suggests prioritizing affluent and mass affluent consumers who hold 39% of global wealth and constitute about 20% of the aging population.
These consumers have the biggest need for ageing-well solutions. 75% of them are seeking innovative life products. The key lies in partnerships and embracing innovation.
Ecosystem partnerships, especially with firms specializing in serving seniors, seem critical for insurers to provide a wide range of value-added services and close capability gaps in key areas.
The journey towards customer-centricity involves enhancing the onboarding process, promoting policyholder and beneficiary engagement, and leveraging technology for personalized advice.
The report concludes that insurers prioritizing early engagement with clients and beneficiaries will generate trust, safeguard assets, and navigate the impending wealth transfer successfully.