In a recently published report by the Capgemini Research Institute, it has been highlighted that the life insurance industry is facing an unprecedented challenge as it grapples with the impending transfer of an estimated $7.8 trillion in assets under management (AUM) to beneficiaries by 2040.
This transfer represents the largest inter-generational wealth shift in history, the report noted. It underscores that currently, individuals aged 65 or older own 40% of insurers’ AUM, which amounts to USD 7.8 trillion for the 40 largest global life insurance companies.
As the United Nations predicts that 33% of the global population will be over 50 years of age by 2050, the need for financial planning and life insurance for aging well becomes increasingly critical.
The study reveals that 60% of individuals aged 65 or older have not sought professional financial advice to prepare for their retirement or to facilitate the transfer of their wealth.
The complexity of life insurance offerings, limited awareness (39%), and a lack of trust (29%) were cited as the primary barriers to product adoption.
Samantha Chow, the Global Leader for Life, Annuity, and Benefits Sector at Capgemini, emphasised the urgency for insurers to adapt to this demographic shift, stating that insurers must “appeal to the evolving needs of consumers by creating a personalised and tailored experience through more innovative product design.”
The report suggests that insurers can navigate this challenge by forming ecosystem partnerships with firms specialising in serving seniors to offer value-added services and bridge their capabilities gap. Early engagement with clients and their beneficiaries will be essential to building trust and safeguarding assets.
The report also underscores the importance of targeting affluent and mass affluent consumers who hold a significant share of global wealth and make up a substantial portion of the aging population.
More than 75% of this group expressed interest in innovative life products, but only 27% of insurers currently possess the advanced product development capabilities to meet this demand. Ecosystem partnerships will be crucial for closing this gap and providing a wider range of value-added services, from wellness initiatives to assisted living.
To adapt to this changing landscape, insurers are encouraged to transition from a product-centric approach to a customer-centric one, offering comprehensive, higher-value solutions that help consumers age well.
This transformation should include enhancing the onboarding process, driving policyholder and beneficiary engagement, and simplifying the claims experience.
Despite the challenges and opportunities, the report notes that only a limited number of insurers currently possess the advanced data analytics tools and technologies necessary to streamline their operations and make data-driven decisions.
Those who successfully navigate this transition will build trust across generations, foster future growth, and safeguard substantial assets set to be transferred in the near future, the report noted.
