The aging of the world population is set to dramatically increase the global dependency ratio, and as consumer behaviour shifts alongside trends towards greater urbanisation and automation of technology, the global property & casualty (P&C) insurance industry is expected to transform by 2050, according to the Capgemini Research Institute’s World Property and Casualty Insurance Report.
The research shows that by 2050, the global dependency ratio is expected to rise to 26% from 16% in 2024, which means that for every 100 working-age people, there will be 26 seniors to support, compared with 16 today.
According to the report, this increase in the ratio of seniors-to-working age adults will play a key role in changing habits around consumption, transportation, and all the use of technology, with major implications for both commercial and personal P&C insurance.
“These trends will drive the industry towards a more prevention-focused, modular approach with real-time risk monitoring, as well as more technology-enabled underwriting models,” explains the report.
Interestingly, the report finds that 45% of consumers expect to increase their spending on lifestyle enhancements, which includes things like travel, luxury goods, and home renovations. At the same time, 70% do not plan to buy an additional house or upgrade their current house to a bigger one.
This change in spending habits, coupled with greater urbanisation and advancements in the automation of technology, will, according to Capgemini, have a significant impact on how P&C insurers serve their customers.
“For example, auto insurers are expected to transition towards commercial insurance and shared mobility coverage, as seniors drive less and rely more on rideshares,” claims the report.
“Equally, personal property insurance will have to evolve towards preventive, age-friendly options that address smaller, multi-generational homes. In the workplace, commercial lines will need to account for demographic-driven automation and altered risk profiles,” continues the report.
Climate change is already a top concern for the insurance and reinsurance industries, but the report stresses that carriers will need to grapple with its implications on the aging work force.
“According to research from Oxford Economics prepared for Capgemini, 98.5% of the world’s population will be at risk from drought and 80% will be at risk from excessive rainfall,” which highlights the challenge of interconnected risks as climate volatility combines with urban risk concentration.
Adam Denninger, Global Insurance Industry Leader at Capgemini, commented: “Monumental demographic shifts are set to have a major and direct impact on P&C insurers in the coming decades. Today, insurers should be analyzing their portfolios to understand these sensitivities and to ascertain their exposure in mature and transitioning markets. This will support them in developing service models that are optimized and future-proofed.
“Finally, having an edge on customer experience, made possible through AI, will also help protect insurers against a competitive race to the bottom on prices.”
On AI, the report finds that a key feature of the new approach from P&C carriers will be the use of predictive insights and real-time intelligence in underwriting. In fact, the report found that 88% of insurance companies recognise the importance of advanced underwriting, although only 17% have mature capabilities.
To stay ahead and prepare for the changing demographics, the report recommends numerous approaches P&C insurers should adopt. This includes placing focus on changing customer behaviour, transforming operating models, and improved risk governance.
“All these approaches require a process of continuous evolution, with executives delivering on medium-term actions while boards address long-term strategic questions,” says the report.
