Age-old problem a thorn for insurers

Aging has been a thorn in the side of insurers since ink dried on the first life insurance policy centuries ago – and it is a problem that isn’t going to go away anytime soon.

With advances in technology and medical science, the insurance industry is facing the prospect of the “baby boomers” of the 1940’s set to live to 100 years of age or more, a fact that is besetting the industry with conundrums.

“Insuring the 100 Year Life” was the topic of a keynote speech delivered by Jayne Plunkett, Regional President Asia, CEO, Reinsurance Asia, and a Member of the Executive Committee, Swiss Re, during the second day of the 28th Pacific Insurance Conference 2017 in Hong Kong.

“There is a large protection gap in front of us, and the gap is caused by lack of attention within the industry,” Plunkett said. “People do not find buying insurance enjoyable, and the thought of planning to live to 100 almost never enters their mind.

“However, the aging society will affect all of us,” Plunkett told her audience of more than 300 delegates from over 20 countries. But what does the 100 Year Life mean really mean?  “One in three babies born today will live to or beyond 100 years of age. Medical advances are becoming preventive and people are living longer, but insurance needs are not keeping pace.”

Plunkett, an actuary with 25 years of industry experience, recounted the traditional insurance path for younger customers to reinforce her argument. “When you start out in your first job, your attention is directed towards paying your rent and car payments. I wasn’t thinking about living to 100 years old when I first started working, and it is the same for the majority of my clients.”

Dwelling on how the world has advanced in recent times, Plunkett focused on how China has evolved. “If you look back 10 years, China was just about to pass Germany as the third largest economy in the world and scientists had just discovered stem cells; China went from having 22 marathons in 2011 to over 400 this year and ten per cent of Chinese are diabetes whereas that figure was one per cent in 1980. China’s population has grown from 288 million in 2010 to 572 in 2017.”

This, she stressed, was just a snapshot of how the world has advanced in a few years.

To emphasise her point, Plunkett constructed a “future reality” situation featuring her niece, Maeve Plunkett, a 23-year-old app-enabled graduate making her first foray into the employment world.

“Maeve Plunkett, aged 23, only has compulsory insurances, for her car and through her job and little else at present,” Plunkett said. “Her life is recorded or chronicled through apps, which are a major part of her existence.

“Move to 2027, and Maeve is 33, married and expecting her first child. Most likely she has an app to manage her insurance and life choices, and she has provided for the short term, maybe five or 10 years in advance because her life changes by the week of the month, not over the long term.

“Move to 2057, and Maeve is now aged 53. Everything is tracked by apps, her health, her future for her and her children, has had three previous careers, and has now taken up independent work to utilise her life experiences,” Plunkett continued.

“Move to 2077 and she is now aged 83 (coincidently the same age as Plunkett’s mother) and she is in a virtual home with robotics covering every task. She is supported by the insurance industry through these later phases of her life.”

But, Plunkett declared, this would only possible if Maeve had made the conscious decision to act now, or if the industry can reach her at an early age to help plan for her future.

Plunkett said: “The reason I started in the industry was to deliver social good. It is for us to protect our customers. We must manage risk and we must find ways to manage more risk for society. We need to create a larger safety net for society.”

The conundrum, she admitted, is how to enable the insurance industry to stay abreast of life changes, to deliver the right solutions to fund the 100-year life.