Life insurance industry faces unprecedented challenges with $7.8 trillion wealth transfer

Insurance
26/12/2023 Article

The life insurance industry is on the brink of a seismic shift as it grapples with the impending transfer of $7.8 trillion in assets to beneficiaries by 2040, according to the Capgemini Research Institute's World Life Insurance Report 2023. Currently, policyholders aged 65 or older own a substantial 40% of insurers' assets under management (AUM), and this wealth is poised to change hands within the next two decades.

Alarming findings reveal that 60% of individuals aged 65 and above have not sought professional financial advice for retirement or wealth transfer. With the United Nations predicting that 33% of the global population will be over 50 by 2050, the lack of financial planning among senior citizens becomes a critical concern.

As economic challenges, dwindling government support, and rising healthcare costs compound the cost-of-living crisis, individuals approaching retirement bear more financial responsibility for aging well. Despite the growing need for life insurance, consumers face barriers such as complexity in offerings (39%), limited awareness (29%), and a lack of trust (29%).

To address these challenges, the report recommends that life insurers prioritize affluent and mass affluent consumers, who hold 39% of global wealth and constitute 20% of the aging population. This demographic desires innovative life products, with over 75% expressing interest. However, only 27% of insurers possess the advanced product development capabilities needed to cater to this market.

Ecosystem partnerships are identified as a crucial strategy for insurers to bridge the gap in providing value-added services. By collaborating with firms specializing in serving seniors, insurers can create a personalized and tailored experience for policyholders.

The report emphasizes the need for insurers to transform their customer lifecycle approach, shifting from a product-centric model to one centered on customer needs. This transformation involves consolidating customer data for a comprehensive view, leveraging artificial intelligence for personalized advice, and modernizing technology to streamline operations.

Insurers are urged to simplify and personalize onboarding journeys, enhance claims experiences, and capture a single view of the customer. By successfully navigating this journey, insurers can fortify trust across generations, foster future growth, and safeguard the substantial assets at risk of transfer in the coming years.

In essence, the life insurance industry faces a critical juncture, requiring innovation, collaboration, and a customer-centric focus to navigate the challenges posed by the unprecedented wealth transfer on the horizon.

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