Paul Murray, CEO Swiss Re Life & Health Reinsurance, said: “Interest rate hikes initiated to counter post-pandemic inflation have meant higher returns on life savings and annuity insurance products in many places, providing more options for reliable retirement income combined with the traditional protection that comes with insurance cover.
“After the low-interest environment that dented annuities' appeal in recent decades, it’s encouraging to see them having regained their spark as a means of helping people prepare for life beyond work. But the impact on life insurers is significant too.
“Some have restarted dormant annuity businesses, for good reason. Over the next decade, we predict life insurers will generate USD 1.5 trillion of additional savings premiums, with total savings premiums reaching USD 4 trillion by 2034.”
But this spark in popularity isn’t a panacea, with the estimated retirement savings gap for eight of the world's biggest economies sitting at USD 106 trillion in 2022, according to Swiss Re Institute estimates. Murray says this gap is widening and could quadruple by 2050.
“Today's insurance savings products are a partial antidote, but people will need additional options to shore up their finances for the long haul. With life insurers already managing an estimated USD 6 trillion in pension funds globally, our industry has the knowledge and scale needed to contribute in a variety of ways.”
Against this backdrop, Murray says re/insurers should focus on developing financial products that can meet the varied objectives of individuals as they enter different phases of life.
“People are looking for uncomplicated products that can not only help them with rising medical bills and cover needs as they age, but also offer the peace of mind that comes with steady income beyond retirement. With our knowledge of mortality, disability and longevity risk, it is possible to create flexible, fit-for-purpose products that can be adapted or converted based on evolving circumstances and needs.
“One example is combining life insurance protection with a cash value component and long-term care benefits that flexibly adjust based on investment returns and age-related life stage. But we must also consider younger people, who have grown up in an era when a changing climate is a central concern, and may place sustainability criteria at the centre of retirement saving decisions. Insurance savings products that reflect this may win favour among Gen Z and Millennial insurance buyers embarking on their own journeys toward retirement.”
Murray adds that, by educating future retirees about their financial options while they are still in the workforce, re/insurers can also foster the basis for stable societies while simultaneously helping ensure a robust future customer base for savings and protection products.
“Beyond using industry channels to expand financial literacy, we should work with policymakers to integrate courses into education curriculums. We should transform the way insurance topics are communicated to underserved groups, including women, to expand access to protection beyond what have long been viewed as traditional insurance buyers.”
|
