Ron Wheatcroft discusses how three reports published in September demonstrate the difficulties in funding an ageing society.
We need to encourage consumers to look holistically at their funding requirements and the financial consequences of not meeting them.
The proposals should create further demand for advice services for care and estate planning.
A high standard of advice is needed to support such a market, but there is a need to ease the rules so that pre-funded pure protection policies fall within ICOBS.
The third report, written by Swiss Re, is called A Window Into The Future: Understanding and Predicting Longevity.
The good news that people are living longer has brought substantial financial problems throughout much of the world.
One reason behind the funding difficulties is that historical projections of future mortality failed to take into account important developments in medicine and society.
The report states that a disease-centred mortality model, based on forward-looking scenarios, can play a key role in the evaluation of longevity risk.
This would involve an improved understanding of potential developments in social factors, medical treatments and preventative approaches to tackle disease.
In order to support society with addressing longevity issues – such as funding the costs of retirement income and social care for an ageing population – we need to get more sophisticated in how we assess longevity risk.
Here, relationships between insurers and reinsurers will be vital, with reinsurers who invest in their research and development capabilities able to support these longer-term risks.
Through the improved management of longevity risk, this will build a platform from which we can improve product design, both through adapting existing solutions and creating new ones.
A new class of product
All of these reports point towards the fact that our industry can provide products to support an ageing society.
The financial consequences of increased life expectancy are so vast that the private sector cannot solve everything, but we are well-placed to play a vital role in any solution.
Whether it is retirement income or funding an individual’s long-term care, with more emphasis being placed on individual responsibility to finance such requirements, the industry has a chance to enhance its reputation in this area.
We should strive to ensure our report card includes an “A* for innovation” when it comes to longevity solutions.
Ron Wheatcroft is technical manager at Swiss Re
