Navigating the Great Wealth Transfer: Innovations in Life Insurance

Capgemini Research Institute released its World Life Insurance Report 2023, revealing a crucial turning point for the life insurance sector. Facing a substantial decline in assets under management (AUM), the industry braces itself for the largest inter-generational wealth transfer in history. Presently, policyholders over 65 control 40% of the AUM, amounting to $7.8 trillion for the top 40 global life insurers. The report anticipates these assets will transfer to beneficiaries by 2040.

The United Nations forecasts that by 2050, one-third of the global population will be over 50. However, a large portion of this demographic lacks adequate financial planning for their senior years. Capgemini’s study finds that 60% of those over 65 have not consulted financial advisors for retirement or wealth transfer planning.

As retirement approaches, many are burdened with increased financial responsibilities due to economic challenges, reduced government support, and soaring healthcare costs. These factors contribute to a heightened need for life insurance, yet consumers face substantial barriers in adopting these products. The report identifies the complexity of life insurance offerings and limited awareness (39%) as major hurdles, followed by distrust (29%).

An illustration depicting the concept of wealth transfer in the context of an aging population. The image shows a symbolic representation of transferring wealth, with visual elements like inheritance documents, family heirlooms, and digital assets. The background includes a diverse group of elderly individuals symbolizing the aging population, subtly highlighting the generational shift in asset ownership.

Samantha Chow, Global Leader for Life, Annuity, and Benefits Sector at Capgemini, comments on this demographic shift and its implications. She emphasizes the need for life insurers to adapt to the evolving needs of consumers through innovative product design and ecosystem partnerships. These partnerships, particularly with firms catering to seniors, could bridge capability gaps and offer value-added services. Early engagement with clients and their beneficiaries is key to building trust and securing assets.

Our Perspective

We concur with Capgemini’s findings and stress the importance of embracing innovative solutions in the life insurance sector. The impending wealth transfer presents both a challenge and an opportunity for insurers to rethink their strategies. To stay relevant and protect AUM, insurers should focus on affluent and mass affluent consumers, who represent a significant portion of the aging population and demonstrate a strong demand for innovative aging-well products.

Pinnacle Digital Advisors

However, only a fraction of insurers currently possess the advanced product development capabilities to meet these needs. It’s imperative that insurers forge ecosystem partnerships to offer a broad range of services, from wellness initiatives to assisted living options. These collaborations can fill the gap in service provision and align with the expectations of over 44% of affluent customers aged 50 and above.

To boost growth, insurers must transition from a product-centric approach to a customer-centric model. This shift involves evolving the value chain to enhance customer onboarding and engagement with policyholders and beneficiaries. By leveraging data consolidation and artificial intelligence, insurers can offer hyper-personalized advice and streamline operations. The focus should be on simplifying and personalizing the onboarding process, enhancing the claims experience, and capturing a comprehensive customer view through technology modernization.

By adopting these strategies, insurers can build trust across generations, foster growth, and secure the significant assets at risk of being transferred soon. This approach aligns with Pinnacle Digital Advisors’ vision of harnessing digital innovation to create customer-centric, efficient, and secure solutions in the insurance industry.

The World Life Insurance Report 2023 combines data from the Global Insurance Voice of the Customer Survey and Global Insurance Executive Interviews. Conducted in 23 markets, it includes insights from 6,775 insurance customers above 50 years and 200 senior insurance executives. These findings represent diverse regions, providing a comprehensive view of the industry’s challenges and opportunities.

This article is based on information from the Capgemini Research Institute’s World Life Insurance Report 2023. The original article can be found at FFNews.

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