European insurance and the future of senior protection and well-being
In Europe, as in many developed regions around the world, the population is aging. For insurers, serving this growing segment means focusing on two opportunities. At a minimum, they must tailor their offerings to senior needs—for example, by providing more diverse and advanced payout options for health insurance. A more ambitious opportunity is to be among the first to create an ecosystem for seniors—a set of products and services that customers can easily access in an integrated and seamless way. Such products and services would need to be specifically designed to address the diversity and complexity of senior needs. For example, they could combine insurance products, banking services, assistance solutions, and services related to lifestyle and well-being into one unified proposition.
Multiple insurers have made progress on tailored offerings for the senior segment, but very few have begun exploring the ecosystem approach.
One of the main factors in this is the complexity of the European senior segment, which is not a unified bloc but rather a group of highly diverse subsegments by age, wealth, autonomy, and so forth. As such, a large variety of factors affect senior needs, and insurers should carefully consider subsegments to determine where to play and what to offer. As Europe’s pension gap continues to grow and nonpublic retirement offerings proliferate, now is the time to answer the difficult questions that will lead insurers to the next level in meeting the needs of older customers and their families.
Ecosystems are built with the customer’s needs at the core. No player has yet deployed an ecosystem focused on the European senior population, but insurers and healthcare providers can move forward and get ahead of the rest of the industry. To succeed, they will need to better understand the complexities of seniors’ product and service needs as well as their own unique value propositions. All of this will inform an integrated offering that seniors and their families can turn to for coverage of their full spectrum of needs: protection, assistance, financing and liquidity management, investment, and well-being. Being a first mover in this space will give insurers a huge head start over the competition.
Why build an ecosystem focused on seniors?
Several key trends are converging to accelerate the need for a senior ecosystem (Exhibit 1). To start, the share of seniors (defined as more than 65 years old) in the European population is expected to grow from 20.6 percent in 2020
to more than 28 percent—or nearly 130 million people—by 2050.
And as modern healthcare and other advantages have lengthened life spans, so too have they increased the share of the population over the age of 80: in 2019, 5.8 percent of the European population was at least 80 years old. By 2100, that share is expected to reach 14.6 percent.
The wealth profile of the senior population has also been evolving. On the one hand, some seniors are living comfortably on their wealth; in Italy and the Netherlands, for example, seniors account for 20 percent of the total population but hold 40 percent of total wealth.
On the other hand, the pension gap has been increasing steadily in recent years, and the share of pensioners at risk of poverty has been rising since 2014, reaching 15.1 percent in 2019.
A steady increase in the old-age dependency ratio appears to be exacerbating this gap—in other words, the working-age population can only give a reduced level of support to older adults.
In 2001, the old-age dependency ratio was 25.9 percent, meaning there were about four working-age people for every senior individual. This ratio increased to 32 percent in 2019 and is expected to reach 56.7 percent by 2050—meaning there will be fewer than two working-age people for every senior in Europe.
This reality has led to a burgeoning market for private pension products and has required seniors to rethink how to tackle their own healthcare and financial needs.
The needs of the senior population are extremely complex and are constantly evolving. Some shared needs unite much of the population, including the need for protection against unforeseen events, support in daily life (for example, on-demand grocery delivery and in-home care services), and social interaction—particularly as younger generations move away from older family members.
However, the senior population is far from homogenous. Key to creating products and services that meet the needs of the population is developing a differentiated offering based on a varying set of needs. The drivers underlying such complexity include age; wealth; level of personal autonomy and, conversely, fragility; self-awareness of the need to plan for protection and well-being; and the extent to which family can support older adults both physically and financially.
Taken together, an analysis of these factors leads to hundreds of potential profiles of senior customers and, therefore, a complex set of needs for products and services. While multiple insurers have started expanding their insurance offerings to meet discrete needs—for example, by bundling health services with life-insurance policies—any effort to build a true ecosystem to date has been, at best, nascent. This presents an opportunity for market players to act as first-mover orchestrators of a dedicated proposition in the senior space.
Developing an ecosystem for the senior population
Successfully orchestrating an ecosystem dedicated to senior protection and well-being will require developing an integrated offering that meets the specific needs of older customers and their families. While the decision of which customer segments to focus on and how to serve them will vary depending on the unique value proposition and capabilities of the orchestrator, all insurers should consider five product and service areas: protection, assistance, financing and liquidity management, investment, and well-being (Exhibit 2). To help determine where and how to play, players should ask themselves a set of key questions (see sidebar “Key questions for players in the senior space”).
Coverage against disease and injury is one of the primary—and more important—needs to be addressed for the senior population. Various offerings can be tailored to the varying levels of fragility exhibited by customers, from those with low risk of experiencing a life-altering injury or illness to those already living with disability. In-kind benefits can be directly provided as insurance payouts, simplifying older customers’ access to proper healthcare and assistance services. Health-focused devices can also be bundled in the protection offering to continuously monitor (and allow family members to monitor) customers’ health status. An example of an integrated offering combining health devices with insurance protection comes from the Chinese platform company HiNounou. The company partners with digital services and device providers to offer customers continuous monitoring of health factors such as blood pressure and blood oxygen levels, in combination with protection against injury and death risks and a 24/7 telemedicine service from insurance partners.
In addition to protecting their older customers, orchestrators should also consider how to protect against accidents and illness of family caregivers, whose health and well-being are essential to supporting their older relatives. An example of coverage in this case could grant home services (such as grocery delivery, home maintenance, and transportation services) to older adults in the event of illness or injury of the family caregiver. This would ensure continuity in the care and assistance typically provided by the family member.
Access to proper assistance services, especially to families with limited financial independence, is a key service in a senior-focused ecosystem. Today, national health systems across Europe offer varying levels of assistance to their citizens, mostly focused on those who are not self-sufficient. There is ample room for an ecosystem player to expand and broaden the available options for a wide variety of services, such as the support of a professional care manager to deal with assistance, healthcare, and administrative needs. It can also involve professional in-home care services (such as physiotherapy and nursing) and daily living services (such as transportation, grocery shopping, and home maintenance). And for those with higher levels of need and less autonomy, assistance could take the form of residence in communities designed for senior living, similar to what Taikang Insurance Group is doing in China. Taikang Community, started in 2015, encompasses approximately 20 senior-living residences aimed at covering senior needs, including socialization, recreation, sense of belonging, health, and financial management.
Financing and liquidity management
Older individuals often have some form of financial need, especially those with low autonomy and self-sufficiency who are faced with paying for nursing-home expenses. This is a particular issue given that, as noted above, the share of older individuals at risk of poverty is growing. Today, options for financing and liquidity management are fragmented. Primarily offered by financial-services providers, they are not usually tailored to seniors.
An ecosystem orchestrator could begin by partnering with financial institutions to offer reverse-mortgage (or equity-release) financing to pay expenses or to address both wealth accumulation and management, allowing for its decumulation when necessary to pay expenses. Some families may be seeking property management of an older family member’s real-estate assets to help pay for medical expenses accrued during a nursing-home stay. Ecosystem orchestrators can also go beyond what is currently available by integrating these propositions; for example, the property of an individual who is not self-sufficient can be managed by a financial institution partner that also handles payment of nursing-home costs.
As customers get older, life-investment products become more and more relevant because, in most European countries, they allow for greater tax efficiency. However, financial institutions usually have little incentive to advise senior clients to shift their investment portfolios to take full advantage of these products. In most European markets, integrated players such as bancassurance companies are best positioned to drive such a shift in asset allocation—from asset-management products to life-insurance policies—to increase tax efficiency and facilitate the inheritance-management process. In addition, an ecosystem proposition could enrich the investment-focused offering by combining it with third-party services such as tax reporting and consulting services.
A notable exception to the phenomenon of shifting toward life policies is the UK market, where life insurance typically does not have a tax-efficient, savings-oriented proposition, mainly due to market characteristics that make it a more investment-oriented market. In this case, life-insurance players can reap more benefits by helping older clients navigate the wealth of alternatives in the investment and financial management space (for example, pension drawdown schemes and equity release).
Well-being services can be a highly valuable complement to a compelling product-and-services proposition for the ecosystem, particularly for younger or more physically active customers. Well-being services tailored to older customers could include educational classes; art, culture, and other leisure experiences; digital platforms offering everything from social interaction and entertainment to dating apps; and wellness services such as exercise classes and nutrition and lifestyle-guidance programs.
Saga, a senior-focused player in the United Kingdom, provides an example of well-being solutions targeted toward seniors. In addition to insurance products, the company provides holiday and group-tour services (including cruises with Saga’s own ships), subscriptions to a Saga magazine (which covers topics such as home and garden, health and well-being, money, entertainment, and food), and a membership program granting access to discounts on events, VIP-like experiences, and products from selected partners.
Enabling factors: Distribution and technology strategy
In addition to each of the five product and service areas, senior ecosystems will require go-to-market strategies tailored to people in this population and their families. As a starting point, customers need to be aware of the products and services made available through the ecosystem, which requires distribution networks to convey the breadth and the value of offerings. The variety of the networks involved in the ecosystem can provide a huge advantage, as they may range from bank and insurance branches to healthcare facilities and other professional networks. However, this network needs to be properly supported to ensure that the customer has a central touchpoint—in other words, a reference network—that acts as coordinator of all the other networks involved in the ecosystem.
A key aspect of the go-to-market approach is the correct identification of customer needs, for which two elements can prove essential: specialized individuals who act as comprehensive advisers to senior customers and an opt-in technology platform that can automatically identify the needs of senior customers and share those needs with ecosystem partners. Such a platform could segment the customer base and develop highly tailored offerings by combining the different data sources available to all the ecosystem’s participants.
More broadly, technology will be key in fostering the launch and growth of ecosystems by enabling simplicity of access and fluidity of use for senior customers and their families (for example, by allowing them to move seamlessly from one product to another and by enabling smooth and secure data handling). Taking the time up front to design the technology strategy of the ecosystem is an investment that will pay off in the long term.
Europe’s aging population and evolving pension situation have piqued the interest of insurers and other providers capable of better serving the senior population and their families. First movers in this space will win a huge advantage in setting up the foundation for an ecosystem dedicated to senior protection and well-being.
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