2017-2018
ANNUAL REPORT

GLOBAL AGEING

The Geneva Association is researching the role of the (re)insurance mechanism in supporting governments and individuals in funding age-related costs and achieving a secure retirement.

Social pension systems designed to provide financial security in retirement have not accounted for improvements in life expectancies and low fertility rates. The issue is exacerbated by the increased healthcare costs of an ageing population.

Adequate solutions will require a concerted effort (and perhaps compromise) from governments, corporations and individuals alike. The Geneva Association continues to research funding solutions, including post-retirement work and ways in which the insurance mechanism can support governments and individuals in financing retirement and age-related health costs.

RESEARCH REPORT

Genetics and Life Insurance

In its report entitled Genetics and Life Insurance—A View into the Microscope of Regulation, released in June 2017, The Geneva Association highlights the inconsistency in regulation concerning genetic testing by country and even within certain countries. Direct-to-consumer genetic testing creates an asymmetry in underwriting knowledge between the potential insureds and the insurer. Armed with medical data not known to the insurance company, individuals can make life and health insurance decisions against the interests of their insurer.

The insurance industry has always been innovative with respect to anti-selection risks and should also be able to find a way to manage this one. On the other hand, genetic testing can create a huge opportunity for the insurers’ inforce blocks of business. If insurers offered ‘free’ genetic tests to their inforce policyholders, longevity could increase, making the cost of testing more than worthwhile.

There are many challenges facing the insurance industry with respect to longevity. A combination of thoughtful regulation, consumer-oriented products and proper financial education for individuals could go a long way in solving these issues. New technologies, such as genetic testing, will continue to emerge. The life insurance industry should embrace these technologies by working with technology companies to enhance policyholder value as well as the sustainability of insurance companies themselves.

CONFERENCES

14th Global Ageing Conference

The 14th Global Ageing Conference, under the umbrella theme Competing Influences on Longevity, took place in Zurich on 2-3 November 2017 and was hosted by PartnerRe.

Several competing influences on longevity are being discussed by insurance industry leaders. New technologies can help to improve longevity, for example wearable devices. On the negative side, the world is increasingly faced with antimicrobial-resistant bacteria that are difficult to treat. Also, climate change seems to be causing new and more powerful natural catastrophes that are taking a toll on life as well as on property.

The most promising positive development is in the field of genetics. With direct-to-consumer genetic testing now accessible to everyone at a very low cost, individuals can find out their susceptibility to certain diseases and take mitigating steps early enough to help increase longevity. While this is positive news for individuals, the new technology also introduces challenges for the insurance industry with respect to anti-selective risks. Governments, the insurance industry, academia and policyholders will need to continue to work together to achieve reasonable solutions to embrace this technology, increase lifespan and improve the health of all individuals.

However, increased longevity, decreased fertility rates and persistently low interest rates mean that a large majority of individuals are facing retirement funding issues that they find difficult to solve by themselves. Governments are not able to fulfil their pension obligations to retirees, and at the same time employers are passing more investment risk onto employees. The average individual is not equipped to make informed decisions about investment options for retirement, not least because of a lack of awareness and financial literacy.

1st Annual Life Executive Round Table (ALERT)

The 1st Annual Life Executive Round Table took place in London in May 2017. The event brought life insurance executives together to discuss the low interest rate environment. At the conference, the research report The ‘Low for Long’ Challenge was presented and discussed.

Life insurers are moving away from investment-type products (especially those with guaranteed benefits) towards protection products in the European markets. This has proved to be a challenge because consumers are not willing to switch to protection products quickly. Sales representatives are not always well equipped to support this fundamental change.

The likelihood of the industry adopting new digital technologies was discussed at length. However, most industry executives did not envisage a disruptive shift in the life insurance industry within the next few years. Legacy systems and a focus on inforce policies with guarantees that are currently unprofitable for insurers are draining resources. The consensus is that digital technologies are important, but it will take some time before they become fully functional in the life and pension business.

 

14th GLOBAL AGEING CONFERENCE

The conference, hosted by PartnerRe, offered participants a platform to discuss influences on longevity. Increased longevity, decreased fertility rates and persistently low interest rates mean that a large majority of individuals are facing retirement funding issues.

CEO panel - Christian Mumenthaler, CEO, Swiss Re; Barry Stowe, CEO, Jackson National; and Phil Waldeck, President and CEO, Prudential Retirement

Emmanuel Clarke, President and CEO, PartnerRe, welcomes participants

Ronald Klein, Director of Global Ageing

Left: Greig Woodring, retired CEO and Chairman, RGA moderates the panel on genetics and genomics

Questions from the audience

WHY PEOPLE DON’T BUY INSURANCE: A NEW PROJECT

Insurance protection gaps exist across all geographies and lines of business. The insurance industry has gone to great pains to measure and report on these gaps. What is clear is that measuring and reporting on protection gaps is not sufficient to solve the problem, making it clear that a holistic view is required to better understand the underlying drivers of underinsurance.

A joint project of the Global Ageing (life) and Protection Gap (non-life) working groups intends to take a deep dive into consumers’ insurance purchasing behaviours, aided by a survey. After a bidding process, Edelman Intelligence, creators of the Trust Barometer®1, was selected in March 2018 to design the survey, which will be conducted in seven developed markets (France, Germany, Italy, Japan, U.K., U.S., and Switzerland) in three phases:

  1. A scan of social media sites to determine what terminology people are using regarding insurance
  2. Qualitative personal interviews with 49 people in the seven in-scope markets to dig deeply into their behaviour regarding the purchase of insurance
  3. Quantitative Internet surveys of 7,000 people in the same seven markets

Products covered in the survey will be residential property, private health, term life, and retirement annuity. The goal of this project is to highlight practical steps that the insurance industry can take to address consumers’ behavioural issues regarding the process of buying insurance and to reduce protection gaps in life and non-life insurance markets.

1   Edelman’s Trust Barometer® is an annual global trust survey which measures attitudes about the state of trust in business, government, NGOs and the media.