Life insurers ‘unprepared’ for $7.8trn wealth transfer, report warns

Written by Michael Griffiths

20/10/2023

Life insurers are facing a significant outflow of assets under management (AuM) ahead of the “largest inter-generational wealth transfer in history”, a new report has warned.

The Capgemini Research Institute’s World Life Insurance Report 2023, published today, has highlighted an “unprecedented shift” for life insurers.

Currently, policyholders over the age of 65 own 40% of insurers’ AuM, which for the 40 largest global life insurers totals $7.8trn. According to Capgemini’s report, these assets are poised to be transferred to beneficiaries by 2040.

The United Nations has predicted that 33% of the world’s population will be over the age of 50 by 2050. However, Capgemini said that most senior citizens lack a financial plan for ageing well.

According to Capgemini’s new report, 60% of individuals aged 65 or older have not sought professional financial advice to prepare for retirement or to transfer their wealth.

Global leader for life, annuity and benefits sector at Capgemini, Samantha Chow, said: “The demographic shift coupled with the greatest wealth transfer to take place in the coming years threaten the life insurance industry, as it competes to serve the needs of an aging population.

“To help policyholders age well, carriers must find a way to appeal to the evolving needs of consumers by creating a personalized and tailored experience through more innovative product design.”

The biggest challenge life insurers currently face is staying relevant amid the greatest wealth transfer, Capgemini warned. To protect the AuM that are at risk, the report recommended prioritising affluent and mass affluent consumers who hold 39% of global wealth and account for about 20% of the aging population.

Capgemini suggested this segment has the greatest need for “ageing-well solutions”, with more than 75% wanting innovative life products. However, just 27% of insurers have the advanced product development capabilities to provide them.

Chow added: “Ecosystem partnerships, such as engaging with firms that specialise in serving seniors, can help insurers orchestrate value-added services and close their capabilities gap in key areas. Those that prioritise early engagement with clients and their beneficiaries will generate trust and safeguard their assets.”

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