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One of the key challenges the world will face in the coming decades is the shift towards older populations. This topic is currently a priority in many countries with a large percentage of senior citizens, such as:
Projections of the United Nations indicate that Asia is leading this “silver society” trend, with Hong Kong, South Korea, Taiwan, and Japan expected to have the largest proportions of people aged 65 and older by 2050. Hong Kong is anticipated to reach the highest percentage at 46.4%,4 meaning nearly half of its population may be aged 65 or above at that point in time. How would a society look with a substantial share of people close to or beyond retirement age?
Consumer behaviour is shifting due to an increased demand for medical and caregiving services (e.g., telemedicine and care robots), medical devices, wellness offerings, and travel options tailored to seniors. The need for barrier-free housing, assisted living arrangements, and everyday support services (such as shopping or banking assistance, delivery services, and transportation) is growing. The respective industries are expected to respond by offering senior-friendly solutions.
Silver society refers to the segment of the population comprising citizens aged 65 and above. The broader focus includes senior consumers and the very elderly, but also their relatives when they use services or buy products tailored to older people. This expression is derived from concepts such as silver economy5 or silver market which originated in Japan during the 1970s in response to the expansion of services and facilities designed for seniors.
Social security systems face major challenges, particularly regarding long-term care and pensions. Generally, these systems are not designed to cover all costs incurred by the ageing population. Specifically, public long-term care schemes, if available at all, typically provide only partial cost coverage. As the number of beneficiaries increases and fewer young people contribute to the social system, the financial pressure on these systems will intensify.
On the other hand, a shortage of skilled workers is expected in the future, but extending working lives could help mitigate part of this shortfall. This underscores the importance of ensuring that older employees remain healthy for as long as possible so they can continue to apply their skills and experience in the workforce.
In addition, there is a growing need for caregivers to meet the increasing care demands of the elderly. This requires both policymakers and society to develop solutions. Encouraging more people to work in the care sector and recruiting necessary staff through migration are important steps for the future. In many countries, especially in Europe, it is possible to fulfil military service requirements through social or civil service alternatives. Expanding such options could also help increase capacity. If we are unable to further grow the care sector, the supply of professional care facilities will likely be insufficient to meet the rising demand – especially from the baby boomer generation, who are now approaching retirement. This makes it even more important for the community to have the financial means to organise care assistance independently.
Older individuals should be better integrated into both the economy and society, as they will represent a growing proportion of the population and should be able to lead independent lives with good care for as long as possible. Insurers can play a role by informing their insured lives about relevant health topics and, for example, supporting policyholders through digital solutions that help maintain health. Apps can assist by providing information about medical conditions, monitoring important blood values, and helping users follow prescribed therapies effectively. Insurers transform from mere risk carriers into health service providers, thereby positively influencing the everyday lives of policyholders – and, in turn, the modifiable risk factors.
The likelihood of needing long-term care (LTC) rises with age (see Table).
|
Age Group |
Share of Population Requiring Care |
Equivalent Ratio |
|---|---|---|
|
65–69 |
7% |
1 in 14 people |
|
75–79 |
18% |
1 in 6 people |
|
85–89 |
51% |
1 in 2 people |
Women are more likely to require care than men. The average duration of care in 2024 is around 7.5 years.7 In Germany, an LTC reform in 2017 broadened the concept of care needs to include cognitive and psychological impairments. As a result, the likelihood of individuals qualifying for care has increased.
The significant likelihood of requiring care, coupled with substantial monthly expenses, underscores the importance of LTC insurance for individual financial protection. In addition to covering one’s own care costs, a motivation for purchasing LTC insurance can be to protect one’s children’s assets from being accessed by the state to finance the parents’ care expenses.
The thresholds for any exempt assets vary considerably between countries. In the UK, children are not required to contribute to their parents’ LTC costs.8 In Germany, however, children must help cover care costs if the parents are unable to pay their share of the inpatient care costs and children’s annual gross income exceeds EUR 100,000.9 In Asia, the obligation is more strongly anchored both culturally and legally (e.g., China’s Constitution mandates that adult children take care of parents10), but exempt assets are not standardised and are decided on a case-by-case basis.
The need for LTC insurance does not usually become a priority for policyholders until advanced stages in life. Earlier, individuals tend to focus on ensuring health and income loss risks, followed by taking out Life insurance when purchasing property. It is only years later that people begin to consider their own potential need for care – often prompted by witnessing the level of support required by their ageing parents.
A typical LTC product pays annuity benefits once the claim definition is met. By reducing the benefit period from a lifelong care annuity to a shorter duration – such as one based on the average length of care or life expectancy – the insurance premium can be lowered. However, this means the policyholder accepts the risk that, in the case of longer survival, their assets and insurance benefits may not be sufficient to cover the higher costs of care.
As seen in the previous paragraph, LTC risk increases with age. Against this background, it is not surprising that the risk premium for LTC insurance becomes more expensive as the policyholder gets older. To secure a policy with affordable premiums, it is advisable to purchase insurance at a younger age. Since the burden of illness also rises with advancing years, it is more likely that the policyholder will pass the risk assessment when younger. For LTC products, especially those with a dementia benefit trigger, thorough underwriting is important to prevent anti‑selection.
However, insurers can also tailor their underwriting guidelines more specifically to the senior target group. Generally, as people age, their medical histories tend to grow longer, and chronic conditions become more common. When underwriting a 70‑year-old applicant the benchmark should not be a healthy 30‑year-old with no medical history. Underwriting guidelines can be adapted for seniors while still ensuring adequate risk selection.
An LTC benefit can be integrated into other insurance products and increase the benefits accordingly. A combination with Term Life, Disability Income insurance, Essential Ability insurance or Deferred Annuity insurance would make sense – depending on the local insurance market. This allows LTC to be offered to younger customers and adds value to the underlying product. At younger ages LTC premiums remain low and applicants pass medical underwriting more easily.
When the LTC cover period is limited to the time before retirement the additional LTC benefit is relatively inexpensive because the probability of needing care at this age is low. A shorter cover period could therefore be a good starting point for insurers to gain policyholders’ interest in LTC products – followed by product offers with a more comprehensive cover later. Expanding the LTC cover period into higher ages would increase the risk premium accordingly.
If policyholders generally want to insure themselves against the risk of disability, it is reasonable also to draw attention to the risk of needing LTC after retirement. In addition, insurance premium payments for Disability Income that end at retirement could potentially be redirected towards buying LTC insurance.
A Whole Life insurance product with an accelerated LTC benefit might be more attractive to consumers than both insurance concepts separately. The guaranteed death benefit ensures that the policyholder receives a payment at the end of life – even if no LTC benefit was claimed previously. This should alleviate the policyholders’ concern that they have paid premiums but received no insurance benefit in return. And if the policyholder requires care before death, they can use the insurance payout during their lifetime to cover care costs.
Especially in the German market, we see various combinations of Disability Income (or Essential Ability) coverage with an LTC rider:
An Immediate Needs Annuity (also known as Immediate Care Annuity) is a specialised insurance product designed in the early 1990s in the UK to fund LTC costs for someone who already needs care. The product idea is that an individual in need of care buys this product when entering a care home or requiring home care. The care costs will be paid by the insurance company – usually directly to the care provider. In exchange for a single lump sum premium the insurer pays a guaranteed income for life. The longevity risk (including the risk of outliving funds) transfers from the policyholder to the insurer. Regardless of how long the policyholder in need of care survives the future care costs will be financed through insurance benefits. This insurance product can also be used for asset-protection purposes.
Underwriting is typically based on age, gender, health condition and care needed. Poorer health generally means a lower premium because life expectancy is shorter.
The target group for this product are wealthier households, because a single lump sum must be paid at the policy commencement date. There is an upper limit as very wealthy people may have sufficient financial resources to cover all care costs.
Loss aversion may be a barrier to purchasing such a policy. Should the policyholder pass away shortly after acquisition, the lump sum paid could greatly exceed any benefits received. To address this concern, insurers in the UK offer a premium refund feature: if the policyholder dies within the first six months following the start of coverage, most of the premium is reimbursed.
For couples, it is important to assess the financial resources available to cover the potential LTC needs of both partners. Statistics show that people in a partnership often provide mutual support if one partner requires care, thus reducing the financial burden of care dependency. However, household income usually drops significantly once one partner passes away creating an increased care risk and a greater gap in provision for the surviving partner.
Gen Re’s Partner Product concept uses a joint lives approach. The product pays out a funeral benefit when the first partner dies and after this event it functions like a single-person product providing an LTC and funeral benefit for the second partner. Unlike LTC products for one person a partner product entails not only a care risk but also a death risk. Consequently, the underwriter must consider not only a potentially elevated LTC risk but also a potentially elevated death risk. Compared to two corresponding single life policies the premiums for the partner product are far lower and the price advantage increases with the entry age.
Another approach to create an LTC product with affordable premiums is to introduce an additional requirement that must be met before benefits are paid to seniors in need of care. For example, this condition could consider the health status of the caregiver – usually the children. In this way, insurance coverage can be more precisely targeted to situations where family support is no longer available.
The insurance industry is being called upon to support customers to secure their future care costs by offering suitable products. Particularly in Asia, where the population is expected to age at a high rate in the future, it will be interesting to see which insurance solutions will be developed in the coming years.
