Interest in insurance products for senior care and impaired lives is nothing new. Both have been big business in Asia for at least a decade.
So, what is new? The speed at which senior segments are evolving – and expanding – throughout the region. In the past, life and living benefit products in Asia have been narrowly tailored around unique needs within certain countries. Today, many of these distinctions are collapsing amid sweeping demographic and economic changes.
Insurers throughout the region face rising demand for cost-effective short- and long-term solutions to the needs of ageing populations. For example, supplemental senior care and impairment cover are gaining popularity in many Asian markets. In addition, demand for more holistic eldercare solutions is also on the rise, inspiring development of bundled products, or insurance policies containing non-insurance products and services. To seize opportunities, product developers would do well to fully understand the forces reshaping insurance needs across the continent.
Government-sponsored care for seniors has long been the norm in Asia. However, rapidly expanding, fast-aging populations are forcing a reckoning.
At a time when record numbers of people in more advanced Asian economies are living past age 80, governments are challenged by higher incidence of the diseases of aging and longer potential lifespans for both healthy and impaired lives. Most elderly populations in the region rely primarily on government programs, which are supplemented by private products targeted to specific conditions.
Yet government programs today are stretched thin, and supplemental single-need cover for seniors represents a growing opportunity. Typically, supplemental senior products in Asia cover long-term care, cognitive impairments, chronic conditions, and the diseases of aging. Japan, for example, supplements its government-provided dementia and long-term care insurance with private products. Korea’s senior supplemental market mostly consists of simplified- and standard-issue dementia products, due to increasing rates of cognitive disorders, and Taiwan’s senior supplemental products cover long-term care and dismemberment.
Singapore’s approach to senior care has been more holistic. Next year, its nearly 20-year-old government scheme, ElderShield, will be supplanted in 2020 by CareShield, which will be wholly government-run, mandatory for residents age 30 and up, and have various improvements currently covered by supplemental products. Private companies will still be able to provide supplemental cover, although it is not yet known what type of cover will be permitted. Current supplemental products increase payouts, extend payout duration to lifetime, and reduce the activities of daily living (ADLs) needed to trigger cover.
This opportunity does not come without risk. In Asia, insurers could face rising future claims exposures due to greater longevity and morbidity rates. Claims for those age 75 and older are known to rise exponentially, but as claims data for individuals age 80 and up is sparse and hardly exists for age 90 and above. Exposures may build more rapidly than an insurer's awareness of the risk.
Designed specifically to cover impaired risks, impaired solutions offer another response to the expanding Asia senior market. As needs and treatments have changed, single-condition impaired risk insurance offerings, especially diabetes and cancer products, have evolved significantly during the past four years, both in more developed and developing markets.
The challenge when developing impaired life products is risk heterogeneity. The uncertainty range for impaired risks is wider than that of other health risks, and each impairment – even within a category of impairments – has its own claims-risk profile.
With cancer, for example, the claims incidence rate early in policy duration is higher than normal, but if the patient survives, that rate can converge to one similar to a healthy life. In addition, breast cancer is a lower-risk condition than liver cancer. Diabetes products, meanwhile, have been moving from a emphasis on pure illness care to one that rewards good disease management with adjusted benefits and/or premiums. For diabetes, the claims incidence rate early in a policy’s duration is not much higher than that of a normal life, but as the patient ages, risk escalates. The long-term cost of covering diabetes can become quite high, so an emphasis on incenting sound disease management can be quite cost-effective.
When underwriting, it is essential to ensure balance. Finding the right level of risk for impaired lives can be challenging, as a shift in either direction could change portfolio results dramatically.
Another growing product category involves bundled insurance products, where protection cover is combined with appropriate and useful non-insurance products and services. Bundles can incorporate general wellness and disease management tools, non-insurance-related senior care services, and even genetic tests. These products also can consist of non-insurance products with insurance cover attached.
Bundles generally target healthy lives but can also be structured to provide specific disease management services for impaired lives. Many companies are bundling wearable devices with their insurance products and providing premium discounts as well as discounts for related products and services in exchange for the data provided by these devices.
Is bundling the protection model of the future? Right now, that’s not an easy question to answer. Whether this trend prevails may depend upon how clearly policyholders experience tangible benefits from bundling insurance with other goods and services. Merely gaining access to additional services may not motivate consumers to buy insurance policies. Wellness programs that provide benefits such as lower premiums from policy inception by incorporating ongoing health improvements might boost use of wellness programs and improve bundled product sales.
Traditionally, life and living benefit products in Asia have been needs-driven – evolving based on demographic characteristics such as population age or income, public health conditions, and/or public healthcare systems. Such country-to-country differences, however, have been narrowing in recent years. For Japan’s insurers, this means a wealth of inspiration is increasingly available.