Global Dependency Ratio Set to Rise by 2050
The world is facing a significant demographic shift that will transform the property and casualty (P&C) insurance industry by 2050. According to the Capgemini Research Institute’s World Property and Casualty Insurance Report, the global dependency ratio is expected to rise to 26 seniors for every 100 working-age people, up from 16 today. This change will have profound implications for consumer behavior, risk profiles, and insurance models.
Aging Population: A Key Trend in Insurance
The aging of the global population is a critical trend driving the forecasted 4.4% compound annual growth rate (CAGR) for global commercial insurance lines and 3.3% for personal insurance lines. By 2050, the global dependency ratio will reach 26%, meaning there will be 26 seniors to support for every 100 working-age individuals, compared to 16 in 2024. Excluding Africa’s relatively young population, this ratio will reach 31%, up from 18%.
Shifts in Consumer Behavior
As the global population ages, consumer spending habits are expected to shift towards experiences rather than large, fixed purchases. The report found that 45% of consumers plan to increase spending on lifestyle enhancements such as travel, luxury goods, and home renovations. In contrast, 70% do not intend to buy or upgrade to a larger house. These changes, combined with urbanization and technological automation, will significantly impact how P&C insurers serve their customers.
Adapting Insurance Models to Demographic Changes
Auto insurers are likely to transition towards commercial insurance and shared mobility coverage as seniors drive less and rely more on rideshares. Personal property insurance will need to evolve towards preventive, age-friendly options for smaller, multi-generational homes. Commercial lines will have to account for demographic-driven automation and altered risk profiles. “Monumental demographic shifts will have a major and direct impact on P&C insurers,” said Adam Denninger, Global Insurance Industry Leader at Capgemini. “Insurers must analyze their portfolios to understand these sensitivities and develop future-proof service models.”
Rising to the P&C Challenge with Data and AI
The report emphasizes the importance of advanced underwriting enabled by technology. While 88% of insurers recognize its critical future importance, only 17% have mature capabilities. To prepare for the changing demographics, the report recommends that P&C insurers:
- Focus on changing customer behavior by recalibrating geographic footprints and developing age-sensitive service models
- Transform operating models by modernizing data architectures and leveraging AI and automation
- Enhance risk governance through predictive underwriting insights and dynamic portfolio management
These approaches require continuous evolution, with executives focusing on medium-term actions while boards address long-term strategic questions. The integration of climate risk data and predictive analytics will also be crucial in assessing and managing interconnected risks that drive loss potential.
As the insurance industry navigates these challenges, having an edge in customer experience through AI will be vital in protecting against price competition. By embracing novel approaches and leveraging data and AI, P&C insurers can develop more resilient and adaptable business models for the future.
