Insurers Must Adapt to Demographic Shift, Says Capgemini Report
A new report from the Capgemini Research Institute has predicted that the aging global population will significantly impact the property and casualty (P&C) insurance industry by 2050. The World Property and Casualty Insurance Report highlighted how demographic changes, evolving consumer behaviors, and shifting risk profiles will push insurers toward more prevention-oriented and modular insurance models.
The report also underscored the increasing reliance on technologies like AI and predictive analytics to transform underwriting and improve risk management practices in the industry. According to the report, by 2050, the global dependency ratio – or the number of seniors per 100 working-age adults – is expected to increase from 16% in 2024 to 26%. This demographic shift will influence consumer behavior, particularly in terms of spending patterns. Older consumers are expected to prioritize spending on experiences, such as travel and home improvements, over large purchases like new homes or cars.
This change in priorities will impact the types of coverage insurers offer, with a greater emphasis on flexible, lifestyle-driven products. For example, auto insurers are expected to shift towards coverage for shared mobility and commercial insurance, as older adults reduce their driving and use ridesharing services more. Personal property insurers may need to adapt their offerings to reflect the rise of smaller, multi-generational homes, incorporating age-friendly features and preventive solutions to meet the needs of older homeowners.
Alongside demographic changes, insurers will have to contend with evolving risks driven by automation and the changing workforce. With fewer people in the workforce and more automation in workplaces, P&C insurers will need to adjust underwriting models to account for these shifts in risk. Commercial lines will need to reflect new risk profiles, while personal lines will require customized policies for an aging population.
Capgemini’s Adam Denninger noted that insurers should analyze their portfolios to understand their exposure in maturing markets and adjust their service models accordingly. He emphasized that leveraging AI and predictive insights to enhance customer experience will be critical in remaining competitive in an evolving market.
The report also highlights the challenges posed by climate change. By 2050, nearly 99% of the global population will be at risk from droughts, while 80% will face risks from excessive rainfall. These climate-related risks, combined with increased urbanization, will create interconnected risks, increasing the potential for losses. Insurers will need to incorporate climate risk data and predictive analytics into their underwriting processes to manage these emerging risks more effectively.
Predictive insights and AI-powered decision-making will be essential for underwriting in the future. While 88% of insurers acknowledge the importance of advanced underwriting capabilities, only 17% have developed mature systems. Insurers are encouraged to adopt data-driven approaches to improve efficiency, streamline operations, and enhance risk management.
As insurers prepare for the future, the report urges them to recalibrate service models to meet the needs of an aging population, invest in AI and automation, and use predictive analytics to refine underwriting processes and manage evolving risks. These strategies will help insurers navigate the changing landscape and position themselves for long-term success.
