The following was originally published by Middle East Insurance Review.
Every insurance market will have to grapple with the inevitability of an aging demographic. How can (re)insurers ensure that the elderly customers are not left behind and the industry is equipped to take care of them. How do insurers market products and address increasing longevity? Can the industry contribute to a healthy society? Middle East Insurance Review speaks with RGA Middle East’s Karuna Muthuswamy for his thoughts on these subjects.
The Middle East healthcare industry is poised for strong growth and will be aided by expansion of mandatory health insurance and a growing and ageing population in the region according to an industry report.
As the population ages, the question is no longer about mortality – the risk of dying prematurely and leaving dependents without financial protection. The major concern shifts to outliving one’s own financial resources; lifelong pensions, medical and long-term care become important.
While elderly care in the Middle East has traditionally fallen on the state and family, this social dynamic is changing now. Dispersed families and the excessive strain on the state social security system are resulting in fewer contributors supporting a higher number of beneficiaries.
Speaking to Middle East Insurance Review, RGA Middle East Deputy Medical Director and Chief Actuary Karuna Muthuswamy said of this trend, “What do the elders actually require? Ideally, people would save during their active working life for their later years. However, there is a tendency to view this as a distant need, leading to inadequate retirement planning and financial protection at older ages – financial independence is becoming critical for dignity in later life. Products, services, and distribution approaches are therefore tailored for different segments.”
Muthuswamy said, “Products offering services, not just cash, are important for the elderly segment. For example, offering access to care homes as opposed to paying just cash. Insurers often use multi-channel approaches, combining traditional methods (print ads, direct mail) with digital marketing, but personalized communication and face-to-face interactions through agents or brokers also remain important.”
“Many insurers maintain dual systems to process both digital and paper-based claims as the elderly may prefer paper-based communication. Some use scanning and Optical Character Recognition technology to digitize paper claims for more efficient processing. Customer service representatives are often trained to assist elderly clients with claim submissions over the phone,” he said.
He said, “At RGA, our purpose is to make financial protection accessible to all. We work with our insurance partners in a variety of ways, including:
Addressing the impact of longer life expectancy on underwriting, Muthuswamy said, “Yes, customers are living longer, and this burden affects not only insurers but also state-sponsored social security systems at large."
“Life insurance product pricing incorporates an element of mortality improvement, which is reviewed periodically. Interestingly, people living longer than expected can benefit insurers offering mortality protection products, to the extent the longevity exceeds expectations.”
“Protection-cum-savings insurance products in the region tend to last for shorter durations, around 5-10 years, due to low persistency and so the impact is less significant. The real challenge with longevity arises in annuity products, which require long-term predictions,” he said.
Reinsurers and insurers regularly update mortality tables and use predictive modelling to adjust for longevity trends. For annuity products, the risk classification from an underwriting perspective is inverted – healthier customers would need to pay more than those less healthy.
He said, “Insurers might introduce new products designed for longer lifespans, such as policies that pay out at later ages. Some may use financial instruments like longevity swaps to hedge against the risk of customers living longer than expected. Reinsurers play a crucial role in helping insurers manage this longevity risk through various reinsurance arrangements.”
On changing retirement patterns, Muthuswamy said, “In many countries, retirement ages are increasing and people are working longer. This trend varies by region, influenced by factors such as economic conditions and cultural norms. Generally, people are living healthier lives due to advancements in healthcare and increased health awareness.”
“There is, however, also a rise in chronic conditions related to lifestyle factors (such as obesity, diabetes and hypertension). The concept of healthy aging is also gaining prominence, focusing on quality of life in later years.”
Asked if an aging population impacts healthcare inflation and, in turn, results in increasing health insurance, he said, “Yes, an aging population is a significant factor in health insurance and healthcare inflation. Older individuals typically require more frequent and expensive medical care.”
“Chronic conditions become more common with age, leading to higher healthcare utilization. Advanced medical treatments that extend life are often costly."
“Other factors contributing to inflation include the rising costs of medical technology and pharmaceuticals, the increased demand for healthcare services across all age groups, and administrative costs and regulatory requirements.”
Muthuswamy said, “Especially after the pandemic, mental health has garnered wide attention, seniors are impacted more, and reinsurers are likely adjusting their risk models to account for the increased prevalence and recognition of mental health issues. This adjustment involves potential increase in claims related to mental health conditions and the need for more sophisticated underwriting and claims processes to assess mental health risks.”
“Reinsurers provide expertise and support to insurers in managing mental health-related risks. While mental health issues increase risk for insurers, they also present opportunities to develop new products and services specifically addressing mental health coverage.”
“Reinsurers are particularly focused on the intersection of mental health and age-related conditions like dementia. They are also researching the long-term impacts of isolation and other pandemic-related factors on senior mental health,” said Muthuswamy.
He said, “RGA has launched a dementia-only product in Japan, addressing a significant need. Over 4.6 million people in Japan suffer from some form of dementia, with the total expected to soar to about 7.3 million people – or one in five Japanese aged 65 or over – by 2025. The Japanese government aims to reduce dementia cases by 6% in those aged 70 and older over the next six years.”
“Technology is crucial to developing solutions. For example, mobile applications allow users to evaluate their cognition across eight brain functions such as executive function, working memory, and impulse control. The results can also be used by underwriters to ascertain the cognitive health of the applicant.”
According to Muthuswamy, “Many insurers are indeed attempting to integrate wellness and prevention into their products in a variety of ways. These efforts include offering premium discounts for healthy behaviors (regular exercise, nonsmoking, healthy diet, and more), providing wearable devices or apps to track health metrics and by including preventive care coverage in health insurance policies.”
He said, “The success of these initiatives varies. Some programs have shown positive results in improving customer health and reducing claims. However, challenges persist, including data privacy concerns, customer engagement issues, and difficulties in measuring long-term impact. Like in many parts of the world, in the Middle East cultural factors and regulatory environments influence the adoption and success of such programs. Successful programs tend to leverage technology and offer tangible incentives for healthy behaviors.”
RGA experts are eager to engage with clients to better understand and tackle the industry's most pressing challenges together. Contact us to learn more about RGA's capabilities, resources, and solutions.
