Going online and digitalisation need not be unfriendly to the elderly. Insurers in China are taking care to keep their ageing customers in good humour and are also ensuring that the ageing population does not adversely impact their risk pools. Asia Insurance Review spoke with SCOR’s Ms Chloe Wang to get the lowdown on how insurers are helping their ageing customer bases.
The move to online and the digitalisation of insurance sales and operation processes is a current development trend in China’s insurance industry and looks set to continue in the future.
As the shift to online and digitalisation of insurance happens, many insurers are focused on ‘metaverse’-style of communications to deal with their young millennial and generation-z customers.
Many elderly customers, however, still prefer a personal visit to the physical offices if possible and paper-based communication. Are the ageing and elderly getting left behind as the juggernaut of digitalisation rolls on? How are the insurers catering to them? How do they deal with paper-based claims?
Making things easy for ageing customers
Speaking with Asia Insurance Review, SCOR head of life and health in China Chloe Wang said, “The process of digitalisation does bring convenience to the elderly in some circumstances, but it might also bring them trouble. After all, digitalisation can be unfriendly and sometimes even a stretch for many elderly and ageing people. They are, however, not being left behind.”
Ms Wang said, “In December 2021 China Banking and Insurance Regulatory Commission issued a plan ‘to strengthen the protection of financial consumers’ rights and interests and improve the suitability of financial services for the ageing’ which emphasises that banks and insurers should optimise traditional and intelligent services based on the needs of elderly consumers, vigorously develop financial and insurance technology suitable for the elderly and help the elderly to bridge the ‘digital divide’.”
Insurers are seized of the problem and make genuine efforts to cater more to the elderly to alleviate the difficulties posed by digital marketing trends and intelligent technology. Very often insurers now reach their older and ageing customers through their children. They bridge the digital divide through traditional channels such as agencies, bancassurance or telemarketing.
Ms Wang said, “To take their initiatives for the elderly and ageing customers further, in terms of insurance understanding, purchasing covers and claiming, insurers are designing simple and practical elderly care models in apps, providing a one-button call manual service on customer service hotlines, making use of modern service means and internet technology to simplify the claims process for them.”
Increasing life expectancy and life actuarial tables
When many life insurance actuarial tables were drawn up, they would have predicted average life expectancies that are far shorter than the present day reality. Now the life insurance industry has to handle and cope with the actuarial burden of a significant number of their customers living significantly longer than they were predicted to.
Speaking about this significant gap Ms Wang said, “Insurers in China generally deal with the longevity risks in the following ways.
- Risk hedging through more protection products (products with a higher proportion of mortality margins and morbidity margins)
- Control the proportion of mortality margins in annuity products. Currently, the interest margin of most annuity products is still the main source of profits
- Maintain the insurance period structure of annuity products and carefully develop whole-life annuity products
- The underwriting rules for annuity products are very loose at present – some customers who are not in good health will come in, and their longevity risk will be relatively low, which also forms a certain degree of risk hedging
- In the pricing and profit testing of annuities, certain mortality improvement margins should be added to the model, along with stress tests for longevity risk and future trends should be taken into reasonable consideration in the premium.
Ageing population demands different products
People in Asia are living longer and they are also working longer. China’s average life expectancy is expected to reach 78.3 years in 2025, up from 77.3 years in 2019 according to the country’s 14th five-year plan (2021-2025) for public service. This changing demography dictates changes in the demand pattern of insurance products.
Ms Wang said, “It is true that elderly are working longer than before. Although the Chinese government has not officially raised the retirement age yet, we have seen more and more retirees start new jobs after retirement, whether part-time or full-time.
“From the insurance supply side, the government and regulators have been re-emphasising and encouraging the supply of products for the elderly and for some major products such as critical illnesses, mid-end Medex and whole life, the maximum insurable age is continuously rising.”
She said, “Insurers involved in developing and marketing products for the elderly and ageing population are getting more innovative and are also paying more attention to these aspects. The supply of specific insurance products for the elderly is expected to be more varied and abundant in the future.”
As people age, risk pools get ‘unhealthy’ but not a major issue in China
For health insurers – more ageing people means more unhealthy people in the risk pool. This could be one of the major factors behind health insurance and healthcare inflation. Ms Wang said, “Indeed, the higher the proportion of the elderly in the risk pool, the more serious the deterioration level of health insurance claims will be, which is also determined by the age characteristics of the incidence curve.”
She said, “The influence of this factor is, however, limited on China’s health insurance market at present, because most of the domestic health insurance for middle-aged and elderly insured people falls under relatively strict underwriting rules. Therefore, the proportion of the elderly in the health insurance risk pool, especially those who are not healthy, is relatively low.”
The pandemic has impacted the ageing and the aged most. The survivors’ general health including their mental health has suffered. The pandemic is still having a significant negative impact on China’s insurance market, both in terms of sales and claims, but it has gradually returned to normal in the past two years.
Ms Wang said, “During the pandemic, China’s insurance industry has indeed made a great contribution, including related supplies and free insurance of donations and many companies have also developed new insurance products and responsibilities, mainly guarantees for critical illnesses, death and isolation allowance due to COVID-19. But with regard to elderly survivors, we have not seen any special products related to COVID-19.” A