Property insurers must prepare for aging population: report

The global population is expected to hit nearly 9.7 billion people by 2050, but beyond that, the nature of the population itself is changing due to aging. This is expected to fuel a rise in the “global dependency ratio,” or the proportion of people ages 65 and older to those of traditional working ages.

As a result, the property and casualty insurance industry will need to prepare for these rapidly changing age dynamics. This conclusion comes from a report published this week by Capgemini, a multinational information technology services and consulting company.

“By 2050, for every 100 working-age people, there will be 26 seniors to support, up from 16 today — a 63% increase,” the report explained. “And in most regions outside of Africa, the imbalance intensifies, approaching nearly one dependent for every three workers.”

This is augmented by a global shift to more urban-centric living. By 2050, nearly 70% of the global population will be living in cities, which concentrates people “and the risks they carry, into denser, more complex environments,” the report stated.

For property insurers, aging and urbanization trends are serving to reshape “the foundation of risk, value and demand,” according to Capgemini. And when people live longer while also crowding into “high-risk zones,” traditional models of homeownership and behavior change in ways that insurers must be prepared for.

The changes serve as a “call to redesign how risk is assessed, products are structured, and portfolios are shaped,” the report stated. This involves making choices that impact practices like loan underwriting and product offerings, as well as the use of new data sources so that insurers can be prepared to operate in an evolving global landscape.

This could involve changing to meet the evolving nature of property ownership, and to shift insurance products to reflect wider economic realities such as the market composition of intangible assets like data and intellectual property.

Property insurance, specifically homeowners insurance, is an increasingly disruptive factor in the homebuying market today, as noted by Odeta Kushi, deputy chief economist at First American Financial Corp.

“Historically, discussions about affordability have centered around mortgage rates, income, and house prices,” Kushi wrote in a social media post on Wednesday. “However, in today’s climate, homeowners insurance premiums have become an essential part of the conversation.”

First American published an analysis this week that describes how economic headwinds and an acceleration of extreme weather events have served to significantly raise U.S. homeowners insurance premiums. This phenomenon has the potential to hit older Americans on a fixed income particularly hard.

This has led some to advocate for the wider availability of property tax deferral programs designed specifically for older homeowners.