Insurers factor in Hong Kong’s ever-ageing population

The city’s major firms are now offering longer-term annuities, as more policyholders expect to live well after retirement

PUBLISHED : Friday, 12 August, 2016, 8:53pm
UPDATED : Friday, 12 August, 2016, 10:48pm

Do you want to live forever? Yes, of course. But make sure you have a good retirement plan, and health care.

With Hong Kong people now living longer than anyone else, there has been a surge in demand for insurance products to cover the risks of living to a ripe old age, a time when probably life savings have run out.

To respond to the needs of its ageing clients, MassMutual, AIA, FWD and BOC Life are among the majors who have now extended their life and annuity coverage, from the previous normal 100 years old, up to 120 years old.

The record holder for the oldest person in the world was Misao Okawa who died last year after turning 117.

According to data released by Japan’s health and welfare ministry issued last month, the average lifespan for women in Hong Kong is 87.32 years, and local men can expect to live an average 81.24 years, that’s the healthiest totals globally.

Japanese women took second place at 87.05, while Icelandic and Swiss men shared the second position in the men’s category at 81 years.

There are policyholders who are now demanding more retirement, medical and long-term care products, which are new business opportunities for insurers
David Alexander, Swiss Re’s head of property and casualty reinsurance products

Japan now has 30,000 people over 100 years old. The UK’s Queen Elizabeth II just celebrated her 90th birthday, legendary American actress Olivia de Havilland – best-known for her role as Melanie Hamilton in Gone With The Wind – celebrated her 100th birthday last month, while Spartacus star Kirk Douglas who will celebrate century on December 9.

The Hong Kong government estimates some 9.1 per cent of the local population will be over 85 years old in 2050, up from just 2.4 per cent this year.

But the city may well be the hardest to live in when it comes to the cost of pension, health and dependency insurance provision.

Swiss Re head of property and casualty reinsurance products David Alexander said the ageing population provides both opportunities and challenges to the insurance sector.

“There are policyholders who are now demanding more retirement, medical and long-term care products, which are new business opportunities for insurers.

“But some of Hong Kong’s older people may find it hard to even get cover [and find it expensive] if they have suffered from illness diseases before,” Alexander said.

Sohila Kwan, vice president of life and health in Asia at Swiss Re, said the ageing problem is not only a Hong Kong but also a global issue.

The number of elderly in Asia will nearly double between 2010 and 2030, from 288 million to 572 million. Globally, there could be 1 billion people older than 65 years in 2030, up from 530 million in 2010.

“With the rapidly ageing population, the [insurance] industry needs to step up its efforts to help people better prepare.

“In particular, insurers should expand the scope of their current product offering to focus on paying for advanced-stage care needs,” Kwan said.

“It is imperative that consumers take their future care needs into consideration when planning for their future retirement,” she added, as medical costs in Hong Kong continue to soar..

In Hong Kong, some insurers now have whole-life policies that carry a maturity date when a policyholder hits 100 years old.

Policyholders get a lump sum the same as the compensation amount.

None of the insurance companies contacted by the South China Morning Post had clients over 100 years old, however. But local insurance companies are now considering, even capturing business from those over 100 years.

Tay Keng Puang, managing director and chief executive of MassMutual Asia, said the insurer has even extended its guarantee to policyholders so they can still get payments after their hit the century.

“MassMutual’s Target Annuity Lifetime Saver, as an example, guarantees lifetime annuity income even if you live beyond 100 years old.

“In other words, the policy will not end at age 100, but will terminate upon the death of the insured,” Tay said in an interview with the Post.

People used to take out life insurance to hedge the risk of ‘dying too soon’. With longevity steadily increasing ... awareness of having proper retirement planning in place has significantly increased
Tay Keng Puang, managing director and chief executive of MassMutual Asia

He said traditionally, many policyholders buy policies for protection for their family so the firm pays out to the family upon his or her death.

But people in later life often have different demands.

Annuity products allow policyholders to pay a lump sum to the company, and then the company provides a monthly payment until death.

“People used to take out life insurance to hedge the risk of “dying too soon”.

“However, with longevity steadily increasing over the years, awareness of having proper retirement planning in place has significantly increased.

“Our annuity business has enjoyed robust growth of over 70 per cent over the past three years,” Tay said.

MassMutual is the market leader in the annuity market, with more than 55 per cent market share by policy count, according to statistics published by the Office of the Commissioner of Insurance.

And Tay said it’s not just those nearing pension age that are seeking policies. Young people too, most often in the 29- to 39-year-old bracket, are now regularly buying annuity products to save for well into their old age.

Margaret Kwan Wing-han, head of retail banking and wealth management at Hang Seng Bank, said its annuity products have become its most popular class of product in the past decade. Its oldest clients are in their nineties, and there are more of them.

“Hang Seng Insurance annuity products make payments for a fixed-term rather than until the death of the life insured,” she said.

BOC Life has even extend its life policy’s “maturity date” to 121 years old, up from the normal 100, as it says more clients are demanding cover until death.

“The silver-hair market is emerging, as the number of healthier and wealthier senior citizens continues to grow. These people are concerned about their retirement, which can be for a prolonged period,” a spokeswoman of BOC Life said, rather than simply providing for their families if they die.

AIA, Hong Kong’s largest insurer, also allows its death cover to go beyond 100 years old, but its spokesman added that the company considers the city’s ageing population are also more likely to ask now for medical insurance products, too, so they are providing a boost to other types of insurance.

Besides life and retirement protection, AIA says it is paying much closer attention to helping older customers ensure their medical needs are covered properly.

It has launched a medical plan, for instance, offering HK$10 million in immediate payout or a lifetime limit of HK$25 million, for policyholders around Asia.

Two years ago, FWD launched an annuity plan that covers policyholders up to 105 years old, and they could buy that cover even after retirement – a very clear commitment to catering for the needs of the city’s elderly, said a spokeswoman

“The age range of customers interested in life insurance has grown much wider. We even receive enquiries about life insurance from customers over 80 years old from time to time,” she added.