Insuring Longevity: Adapting Life Insurance to an Aging World

Introduction

As life expectancy increases and birth rates decline, many countries are experiencing a demographic shift toward an older population. This transition presents both challenges and opportunities for the life insurance sector.

By analyzing key trends, risks, and strategies, this report aims to provide insights into how life insurance providers can adapt to meet the demands of an aging society while maintaining profitability and ensuring long-term financial security for policyholders.

World’s Population of +65

The global population aged 65 and older has surged by 436% from 1960 to 2023, with a CAGR of 2.7%, reflecting one of the most profound demographic shifts in modern history.

This steady acceleration is driven by a combination of rising life expectancy due to advancements in healthcare, declining fertility rates, and improved living standards across many regions. The trend has particularly intensified since the early 2000s as medical innovations, better disease management, and economic development have contributed to longer lifespans. Additionally, urbanization and shifting societal structures have reduced birth rates, accelerating the imbalance between younger and older generations. The compounding effect of these factors signals a continued trajectory toward an aging world, presenting both economic challenges—such as increasing healthcare and pension burdens—and opportunities for industries like life insurance, senior care, and wealth management, which must adapt to an expanding elderly consumer base.

In the case of developed economies, OECD countries have experienced a steady and accelerating rise in the share of elderly individuals, with those aged 65+ now making up nearly 18% of the total population, up from below 9% in 1970. This trend is largely driven by higher life expectancy, fueled by superior healthcare systems, medical advancements, and better living conditions. Wealthier nations tend to have lower birth rates and longer lifespans, leading to a demographic shift where a shrinking working-age population must support an expanding elderly cohort.

This aging trend has profound implications for life insurance and financial services. Longer life expectancies increase the duration of retirement, intensifying demand for annuities, long-term care insurance, and wealth management solutions. At the same time, as people live longer, traditional life insurance products must evolve, with insurers adapting underwriting models, pricing strategies, and policy structures to account for extended lifespans. Moreover, the rising elderly population increases the need for end-of-life planning, inheritance solutions, and hybrid insurance products that combine savings with long-term care coverage. The combination of wealth and longevity in these economies presents both challenges and opportunities, requiring the insurance industry to innovate and cater to a rapidly aging, yet financially stable, demographic.

+65 Aged People per 100 working aged people in developed countries

The dependency ratio of elderly individuals (+65) per 100 working-age people (20-64) in OECD countries has been steadily rising and is projected to accelerate significantly in the coming decades. Historically, this ratio was relatively low, remaining under 30 elderly per 100 workers until the early 2000s. However, as life expectancy increases and birth rates decline, the ratio is now climbing sharply, with forecasts suggesting it could exceed 60 by 2050 and continue rising toward 70 by 2100. Some countries within the OECD will experience even more dramatic imbalances, with the highest projections surpassing 100 elderly per 100 workers, meaning a one-to-one ratio between retirees and those in the workforce.

This demographic shift has profound implications for life insurance and financial stability. As fewer workers support a growing aging population, pension systems and public healthcare funding will be strained, increasing the demand for private life insurance, long-term care coverage, and annuities. With individuals living longer and spending more years in retirement, life insurance providers must adapt products to account for extended payout periods, rising healthcare costs, and evolving estate planning needs. Moreover, the shrinking workforce relative to retirees may lead to higher policy premiums and increased scrutiny on underwriting standards, as insurers balance risk exposure with profitability.

Additionally, this shift will create opportunities for innovative insurance solutions, such as hybrid life and health policies, longevity risk hedging, and digital insurance platforms tailored to senior needs. The industry must prepare for a future where traditional life insurance transforms into a broader financial security framework, ensuring that individuals can sustain their quality of life well into old age while managing intergenerational wealth transfers efficiently.

Life Expectancy Growth: The Main Driver of the Aging Population

Life expectancy has been on a steady upward trajectory, significantly shaping demographic trends and economic structures worldwide. In OECD countries, life expectancy has risen from around 60 years in 1950 to over 80 years today, while the global average has also increased substantially, narrowing the gap with developed economies. Projections indicate this upward trend will persist, with OECD life expectancy approaching 90 years by the end of the century.

This unprecedented longevity growth is the primary force behind the increasing elderly dependency ratio, as more individuals live well beyond traditional retirement ages. Key drivers of this life expectancy rise include medical advancements, improved disease prevention, better living conditions, and enhanced nutrition. 

Innovations in healthcare, such as personalized medicine, biotechnology, and artificial intelligence-driven diagnostics, continue to push survival rates higher, further reinforcing this trend.

For life insurance, rising life expectancy presents both structural challenges and market opportunities:

• Longer payout durations: With retirees living decades past retirement, life insurance products such as annuities and whole-life policies must adjust for extended longevity risks.

• Evolving mortality risk: Traditional actuarial models based on shorter life expectancies must be recalibrated to account for longer lifespans and changing disease patterns.

• New demand for hybrid policies: With aging populations requiring more healthcare and long-term care, insurance providers are shifting toward integrated life, health, and retirement planning solutions.

• Financial sustainability risks: As policyholders live longer, insurers must rethink pricing strategies to maintain profitability while offering competitive coverage.

In a world where living to 90 or even 100 years old becomes increasingly common, life insurance must transform from a death-benefit-focused industry to a longevity planning partner, providing not just financial security for beneficiaries but also support for aging individuals throughout their extended lifetimes.

Geographic approach: Aging Population vs. Insurance Maturity

The chart that follows, illustrates the relationship between the percentage of the population aged 65+ in 2023 (X-axis) and insurance expenditure as a share of commercial services expenses over the last 10 years (Y-axis), serving as a proxy for insurance market maturity. 

It highlights key trends across the world's top 25 countries by elderly population, revealing stark contrasts between developed and emerging economies in terms of insurance penetration.

Key Insights:

1. Developed Economies: High Aging, High Insurance Maturity

   • Countries with both a high aging population and strong insurance market maturity include Japan, Germany, the United Kingdom, and the United States.

   • Japan has the highest proportion of elderly people (~30%), yet its insurance market shows lower penetration relative to the UK and US, suggesting potential gaps in life insurance uptake despite the need.

   • The United Kingdom leads in insurance maturity, with over 25% of commercial services spending allocated to insurance, highlighting its well-established life insurance industry.

2. Developed Economies with Moderate Insurance Penetration

   • Italy, France, Spain, and Canada fall into this category, with significant aging populations (~20-25%) but lower insurance expenditure compared to the US and UK.

   • This indicates varying levels of insurance adoption despite demographic pressures, possibly due to strong public pension systems reducing reliance on private insurance.

3. Emerging Markets: High Aging, Low Insurance Maturity

   • Countries like Russia, Poland, Ukraine, China, and Thailand exhibit relatively high aging populations (~15-20%) but low insurance penetration (~2-5%).

   • These economies face a growing need for life and retirement insurance solutions but lack well-developed insurance markets, presenting opportunities for expansion.

4. Low Aging, Low Insurance Maturity: Developing Markets Lagging

   • Nations such as India, Pakistan, Egypt, Indonesia, the Philippines, and Ethiopia show low aging populations (~5-10%) and minimal insurance penetration (<5%).

   • This suggests that life insurance demand remains underdeveloped, as economic priorities are likely focused on more immediate financial needs rather than long-term coverage.

5. Outliers & Unique Cases

   • Nigeria stands out with relatively low aging (~5%) but higher-than-expected insurance maturity (~15%), indicating a potentially expanding insurance industry despite its young demographic.

   • Mexico and Brazil show moderate insurance penetration despite relatively low aging, suggesting cultural and economic factors driving insurance uptake independent of demographic pressure.

Implications for Life Insurance

• Market Expansion Potential: Countries in the mid-range of aging (Russia, China, Thailand, and Brazil) represent key growth opportunities for insurers as their elderly populations rise.

• Public vs. Private Insurance: Nations with strong public pension and healthcare systems (France, Italy, Spain) may see slower private insurance adoption, while US/UK-type markets rely more on private sector solutions.

• Demographic-Driven Demand: Aging-heavy nations with underdeveloped insurance markets (Japan, China, Poland, Ukraine) will face pressing needs for retirement and longevity-focused insurance solutions.

Conclusion

The aging population and rising life expectancy are reshaping the global life insurance industry, creating both challenges and opportunities for insurers. As longevity increases, traditional life insurance models—designed around shorter lifespans and lower elderly dependency ratios—must evolve to address longer payout periods, growing healthcare costs, and increased financial security needs for retirees.

In developed economies, where the elderly population is rapidly expanding, insurers face rising claims payouts, pressure on profitability, and changing consumer needs. The demand for annuities, hybrid life-health policies, and long-term care solutions is expected to surge as public pension systems come under strain. At the same time, markets with high aging but underdeveloped insurance sectors—such as Japan, China, and parts of Eastern Europe—present significant opportunities for expansion and product innovation.

Emerging economies with low insurance penetration and rising life expectancy will experience increasing demand for financial planning and protection products, but regulatory, economic, and cultural barriers remain key obstacles to market development. Insurers must invest in digital distribution, financial education, and tailored policies to unlock potential in these markets.

Looking ahead, the role of life insurance is shifting from a death-benefit-centric model to a longevity-focused financial security system. The industry must adapt by developing flexible products, leveraging technology for personalized underwriting, and collaborating with healthcare and retirement planning sectors to create comprehensive solutions for an aging world. Insurers that proactively address these demographic shifts will be well-positioned to thrive in the evolving global landscape.

Sources & References

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