Elderly Market Expansion: Life and Health Insurance Industries Find Profitable Potential in Growing Senior Population
In India, a demographic shift is underway, with the elderly population set to reach 350 million by 2050. This rapid ageing, combined with declining birth rates and rising longevity, presents a complex challenge that requires integrated financial and healthcare planning solutions.
Financial Vulnerability and Longevity Risk
According to a Niti Aayog report, 78% of elderly Indians will be without any form of pension, making them financially vulnerable in retirement. With limited social security, many seniors face income insecurity. Additionally, the risk of outliving savings due to increasing life expectancy and rising healthcare costs is a significant concern. Standard retirement goals, such as a corpus of ₹1 crore, may prove insufficient as inflation and medical expenses rise, significantly reducing purchasing power over time.
Taxation Disincentives and Low Awareness
Annuity contributions come from post-tax income, and payouts are taxed again as regular income, discouraging adoption due to perceived double taxation. A large portion of the population does not actively plan for retirement, often relying on inadequate pension amounts and having retirement corpus far below what is needed for a sustainable lifestyle.
Solutions for a Secure Retirement
Life and health insurers are developing tailored longevity-linked savings and health plans to tap the fast-growing demographic. Solutions being developed focus on tailored longevity-linked savings and health plans, including deferred and immediate annuity products that provide lifelong income, alongside customized health insurance plans addressing rising healthcare costs in old age.
Deferred Annuity Plans and Immediate Annuities
Deferred annuity plans allow disciplined corpus accumulation during working years, building a reliable retirement fund. Immediate annuities provide guaranteed lifelong income streams that protect retirees from longevity risk.
Addressing Tax Barriers and Enhancing Awareness
Product experts believe more favorable tax treatment on annuity contributions and payouts could encourage wider adoption of retirement products. Advocates stress the need for aggressive saving, prudent investing, and education about inflation and longevity risks to improve readiness for retirement.
Customised Health Insurance
Health plans are increasingly designed to meet specific elderly healthcare needs, accounting for chronic conditions and rising medical costs. Approximately 75% of seniors in India live with at least one chronic condition.
Product Innovations
Product innovations such as partial withdrawal features, joint life annuities, and surrender options with minimal impact can help address concerns about annuities being viewed as inflexible or restrictive.
The Silver Economy
India's elderly population, with their significant purchasing power, represents a vast untapped market. Building a sustainable silver economy requires addressing the challenges of inadequate pension coverage, inflation erosion, tax disincentives, and low financial preparedness. With the right solutions, India can secure income and healthcare for its growing elderly population.
[1] Niti Aayog (2020). New Pension System (NPS) 2.0: A Game Changer for India’s Retirement Income System. Retrieved from https://niti.gov.in/writereaddata/files/document_publication/NPS_2.0_A_Game_Changer_for_India_s_Retirement_Income_System.pdf
[2] IndiaSpend (2018). Why India's Retirement Savings Aren't Enough: A Look at the Numbers. Retrieved from https://www.indiaspend.com/themes/health/why-indias-retirement-savings-arent-enough-a-look-at-the-numbers-66609
[3] IndiaSpend (2019). How India's Middle Class is Facing a Retirement Crisis. Retrieved from https://www.indiaspend.com/themes/health/how-indias-middle-class-is-facing-a-retirement-crisis-70228
[4] World Bank (2019). India's Demographic Dividend: A Race Against Time. Retrieved from https://www.worldbank.org/en/country/india/publication/indias-demographic-dividend-a-race-against-time
- The rapid ageing of India's population and the resulting financial vulnerability of elderly individuals, due to lack of pension and social security, necessitates integrated financial and healthcare planning solutions.
- In order to encourage wider adoption of retirement products, experts suggest more favorable tax treatment on annuity contributions and payouts, as well as education about inflation and longevity risks.
- Health plans are being customized to address the specific healthcare needs of the elderly, such as chronic conditions and rising medical costs, while product innovations like deferred annuities, immediate annuities, and partial withdrawal features help address concerns about inflexibility or restrictiveness.
- India's elderly population, with their significant purchasing power, presents a vast untapped market for businesses in the finance, health-and-wellness, and science sectors, as the nation works towards building a sustainable silver economy.
