Digital Insurance Agenda

Silver Economy? Golden Opportunity!

Written by Roger Peverelli and Reggy de Feniks - Founders The DIA Community on May 11, 2021

Now that the dust of the pandemic is finally settling, we can allow ourselves to look forward. Beyond tomorrow. One of the major challenges facing large parts of the world is aging. But aging also provides new opportunities. The 60-plus generation is the fastest-growing consumer group and enjoys an increasingly higher spending power. This silver economy is a golden opportunity. A great new profit pool arises with exceptional opportunities for companies to contribute to society, to innovate and to profit. Also for insurers and insurtechs. That is, if you know how to seize these opportunities.

We all live longer
Thanks to better living conditions and medical care, we all live longer. The life expectation of a newly born in Germany was only 73 years in 1980. Now this is 81. We can already see the effects: more than 20% of the roughly 450 million people in the EU are older than 65. That makes a total of about 90 million people. The silver segment is likely to represent 60 percent of consumption growth in Western Europe, North America and Northeast Asia, says McKinsey. According to the European Commission, the whole of Europe’s silver economy is currently the third largest economy of the world, behind only the US and China. It could be worth 5.7 trillion euros by 2050, says EarlyMetrics. This is a large and interesting market. We see all kinds of new innovative concepts across industries that respond to this attractive target group. Dating sites for people over 55 for instance. Unilever and L’Oreal created various products to ‘age gracefully’. These are good examples to show that when thinking about the silver economy we should not think of stereotypes. As if the aging population is all about people who need very special care. Many elderly people are much more vital than the elderly in 1980. They want to keep up, be independent, stay mobile, have a social life – above all, be happy. That is more important than ‘health at all costs’. It is essential for companies and especially tech companies operating in the area of digital healthcare to understand these different needs.


Decreasing future workforce
In addition to aging, another important demographic trend is taking place. In 2019, in the EU, the total fertility rate stood at 1.53 births per woman. Spain (1.23) and Italy (1.27) are among the countries with the lowest figures. Note that, to ensure a stable population, a total fertility rate of 2.1 children per woman is needed. The effect of this trend is significant. The youngest generation keeps shrinking in numbers, while the pool of elderly becomes bigger. Pensions acts and welfare systems are becoming unsustainable as there will be fewer people in the labour pool. The solution seems simple: more immigration is needed to remain a stable population, raising the retirement age, people should save more for a longer retirement and we have to ensure that people remain part of the labour market for a longer period of time. These solutions turn out to be politically difficult and unpopular discussions with little result so far. Moreover, older employees who lose their job hardly get a new job. As if they have already been written off.

Current health systems not sustainable
The combination of aging and a shrinking working population is also taking its toll on health systems. In most developed markets, current health systems are not sustainable. The costs of health systems are increasing because more and more people are making use of them. At the same time, the shrinking labour pool makes it increasingly difficult to meet the growing demand for health care professionals. There are more elderly than people who can actually take care them.

It seems like an insoluble situation. But often, the more imperfections, the more room for innovation. More and more young tech companies are noticing this and come up with ground-breaking solutions. And, perhaps odd to say so, but ‘thanks to covid’, the conditions for such initiatives have rapidly become much more favourable. Let me explain:

1 – Much more attention for health
The past year made clear that, at the end of the day, for most people, there is nothing of greater importance than your life and health. Consumers are more aware of the importance of adequate life and health insurance plans. But not just your regular life and health plans. All sorts of health apps experience a growing popularity. To monitor what you do, how you sleep, what you eat, how you feel, how much you exercise, and so on. And there is much more willingness to share that data if customers get something meaningful in return. It’s all about giving more than you take.

So, assist customers in improving their lifestyle. There is a lot of room to shift from only covering risk and paying out claims, to rendering pro-active and preventive services as a substantial part of the offering.

2 – Connected homes for connected living
We also witnessed that, during the crisis, many people have invested quite some money in their homes to make them more connected and smarter. Thanks to connected devices, insurers are now able to offer personalized services meeting the lifestyle needs of customers. The more time we spend at home, the more important such services become.

More and more connectivity at home, and all the new data streams that come with it, open up all sorts of new opportunities for insurers to add new value, and to become ‘Always Part of Life’.
Connected devices form the foundation for entirely new business models in the insurance sector; shifting from a transactional to a relational, collaborative, participatory model, assisting customers in all sorts of aspects of their lives.

3 – Increasing digital mindset among healthcare providers
Traditionally healthcare delivery has been focused on face-to-face interactions, resulting in high costs. Immediately after the outbreak, the circumstances forced healthcare providers to help their patients virtually as well. Connected healthcare devices allowed them to extend their reach and interactions with patients. Forced but still, many have now become acquainted with the benefits and will continue to use telehealth for a fair share of the contacts. The acceptance of advanced technologies in the relationship with patients has increased enormously. And that is good news. The application of all sorts of connected devices, telemedicine solutions and advanced algorithms leads to improved access to care and to more convenience, and foremost to better outcomes for patients.

Sharing data among all stakeholders, the shift from the care location to one’s own home, optimal use of this data in treatment optimalisation, data-driven personalized health insights and interventions, and remote patient monitoring have the potential to change the business model entirely, keeping healthcare efficient, affordable and accessible while also improving patient care.


Insurtechs are taking the lead
Last year March, during the first lockdown period, we saw that many insurtechs immediately responded by lending their talent and technology to help the world fight the pandemic. This resulted in all kinds of effective solutions. From fast and reliable remote triage (Mediktor) to software robots that can sort and distribute test results in minutes (UiPath). And from providing real-time datasets of covid cases for developers and data scientists (Fusionbase) to using exhaled breath for a much faster, more efficient, and less intrusive covid test (Breathomix).

Now, while the end of the pandemic seems in sight, we see such young tech companies continue to go full throttle on making all facets of health care more efficient and effective, while at the same time offering patients more relief. They understand the trends that have accelerated in the past year: the growing importance of health, the possibilities offered by connected devices and the acceptance of the application of technology in the relationship with patients. And they know how to develop concepts that respond to these trends. Investors are noticing this as well. Healthcare investments in AI are at their all-time high. Analysis of our DIA Insurtech Database reveals that a fast-growing number of insurtechs are tapping into the needs of the silver economy, specifically in three key areas:

1 – Independence
Innovative solutions help people stay independent and mobile for longer. Think of simple measures making the home of elderly safer and more accessible. Making homes and communities more connected to keep seniors socially active. Obviously, smart home devices play an important role here. The arrival of autonomous cars will also give an unexpected boost to the mobility of the elderly.

The challenge is to interweave those smart home devices with solutions for providing aid to elderly people living self-sufficiently. The condominium platform of Italian insurer Reale Mutua in Turin is already a nice example, with home related services tapping into the elderly way of living, also including digital healthcare services. But also think of pro-active preventive services. Prevention results in seniors staying independent longer. Preventing all kinds of ailments is not only pleasant for the elderly consumer; it naturally ensures lower health costs.

2 – Health
Supporting healthy aging is valuable in itself; being healthy also contributes to being able to live independently and mobile for longer. You might speak of a shift from healthcare to health. More focus on wellness, promoting a healthy lifestyle, prevention and early diagnosis. We also see applications for remote patient support and self-directed care. Care is shifting to a non-traditional care setting: at home. More convenient and lower costs, especially for elderly. The business case is clear: prevention, less hospital admissions, less complications of inpatient care and fewer outpatient visits result in significant savings. According to McKinsey, care delivery is one of the largest health value pools for the coming years.

Wearables, which increasingly have added medical functionalities, play a central role in this. The increasing popularity of such devices clearly show not only the consumers’ need for more control and empowerment, but also the desire and readiness to take a more proactive approach themselves; in personal health and wellness in general, but also in assessing symptoms, connecting with healthcare providers and improved self-management of care. Active participation allows customers to take more responsibility, leading to more equality in the relationship with insurers. This is a fundamental shift in the relationship and a great new perspective on innovation.

In ‘health’ we see many innovations that focus specifically on dementia. Dementia tops every predictive model as the number one cost to economies worldwide. DIA Alumnus Neurotrack for instance, created a cognitive health program with tools and advice so that elderly users make lifestyle changes to reduce the risk of cognitive decline. The longer diseases like Alzheimers are absent, the longer elderly can continue to live independently, and the lower the health costs.

3 – Safety
Seniors want to remain home, while their children want to be sure their parents are safe. Are the doors and windows locked? Has the gas stove or oven been switched off? The kettle has not been used for a daily cup of tea at 9am. Is there something wrong? Security is also about their finances. Elder fraud is another relatively new issue that seems to be growing exponentially due to the growth of the silver economy. According to EarlyMetrics, in 2017, US financial institutions reported 63,000 instances of suspected elder fraud, worth USD 1.7 billion.
EverSafe is a fintech that offers a solution for this: as an adult child of an aging parent, EverSafe warns you if deviating transactions take place in the payments or on the older person’s bank account. Thanks to AI you have an ‘extra set of eyes’ in guarding against financial abuse – from a distance. 

Think in new ways
Insurers and other financial institutions play a crucial role in what our life will look like in the silver economy. But it is also clear that taking care of the monthly pension payment or reimbursing a health treatment is insufficient to really give meaning to ‘Independence – Health – Safety’. Seizing the opportunities that the silver economy offers, requires new ways to do things, to think outside the box, outside the traditional insurance vertical, to work with different partners in ecosystems, ranging from IoT providers to caregivers.

Perhaps a good pension insurer will soon not only provide money, but also a range of services to make sure an elderly can stay in his or her home and that care is available if needed. The mortgage may turn into a housing plan in which house, mortgage, renovation to make things ‘silver proof’ and maintenance are combined in one product. After all, workers are scarcer than money. The scope of home insurance may broaden; and perhaps even converge with health and life plans. New propositions combining home insurance, smart home solutions, property services and all kinds of personal healthcare services. Ideally, we would think of smart combinations of what different insurtechs already offer in these areas. We call this ‘Innovation Multiplied’: combining insurtech innovations to come up with something that is even more innovative and that unlocks totally new economic value. Instead of taking care of payments, this insurer becomes a problem solver.

Why only pay if you can really mean something to your customers?

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