An explosion of product innovation is expected for UK life offices, especially in key expanding market areas such as retirement planning and that good old annuity. Life insurance companies will see around a third of their income come from products that are not yet developed, according to State Street’s Wade McDonald.He believes that the industry will experience something of an explosion of innovation over the next few years as it develops new flexible solutions to meet the needs of the generation of baby boomers.
The first wave of those baby boomers, those born in the late 1940′s and 1950s when the whole world experienced a massive post-war birth rate hike, will reach retirement age in 2010/11, thus creating a growing need for fresh retirement and pension annuity solutions. With the baby boomers starting to reach retirement, there is a tremendous opportunity for insurance companies to grow their business and develop fresh solutions to manage the risks we are witnessing of growing longevity, McDonald added.
Annuities are the most common post-retirement product right now but, in the future, taking retirement benefits from a pension arrangement will be far more complex especially as the retirement phase of life can last some 30 years or more.
The retirement market has already seen some major product innovation in recent years, with the development of postcode, enhanced and third way annuities, changing the whole way annuity rates are calculated, and McDonald expects the retirement market will continue to evolve. Annuity underwriting will need to develop and become far more complex, a trend that’s already started, and equity release will also develop much further.
