The changing UK population demographic structure with a top heavy and aging baby boomer shape is causing serious problems for all financial services providers, not just those pension companies whose funds are shrinking as fast as the death rate.
Insurance companies have also had to consider both the changing shape of the markets and the changing nature of the risks as the population ages.
Insurance itself is partly to blame for the predicament it now finds itself in regarding the new nature of risks, of which fifty percent of the insurance buying UK public are now over the age of 50.
Health and safety demands of commercial insurance policies and wider cover and availability of health insurance have both for example added to the longevity of the buying market.
The recent global economic turmoils have also accentuated a new approach to over fifties insurance. Consider the fact that the average age of a first time buyer in the UK is today 38! The bulk of the home insurance buying market is therefore substantially over fifty.
Unfortunately this age group is also one that is suffering the most under the current economic crises and form the bulk of the ‘squeezed middle’ that we keep hearing about. These over fifties are the first to be made redundant and are least likely to find a like for like replacement job, whilst those over retirement age have seen their capital assets value decrease with lower house prices and low interest rates.
Whatever financial predicament the over fifties age group find themselves in, they are still an attractive proposition to most insurance companies simply due to the nature of the risks presented and the avoidance of adverse selection. In insurance company actuary eyes, old people generally present a good risk. Older people are more likely to have more possessions and a whole specialist home insurance market has sprung up to service the wealthier end of the market.
This is also clearly demonstrated in the UK car insurance market where a complete specialist niche has been created by both car insurance companies and car insurance brokers for over fifties and senior driver car insurance.
For those of us having a mid life crisis at the age of fifty you can rest assured that the cost of the cover for that sports car you just bought will be lot a cheaper than a year ago, if you shop around and visit a niche senior car insurance provider.
Young Mans Blues
So why is car insurance so much cheaper once you cross the rubicon age of 50? The answer can be put down to one word, the same one that is missing and costs an young or new driver so much more in premiums – experience.
Older drivers are more likely to drive newer safer cars. Their driving experience means that they are also less likely to claim which is borne out by the statistics and most older drivers will have built up a substantial no claims bonus history which in many cases will be protected. They are more likely to live in a much safe postcode rating area for theft and damage than younger people and are more likely to keep their cars garaged or on a drive away from the road. Knowing the risk of claims is smaller the greater the size of the pool, the car insurers are all offering further discounts to older people in an attempt to persuade them to switch.
Because older drivers have a less likely propensity to claim on their car insurance policies, this means that claim free senior drivers are in effect subsidising the more reckless young! Think about this the next time you blast past the old g*t in the Skoda!