Several factors, including increased life expectancy and constrained state resources, are putting people increasingly at risk of not having personal financial security as they age.

Insurers, alongside governments, employers, intermediaries and individuals, can play a crucial role in helping to ease the burden and close income protection gaps (IPGs) – with financial education as the key to securing financial security, according to the latest report from Zurich Insurance Group.

“Unfortunately, this comes at a time when governments in developed nations are generally spending less on welfare benefits in response to the increasing cost of an aging population,” said Gary Shaughnessy Zurich CEO for Europe, the Middle East and Africa.

According to the report, there is an urgent need for solutions to help address the issue. That includes finding a balance between responsibilities assumed by governments, employers, insurers – and other financial institutions like intermediaries – and individuals in protecting household income.

Insurers should develop basic insurance products to be introduced via employers under auto-enrollment, with additional features available for individuals wanting to purchase, Zurich said.

At the same time, insurance distributors and intermediaries, including brokers, should not just link supply and demand, but also advise and educate customers and feed market and customer requirements back to insurers, Zurich said.

Other recommendations for public and private partnerships outlined by Zurich include:

• Employers should enroll the workforce in contribution-based income protection insurance schemes (with an opt-out clause) as part of their employment contracts. Provide employees with ongoing financial education and training, including the use of digital tools.
• Governments should regulate and certify approved IPG insurance products and use fiscal incentives to encourage compliance.
• Individuals should buy on the effectiveness of financial education and literacy campaigns.

The situation presents a real challenge to the society, Shaughnessy said. “We all need to act to foster and implement the identified solutions,” he said.

The research report was a collaboration between Zurich and the Smith School of Enterprise and the Environment at the University of Oxford.
 

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