Welcome to the 7th edition of the Financial Longevity Newsletter by Fintech for Longevity. The current edition and all subsequent editions will contain information about our activities and present you with a curated collection of global developments at the intersection of longevity, finance and technology.
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Thoughts on the report of the expert committee on Longevity Finance in India
"Sandboxing Longevity" in India
The International Financial Services Center (IFSC) is a center of international banks, insurance companies, and asset management firms, which have set up their operations in the Gujarat International Finance Tech-City (GIFT City) in India. The vision of the IFSCA (The International Financial Services Center Authority) is to establish GIFT City as a global leader in the longevity space by building a Global Longevity Hub (GLH) in Gujarat.
In order to facilitate the building of a collaborative ecosystem of industry and financial institutions both from India and abroad, the IFSC has established an expert committee on Longevity Finance. According to the committee's report, the Longevity Hub in Gujarat will serve as a ‘sandbox’ for product ideas and tech solutions, thus integrating on-premises medical activities with wealth and legacy planning. Establishing this Global Longevity Hub is a dramatic step from both a local and a global perspective.
Firstly, this initiative is being led by a local regulatory authority, which is quite rare in the longevity space, an area normally characterized by market-led players. Second, India is currently a very young country in relative terms, with less than 9% of the population aged 60 and above. This is an extremely low figure, especially when compared to "super-aging" countries such as Italy, Germany and Japan (where the 65+ population exceeds 20%). Though this is only temporary. In contrast to what is perceived by many, it is not surprising that a “young” country like Inda has decided to build a special Financial Longevity Hub in the country.
Similar to many other “young” countries (such as South Korea and Brazil), one can observe that the rate of aging in India is one of the highest in the world. Looking to the future the population pyramid of India is moving fast from expansive to stationary as demonstrated in the pictures above. Considering the continuing trend of decline in fertility rates and the increase in life expectancy in the coming decades, India’s elderly population is expected to rise 41% over the next decade to touch 194 million in 2031!. In less than three decades, however, 1 of every 5 people in India will be at least 60 years old. Therefore, it's not only the proportion of the elderly that matters in India, it's the rate of the aging trend.
The key takeaways from the report on Financial Longevity:
1. New products, services and business models are needed in the financial sector to serve the needs of the rapidly aging population.
2. Longevity is not only about health span, but it also raises economic and financial challenges. Therefore, the financial industry is crucial for the development of the longevity industry.
3. Technology and innovation go hand in hand with longevity, as a way to serve the "silver segment" of the population now and in the future.
4. Making the necessary preparations for the aging trend is a driver of growth for financial institutions. Those that will be fully prepared for the aging trend with new products, services, and business models, will enjoy a significant competitive advantage.
5. Longevity is a public good and therefore the IFSCA will develop a regulatory framework, a "sandbox", a specialized stock exchange for longevity startups and education programs while working together with longevity-adjunct sectors.
It is unquestionable that the demographic trends of human aging around the world present new social and economic challenges. But it seems that India’s government isn’t going to sit and wait for market players or any other international organization to help deal with the various challenges related to these trends. Welfare systems, governments and regulators should play an important role in the response to the process of population aging. Yet considerable tension exists between public expenditure and the effort to maintain a balance in terms of financial sustainability. The challenge of sustainability has led different countries to promote welfare privatization processes by redefining the scope of social security, pension, and healthcare programs. These institutions have no choice but to redefine the models they use, while increasingly relying on private resources as the population ages, including households and families.
Against this backdrop, India’s new initiative certainly seems like a smart move, not only from the standpoint of the goal of being well prepared for the aging trend on a national level but also in order to ensure that the risks involved with aging are more smoothly transferred to both the market and to individuals. By building a novel infrastructure in the GIFT city, India is expected to be one of the first nations that are taking serious steps in the preparation for the aging trend.
What does it mean, to be well prepared for the trend of aging ?
From my point of view, carefully maintaining the balance between the risks of aging and the opportunities of longevity, while at the same time, dividing the aging risks between the government sector (i.e., public healthcare and pension systems), market players (such as banks, insurance companies and asset management firms) and individuals (out-of-pocket medical expenses, lifelong learning and late-life employment).
Concurrently, the Financial Longevity Hub in Gujarat is also a huge opportunity to transform the way we perceive the aging process into a real social and economic dividend. Given the huge purchasing power of the "silver generation" (which represents an opportunity valued at a projected multi-trillion USD) over one billion retirees around the world are certain to benefit from this initiative as well.
A very well framed quote from the report demonstrates the tension between the financial burden and opportunity: “The finance industry is pivotal to the longevity industry because global finance has reached a crossroads where it must decide how to approach the issue of an aging global population – whether as a threat or as The Next Big Thing and a Multi-Trillion Dollar Opportunity" (p,22).
The convergence of HEALTH and WEALTH
One of the most interesting issues raised in the report published by the Expert Committee on Longevity Finance is the need to avoid decoupling healthcare and asset management as two different “entities” in the aging process. Since the majority of an individual’s healthcare costs tend to be concentrated in the last two years of life, the IFSC, in contrast to many other organizations, has decided to look at health and wealth in a combined way.
For the IFSC, Fintech and biotechnology go hand in hand and medical examinations are key to wealth management and legacy planning. Therefore, according to the report, the Committee has decided that Longevity Financing Hubs are not limited to just the financial services industry but are also put in the preventive medicine industry category.
Longevity is a huge opportunity for Insurance Companies
One of the important achievements of this report is the motivation to allow insurance companies to offer holistic customers value-added services. Specifically, insurance companies will be allowed by the regulator to expand their offerings far beyond the traditional ‘risk management’ products as we know them today. Besides medical insurance and life insurance, the insurance companies will be allowed to offer wellness programs, legacy creation, retirement planning and document vaults.
This is a big opportunity for insurance companies to turn their historic product-centric approach into a consumer-centric value proposition. At the same time, we must take into account the fact that many people in India have no coverage whatsoever; neither healthcare insurance nor a pension plan. In this regard, a novel and affordable combination of financial and medical consumer-centric products could be a huge promise for the Indian population to improve their well-being as they age.
This is also a huge opportunity also for wealth management firms to create personalized value propositions to customers, based on personal health records, thus decreasing the burden of “over-insurance” in the standardized insurance policies which are available for the masses.
Homeownership as a driver of Longevity financing
From a household-level perspective, longevity is associated with more opportunities for longer periods of employment, leisure, and meaningful relationships. But at the same time, longevity bears the risk of longer periods of economic dependence both on family caregiving and the state. The Committee's report discusses the search for new practices, products and services for the growing number of senior citizens in India.
As in many other countries, a reverse mortgage is a rational choice among homeowners attempting to find new ways to finance longevity. While a reverse mortgage is not a new product in the financial services world, not surprisingly, it received a significant amount of focus in this 124 pages report. The report calls on insurance companies and banks to work together to boost reverse mortgages as a long-term product that could help older people maintain their economic standing well into their retirement.
Reverse mortgages have huge barriers when it comes to selling them to "housing rich and cash poor" older adults. However, the Longevity Hub might be able to jumpstart the process and a more empathetic approach could result in older adults being less reluctant to mitigate their own longevity risk through their untapped home equity.
In summary, India started a process of redefining the public contract between the current and future generations. An interesting question would be how to incentivize the impoverished and those from the lower-to-medium part of the income ladder to participate in the longevity economy for a better future. As we know, healthcare is not accessible or affordable to many, while preventive healthcare is currently still expensive in many parts of the world. Therefore, India and other countries still have to find ways to make sure that longevity will not unintentionally widen the gap in life expectancy between different groups.
Another challenge that will be faced by the Indian Government is what longevity practices can (or cannot) be adopted from high-income economies. Emerging markets have their own economic attributes, and the effect of longevity on their social and economic systems might differ significantly.
To the full report of the expert committee on Longevity Finance - Link
News from the Fintech for Longevity Academy
We are happy to announce that the next cohort of the Financial Longevity Leadership Course starts on June 9th, 2022! Registration is now open with an early-enrollment price which ends on May 1st.
In this 8-weeks program, you will: • Understand the recent trends in aging and longevity around the world • Learn about the distribution of wealth across the generations and the new meaning of risk in the era of longevity • Be aware of the ways in which the financial industry can better serve older adults in the FinTech age • Increase knowledge about the four elements of financial longevity - Protection, Retirement and end-of-life planning, longevity financing and utilization of rights • Understand the untapped opportunities that Fintech provides for aging adults and their families • Learn about the existing banking and Fintech solutions that cater to multi-generational families • Understand the typologies of scams and fraud against older adults.
For more information and early enrolment please visit our program's page or send us an email to academy@fintech4longevity.com
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---------------------------------------------------------------------------------------------------------------About Fintech for Longevity:
@Fintech for Longevity is a novel platform that bridges financial technology and financial inclusion. By focusing on the global aging trend, our objective is to help global organizations, FinTech startups, banks, insurance companies and other financial institutions around the world prepare for the trend of aging and the future of longevity. We do so through research, education and digital adoption strategies.
For more information about our services, please reach out to us by email at sara@fintech4longevity.com.