Growing concentration of wealth in the over-65 age group will drive product innovation in the life sector, Swiss Re says in a new report.

The rise of the “silver economy” will reshape life insurers’ core customer bases, with one-quarter of all people in advanced markets including Australia to be aged over 65 by 2050.

“This longer retirement, combined with a shift away from guaranteed returns on pension products, means retirees will have substantial savings but no guaranteed income, increasing the risk they outlive their savings,” Swiss Re says.

Life insurers need to shift from income replacement and family-oriented risk protection products to wealth planning and personal care funding solutions.

“The impact of the silver economy on insurers will accelerate, leading to a new phase of innovation,” Swiss Re life and health reinsurance CEO Paul Murray said.

“We are seeing a generation that is larger, living longer and arriving at retirement wealthier than we have seen before.

“With new approaches to product design and delivery, the insurance industry has the opportunity to redefine its relevance to over-65s.”

Swiss Re says insurers will need to change their focus from consumers’ accumulation phase to their decumulation phase, when emphasis moves from products such as term life, whole life and universal life to government and employer-funded pensions, plus annuities.

In Australia, the prudential regulator has started reviewing capital settings for annuity products and life insurers have said they back changes that provide choice for retirees.