Over time the demographics shift to the aging of populations is a factor that comes with its advantages and risks hence becoming an interesting topic as the actuarial profession deals with such risks. The United Nations has estimated that the share of population composed of persons of sixty-five years and over will increase from 10% in 2022 to 16% in 2050. This demographic shift blurs the social marginalia creating emergent concerns for several insurance industries.

 

Large numbers of consumers are shifting their preferences towards themselves; the baby boomers, those born between 1946 and 1964. By 2029, it was predicted that in the United States people aged 65 and above will be 20% of total population where in 2012 it is only 14%. This shift reflects an increasing importance of aging related risks and their consequences on financial architectures.

 

As people age, the number of clinical episodes simultaneously rises, as well as their severity, thus expanding the need for health care. For example, Medicare Advantage risk scores that forecast healthcare expenses increase with age owing to greater consumption and requirement of sophisticated care. This trend increases the national health expenditure, hence a need to get better actuarial information on cost of health and resources.

 

The latter problem consists in the fact that due to longevity risk, people live longer than it was predicted, which affects the scenario of life and long-term care (LTC) insurance. Technology is seen to be used often in providing LTC services especially for the aging people who take longer time requiring this kind of services, putting pressure on both public and private programs. Wellness programs should focus on reducing the cost as people approach the end of their lives as well as the effects this has on cash value distributions and capital growth of life insurance products.

 

Aging population also contributes to the challenge of increased demands for spendable money as people age, the burden on pension funds also increases. This makes actuaries vital in setting funding regimes and recommending procedures in covering probable gaps. The desire to have decent livelihoods at the twilight of their working years shows that there is a need for workable long-term solutions to support these systems.

 

The role society has allocated to actuaries situates them as the best suited to tackle issues arising from aging populations.They act as a consultant to the decision-makers, in that they assist the decision makers in assessing the risks involved, the formulation of strategies as well as ensuring that vital programs are sustainable. In all fields concerning health-care, LTC and retirement funding, actuaries are the industries’ strategists on how to handle the demographic shift.

 

Reference : https://www.soa.org/sections/actuary-of-future/aof-newsletter/2024/july/aof-2024-07-friedman/