Wealthy Asians are increasingly turning to life insurance for retirement planning purposes, according to a survey by Transamerica Life Bermuda and Asian Private Banker, which shows that nearly half of all HNW and UHNW individuals in the region do not have a retirement plan in place.
The ‘Exploring High Net Worth Retirement Solutions – 2017 Report’ reveals that of those who have planned for retirement, nearly three-quarters (73%) are not confident or only somewhat confident about their plans. This is despite what industry experts call ‘the largest ongoing transition of wealth in history’, as Asia’s first generation of billionaires and multi-millionaires prepare to pass on north of US$300 billion to the next generation by 2040, according to the UBS/PwC Billionaires Report.
With wealth transfers and succession planning high in the minds of wealthy Asian families, two in three respondents (65%) to the HNW retirement solutions report cite savings as their primary source of retirement funds, followed by investments (47%) and provident funds (17.7%).
Yet, the report shows that Asia’s wealthy have started looking to life insurance as a potential retirement tool for achieving financial security and maintaining their lifestyles, while also maximising efficiency when it comes to legacy planning.
Notably, three out of five HNW and UHNW individuals surveyed say they are keen to purchase life insurance for retirement purposes. When considering life insurance as a retirement solution, clients value high coverage amounts the most (73% of respondents), followed by regular income pay-outs (64%) and death benefits (45%).
“Over the past few years, HNW and UHNW individuals have grown to appreciate the value of life insurance as a low-to-moderate-risk wealth tool that can deliver both protection and potential returns,” according to Transamerica Life Bermuda’s president and CEO, Marc Lieberman. “This is closely linked to the benefits that life insurance policies can offer, such as asset diversification, potential for additional leverage and long-term cash value that is accessible when needed.”
It is promising that more than two-thirds of respondents have worked with their current relationship manager (RM) for more than five years, with 76.5% of them also sharing that they trust their RMs to present solutions that fit their needs and wants.
However, the report suggests that there is significant opportunity for more education and discussions around retirement-based insurance solutions. More than half (58%) of RMs have not received training related to HNW retirement insurance, and 40% have not discussed these solutions with their clients.
“Retirement planning and life insurance are increasingly intertwined as both address the same concerns,” said Lieberman. “With growing interest in retirement-focused insurance plans, we plan to expand our training initiatives to increase distributor and customer awareness around the value that life insurance can bring.”
The life insurance industry appears to be poised for considerable growth, given that penetration rates remain low. Almost 68% of RMs surveyed have referred retirement-focused life insurance solutions to less than 10% of their clients. Moreover, over 70% of RMs and clients expect the popularity of most life insurance products will increase or remain the same over the next 24-36 months.
A total of 456 RMs, wealth managers, independent asset managers, brokers and clients from private banks, family offices and brokerage firms in Hong Kong and Singapore were surveyed between April and July 2017 for the report.
Just last week, Guy Mills, Manulife International’s CEO for Hong Kong and Macau, said that within Asia’s retirement solutions space, the gap between wealth growth and product distribution is “enormous and growing”.
This is because wealth in the region is growing at a faster rate than product adoption, which means the opportunity for insurers is immense, Mills said at the FT Asia Insurance Summit in Hong Kong.
At the same time, there has been “a genuine attitude shift” towards retirement planning across the region, Mills said, explaining that children are no longer expected to support elderly family members after they retire. This is partly because families tend to have fewer children, while retired individuals do not want to be a burden to their younger family members.