Transcript No Slide Title

The Aging of the U.S. Population
and the Property-Casualty
Insurance Industry
Steven N. Weisbart, Ph.D., CLU
Vice President and Chief Economist
Insurance Information Institute
www.iii.org
110 William Street, New York, NY 10038
Office phone: (212) 346-5540
Cell phone: (917) 494-5945
email: [email protected]
November 8, 2007
The Coming Changes
in
the U.S. Age Distribution
US Population: 2007 vs. 2025 Projection*
2007
65-69: Greatest
growth, in terms of
numbers
2025
85 and over
80 to 84
75 to 79
70 to 74
65 to 69
60 to 64
55 to 59
50 to 54
45 to 49
40 to 44
35 to 39
30 to 34
25 to 29
20 to 24
15 to 19
10 to 14
5 to 9
Under 5
50-54: Least growth
in numbers
0
4,000
8,000
12,000
16,000
20,000
Population in each age group (in thousands)
*Using the Census Bureau’s Middle (i.e., most probable) projections
Source: National Projections Program, Population Division, U.S. Census Bureau
24,000
US Population: 2007 vs. 2025 Projection*
2007
2025
There will be
nearly as many
85+ people in 2025
as there are 70-74
today
8,011
85 and over
5,334
7,557
80 to 84
5,523
12,268
75 to 79
7,361
16,041
70 to 74
8,440
19,647
65 to 69
10,721
21,128
60 to 64
14,269
0
4,000
8,000
12,000
16,000
20,000
Population in each age group (in thousands)
*Using the Census Bureau’s Middle (i.e., most probable) projections
Source: National Projections Program, Population Division, U.S. Census Bureau
24,000
Population Projection Questions
How accurate are these forecasts?
Forecast vs. Reality of Census Bureau Projections for 2006
Low
Middle
High
300
Millions of People
290
280
270
260
Instead of Low, Middle, and
High forecasts, future Census
Bureau projections will be
probabilistic distributions.
The actual 2006
population
exceeded the “high”
1996 forecast.
250
1996 Forecast
2000 Forecast
Actual 2006
Source: U.S. Bureau of the Census, (NP-T3-C) Population Projections Program, Population Projections
of the Total Resident Population by 5-year age groups, middle series, released January 13, 2000.
Where will the growing 65+ population live?
Source: Patricia S. Hu et al, Projecting Fatalities in Crashes Involving Older Drivers, 2000-2025, October
2000, Document ORNL-6963, p. 1-4.
Public Attitudes
Regarding the
Auto/Homeowners
Industry
Consumer Perceptions of Auto/Homeowners Insurance Industry
66%
52%
58%
61%
67%
2007
70%
2006
69%
2005
45%
40%
48%
45%
48%
50%
47%
55%
47%
60%
51%
65%
Today’s seniors
look more
favorably on the
P/C industry than
younger people do
46%
Percent with Favorable Perceptions
70%
2004
49%
2003
35%
30%
25%
20%
15%
10%
5%
0%
Age Groups
45 to 54
Source: I.I.I. 2006 Insurance Pulse, July 2003-2007.
55 to 64
65 and over
Consumer Perceptions of Auto/Homeowners Insurance Industry
2003
2004
2005
2006
2007
45%
57%
59%
65%
66%
63%
64%
58%
50%
45%
49%
50%
56%
55%
58%
60%
56%
62%
65%
55%
Percent with Favorable Perceptions
70%
40%
35%
30%
25%
20%
15%
10%
Hispanics are the fastest growing
segment of the US population.
Hispanics, now 6% of those 65+, will
be 11% in 2030 and 18% in 2050.
5%
0%
White
Black
Hispanic
Sources: I.I.I. Insurance Pulse, July 2005-7; 65+ in the United States, U.S. Census Bureau, December 2005, p. 6.
Driving Behavior
and
Auto Insurance
Percent of Elderly Drivers in 1995, by age group
Men
90%
Women
87%
80%
Percent of Active Drives
80%
70%
69%
This was
4 percent
in 1977.
62%
60%
51%
50%
40%
30%
23%
20%
10%
0%
Age 65-74
Age 75-84
Age 85+
Source: Patricia S. Hu et al, Projecting Fatalities in Crashes Involving Older Drivers, 2000-2025, October
2000, Document ORNL-6963, pp. 6-1 and 6-9.
Projected Active Elderly Drivers as % of the Age Group Population in 2025
Men
Women
This was
23% in
1995.
100%
Percent of Active Drives
90%
80%
92%
90%
86%
83%
83%
74%
70%
69%
64%
60%
57%
50%
40%
40%
30%
20%
10%
0%
65-69
70-74
75-79
80-84
85+
Source: Patricia S. Hu et al, Projecting Fatalities in Crashes Involving Older Drivers, 2000-2025, October
2000, Document ORNL-6963, p. 6-10.
Careful Underwriting Required for Elderly Drivers
Elderly Driver Accident Behavior Doesn’t Correlate with Moving Violations
Source: QPC Press Release, dated September 29, 2003, accessed 11-6-2007 at
www.qualityplanning.com/qpc_resources_public/news/030929-Older%20drivers.htm
Factors Affecting Seniors’ Driving Behavior
Why They Will Drive More Than Current
Seniors Do
• More will be employed and will drive to work
• More will be caring for elderly parents/siblings
• More will be healthier and will want to—and be
able to—go places
• More will move to newly-developed areas that
don’t have convenient public transportation
Why They Will Drive Less Than Current
Seniors Do
• Because they will depend on successful
personal money management for income,
some—perhaps many— won’t be able to afford
to keep a car
Elements of the Decision to Drive
Elderly people are more likely to drive
1. The higher their income
2. If they are employed
3. The better their health status
4. If they live where there is less suitable public
transportation
5. If there is no other driver in the household
Also, there has been an increase over time in the
likelihood of elderly people to drive that isn’t
accounted for by the factors above
Points 2 and 3 above suggest that the percent of
elderly drivers will grow in the future.
Points 1 and 4 suggest that the percent might
shrink in the future.
Source: Patricia S. Hu et al, Projecting Fatalities in Crashes Involving Older Drivers, 2000-2025,
October 2000, Document ORNL-6963, Chapter 6.
Source: Insurance Institute for Highway Safety, Status Report, Vol. 38, No. 3 (March 15, 2003).
Source: Insurance Institute for Highway Safety, Status Report, Vol. 38, No. 3 (March 15, 2003).
Auto Driving Behavior of the Elderly
Prediction: The “Baby Boom” generation will be the
first one the amount, stability, and duration of
whose retirement income will depend on their
success in personal financial management.
Prediction: From 1990-2020, total annual mileage
driven by older drivers will increase by 500%
• As their driving increases and incomes decline/vary, will
seniors not buy newer, safer cars? Not replace worn brakes,
worn tires?
• Will auto insurers offer transportation services in order to
get impaired/unsafe elderly drivers to stop driving?
• Will auto insurers create underwriting programs that
incorporate the results of tests of driving ability?
Auto Insuring Behavior of the Elderly
Prediction:
Those over 65, especially those
not employed full-time, will use
the internet to form auto
insurance “buying communities”
• They might create reciprocal or mutual
insurance companies that specialize in
insuring elderly drivers
Implications of Aging Drivers for Commercial Auto Insurance
The Over-50 Crowd Takes to the Road
In Paid Big-Rig Gigs
by Stephanie Chen
Faced with a worsening shortage of long-haul truck drivers,
freight carriers are turning to the RV generation,
aggressively recruiting older couples like the Fords to climb
behind the wheel. Schneider National Inc., the Green Bay,
Wis., company that hired the Fords [he’s 57; she’s 51] and
put them through driving school, fishes for applicants
through AARP, the advocacy group for people 50 and
older, and has a Web page for “mature workers.” This fall,
the American Trucking Association plans a billboard and
television ad blitz to lure older drivers.
Source: Wall Street Journal, August 24, 2006, p. 1
Workers Compensation
19
9
19 8.1
9
19 8.2
9
19 8.3
9
19 8.4
9
19 9.1
9
19 9.2
9
19 9.3
9
20 9.4
0
20 0.1
0
20 0.2
0
20 0.3
0
20 0.4
0
20 1.1
0
20 1.2
0
20 1.3
0
20 1.4
0
20 2.1
0
20 2.2
0
20 2.3
0
20 2.4
0
20 3.1
0
20 3.2
0
20 3.3
0
20 3.4
0
20 4.1
0
20 4.2
0
20 4.3
0
20 4.4
0
20 5.1
0
20 5.2
0
20 5.3
0
20 5.4
0
20 6.1
0
20 6.2
0
20 6.3
0
20 6.4
0
20 7.1
0
20 7.2
07
.3
22.0%
24.0%
25.2%
25.2%
24.8%
24.4%
24.4%
24.9%
24.3%
24.4%
24.4%
26.0%
27.2%
27.9%
27.6%
27.8%
27.3%
27.9%
27.4%
Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.
20.0%
29.1%
30.8%
30.1%
29.3%
28.7%
28.5%
29.5%
29.3%
The labor force participation rate for
workers 65-69 has grown
considerably since 1998. It might
grow even faster in the future as
seniors find they can’t fully retire on
their meager retirement savings.
27.9%
27.6%
26.8%
28.0%
27.0%
26.2%
26.5%
26.3%
30.0%
23.5%
Labor Force
participation rate
32.0%
22.9%
23.0%
22.8%
23.0%
22.3%
22.5%
22.1%
Quarterly Labor Force Participation Rate, Ages 65-69, 1998-2007
19
9
19 8.1
9
19 8.2
9
19 8.3
9
19 8.4
9
19 9.1
9
19 9.2
9
19 9.3
9
20 9.4
0
20 0.1
0
20 0.2
0
20 0.3
0
20 0.4
0
20 1.1
0
20 1.2
0
20 1.3
0
20 1.4
0
20 2.1
0
20 2.2
0
20 2.3
0
20 2.4
0
20 3.1
0
20 3.2
0
20 3.3
0
20 3.4
0
20 4.1
0
20 4.2
0
20 4.3
0
20 4.4
0
20 5.1
0
20 5.2
0
20 5.3
0
20 5.4
0
20 6.1
0
20 6.2
0
20 6.3
0
20 6.4
0
20 7.1
0
20 7.2
07
.3
12.0%
13.6%
14.0%
Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.
16.8%
16.7%
17.0%
17.2%
16.9%
16.7%
16.2%
17.0%
16.4%
16.0%
15.8%
15.3%
15.6%
15.4%
14.9%
14.9%
14.6%
14.4%
14.4%
14.0%
14.0%
14.2%
13.8%
14.2%
14.2%
13.7%
14.4%
13.8%
13.6%
13.5%
13.3%
18.0%
13.1%
Labor Force
participation rate
20.0%
13.1%
12.4%
12.9%
12.4%
12.2%
12.5%
The labor force participation rate for
workers 70-74 has also grown
considerably—by about 50%—since 1998.
It too might grow even faster in the future
as seniors find they can’t fully retire on
their meager retirement savings.
18.0%
Quarterly Labor Force Participation Rate, Ages 70-74, 1998-2007
10.0%
Distribution of Non-Fatal Work Injury Days Away From Work,
by Length of Period and Age group, Ages 45 and over, 2005
Percentage
of cases
Ages 45-54
Age 55-64
Age 65 and over
40%
35%
30%
25%
28.4%
30.2%
34.5%
Seniors take
longer to
return
recover.
to
work
6-10 days
11-20 days
7.2%
8.2%
6.4%
11.9%
12.3%
11.3%
5%
10.2%
9.1%
6.9%
10%
12.2%
12.0%
9.3%
15%
12.3%
11.6%
15.3%
17.9%
16.7%
16.3%
20%
0%
1 day
2 days
3-5 days
21-30 days
31+ days
Source: US Bureau of Labor Statistics, US Department of Labor, Table 8 from 2005 Survey of Nonfatal
Occupational Injuries and Illnesses Requiring Days Away from Work, Revised data released 11-17-2006.
Fatal Work Injury Rates Climb Sharply With Age
Fatal Work Injuries
per 100,000
Workers (2006)
The fatality rate for workers 65
and older is triple that of workers
age 35-44. The workplace of the
future will have to be completely
redesigned to accommodate the
surge in older workers.
12
10
10.8
8
6
4.9
4
2
2.7
2.7
18-19
20-24
3.2
3.6
4.0
0.8
0
16-17
25-34
35-44
45-54
55-64
Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.
65+
Workers Compensation and Medicare
No Help from Medicare …
Medicare law has long specified that
• If Workers Compensation is available, Medicare
will pay nothing,
• Medicare will pay if costs remain after all WC
medical benefits are exhausted, and
• If Medicare does pay a bill, it has a right of
recovery from the employer or WC insurer.
Source: Title 42 Code of Federal Regulations, Section 411 et seq.
Workers Compensation and Medicare
and Maybe a Fight from Medicare
Medicare is worried that, for workers who are
covered by, or eligible for, Medicare, it will be
stuck with costs shifted from those responsible for
paying WC costs.
So, in those cases,
• It wants to review, and maybe disapprove, Workers
Compensation settlements, if it believes there is
insufficient WC money to pay for future medical costs,
• This may align Medicare with workers against
employers and WC insurers
• This will increase WC administration costs
Workers Compensation and Social Security
Interaction of WC with
Social Security Disability Income
Social Security Disability Income is offset
for WC indemnity payments
• For disabled workers under age 65 and their
families
• The worker’s and family’s SS DI benefit may be
cut so that, together with the WC benefit, it is
limited to 80 percent of the worker’s average
current earnings.
• But 18 states and Puerto Rico have a “reverse offset”
(reducing WC payments when SS DI is payable), negating
the SS DI offset
• Since 1981, no new states may adopt reverse offsets
• The SS DI trust fund’s 2007 trustee report projects the
fund to be exhausted by 2029!
Workers Compensation and Social Security
Effect on WC Claims of
Social Security Retirement Income
When a SS DI recipient reaches the “full
benefit” retirement age, the DI benefit
becomes a retirement benefit
• Social Security Retirement Income is not
offset for WC indemnity payments
• So disabled workers age 66 and over can collect
both – moral hazard?
Effect on Insurers as Employers
Will Seniors Who’re Seeking Part-time
and/or Seasonal Work Help Overcome
Shortages of
•
•
•
•
Agents
Claims Adjusters
Underwriters
Call Center Personnel
Will Seniors be Able and/or Willing to
Tele-commute?
Final Thoughts:
Forecasting Challenges
and
Leftover Questions
Other Demographic Projections
• The Social Security Administration forecasts female
life expectancy (from birth) will increase to 83.9 in
2060 (from about 80.8 today).
• But current female life expectancy in Japan is
already 85.2. Is it possible that in 50 years US
females will have a lower life expectancy than
Japanese women do now?
• Female life expectancy in the “record-holding”
country has risen for 160 years at a steady pace of
3 months per year.
• There is no evidence of this pace slowing.
• If this pace continues, female life expectancy in
developed countries in 2060 will be between 95 and
100. Remember, life expectancy is a mean, not an upper
limit.
Source: James W. Vaupel, Director, Max Planck Institute for Demographic Research, in World Economic Forum, 2004,
quoted in G. Reday-Mulvey, Working Beyond 60: Key Policies and Practices in Europe, (New York: Macmillan, 2005), p. 13.
deGrey:
Within a few decades,
we’ll have perfected
cellular “engineering” so
that people could live for
hundreds of years if we fix
cellular damage when it
occurs and don’t wait for it
to wreak greater damage.
Leftover Questions
• As insurance claimants, will seniors need/want more
“hand-holding” than younger claimants?
• With more time “on their hands” and more experience in the
workforce, will seniors be more demanding, perhaps even more
litigious?
• Will you establish distinctive distribution/service
channels for them?
• Larger policy type sizes? Audio versions? Computer-based
versions with help windows, interactivity?
• Special phone centers? Staffed by other seniors?
• Will seniors resist testing that aims to determine
whether they are competent to drive? If they won’t
take/don’t pass a test, will you surcharge them?
• Will car manufacturers design and build cars especially
tailored to the needs of senior drivers?
• Will employers redesign workplaces and work processes
to reduce the injury potential for senior workers?
INSURANCE INFORMATION INSTITUTE ON-LINE
www.iii.org
Steven N. Weisbart, Ph.D., CLU
Vice President and Economist
Insurance Information Institute
110 William Street
New York, NY 10038
Office Tel: (212) 346-5540
Cell phone: (917) 494-5945
[email protected] www.iii.org
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