Longevity is definitely a risk if one is not prepared for it.
Webster’s Dictionary defines longevity as a long duration of individual life.
Are Filipinos living longer? According to the National Statistics Office, which conducted a population census in May 2000 and is currently updating its data by having another census tabulation, the number of senior citizens (age 60 or older) is expected to increase in 20 years from 5.3 million to 7.0 million in the year 2025, which includes over a million Filipinos aged 80 or older. The average mortality age of the Filipino male is 66.1 years while the life span of the Filipina is 71.6 years, five years longer. This is validated by the rates of life insurance companies, which charges higher premium on male lives vis-à-vis female lives at the same age.
So, is living too long a risk? Definitely it is if one will outlive their savings. Those specially affected are pensioners and retirees depending solely on the monthly benefits from the Social Security System, which are insufficient due to increasing costs of living and those who have not been able to build up resources to fund the costs of living too long especially for medical, hospitalization and care-giving services. As a consequence, one either has to continue working or depend on their children or relatives, which does affect one’s self-esteem.
In other words, whilst longevity is a gift there is a price that one must pay for it. And what is the price? The price is intermittent pains in various parts of one’s body and greater exposure to various illnesses and diseases.
Scientists have discovered that 25 percent of the variation in human life is governed by genes whilst 75 percent is influenced by our environment, diet and lifestyle. The lack of exercise or a sedentary life, poor diet, smoking and stress greatly impacts on one’s life span.
The crisis of aging of the world’s population is now a reality according to a study by the State University of New York. This development will impact on the cost of caring for the aged in the next two decades. Japan in particular is a case in point. The life expectancy of the Japanese male is around 84. There are more than a million Japanese who are 90 years or older and surprisingly, many are still capable of daily living, such as dressing, eating and going to the toilet unassisted. It is obvious that a healthy diet, low fat and high fish consumption like sashimi and sushi likely contributes to the longevity of the Japanese populace.
Japanese octogenarians practice “12 habits”:
1. Eating three meals a day at regular hours.
2. Chewing their food well.
3. Taking lots of fiber in their diet through vegetables and fruits.
4. Drinking tea frequently.
5. Not smoking.
6. Having a family doctor.
7. Being independent-minded.
8. Enjoying activities that changed their mood.
9. Reading newspapers.
10. Watching television.
11. Going out often.
12. Waking up and going to bed at regular hours.
To cope with the high cost of meeting all the expenses associated with living too long, life insurance companies in a number of developed countries like the United States, the United Kingdom, France, Canada, Israel, Japan and recently Singapore, have introduced long-term care insurance, which pays for services and support to help policyholders, who are unable to perform certain activities of daily living, such as bathing, dressing and feeding. Unfortunately, this type of insurance is not yet available in the Philippine insurance market.
To provide the right perspective and for those who are willing to prepare for the risk of living too long, one can look at the global product life cycle chart designed by Bill Hogan of Metropolitan Life, US. Wealth accumulation starts in stage 2 of the life cycle from age 35 to 55. This is the age group of people that should be the target market for estate planning, which translates in saving for the risk of longevity.
While it’s great that people are living longer than ever before, the downside is when one’s lifetime savings may be insufficient to cover the costs related to longevity. It is not uncommon for retirees to place their funds in fixed bank deposits but the interest income normally falls below the inflation rate.
So, what could be an alternative for senior citizens to mitigate the risks of living too long? Instead of the standard life insurance policy, one could consider the purchase of longevity insurance. This is actually another form of a special annuity provided by life insurance companies.
Historically, the term annuity may have come from the Latin term “annua,” which means “annual stipend.” In ancient Rome people would make a singe payment in return for annual lifetime payments.
In the United States, longevity insurance or a deferred annuity is usually purchased at age 65 and after a period—20 years, for example—the retiree starts receiving fixed regular payments. A typical fixed deferred annuity usually allows one to withdraw the money before the deferral period is up and will also generally have a death benefit. This coverage can also be used for long-term care in a nursing home.
The sad part is that hardly any life insurance company in the Philippines offers this form of longevity insurance. This is an opportunity for them to tap a highly potential market considering the increasing number of senior citizens who are still active and productive but who would need longevity insurance for the long term.
Reynaldo A. de Dios is a risk & insurance management consultant.
