Social and Cultural Factors

Changing demographics

The post-war baby boomers are rapidly approaching the official age for retirement and yet are predicted to live even longer. But already it is estimated that 3m people between the age of 50 and 65 have been forced into premature retirement. All this generation will need pensions and medical services for many more years than the previous generations. Whilst the UK may well be less impacted than other western economies, the situation is already ringing alarm bells within Government and with large pension fund managers.

The birth rate continues to decline as many women make their career a higher priority.
 

Government will shift retirement and medical risks to private sector who may come under pressure to accept all risks at normal rates. A shift to defined contribution pension schemes will highlight the need for companies to generate good returns on people's investments as well as to reduce administrative costs. Increase in market size will attract new players. Retailers with their strong brands are increasingly aggressive. Foreign companies are making investments in the UK. US companies have much lower costs.

To supply increasing demand for private retirement, medical, accident, sickness and unemployment cover. Women will increasingly make their own insurance and investment provisions.

Individualism

The 80's and 90's have seen an increasing demand for individualism. Many factors may account for this: the majority have their basic needs met; there is an over supply of goods; lifestyles are more varied; and people are better educated and more informed.
 

	Consumers are becoming cynical with mass market advertising which promises much but often fails to deliver. A move away from standard products and services with a potential increase in development and operational costs for providers.
	To provide flexible products that can be tailored to people's individual needs, behaviours and personalities.

Changing Lifestyles

The increasing divorce rate, women being more independent and/or marrying later, an increase in the single elderly, are all creating more smaller households, though not necessarily a need for smaller houses. This is leading to higher demand for new houses (compounded by a large but aging stock of Victorian houses) which will no doubt fuel house prices.
 

	This situation may fuel another boom and bust with another future spell of consumer reaction in the light of negative equity and repossessions.
	Larger volumes of households to insure. Mortgage lending increases both in the volume and size of mortgages.

The changing employment patterns means many more people are working for themselves or working on a contract basis. People's income will fluctuate more widely.
 

	There is a possibility of a large segment of the population becoming relatively poor and unable to meet the cost of adequate risk protection. Thus the market could contract.
	Increasing need for private pensions and insurance risks. Increasing need for insurance for small business (contents, business interruption, professional indemnity, financial advise, etc.).

Lifestyles are becoming less predictable, more fragmented, and we have more active but riskier lives. Divorce, re-marriages, redundancy, 24 hour / 7 day working, zero hour or low hour work contracts, work hard - play hard lifestyles, are just some of the drivers.
 

Many people are so confused about pensions and the other more complex investment products that they are putting off making any decision or are buying inappropriate products. Many standard financial products are ill-suited to fluctuating incomes and circumstances but they continue to be sold. There is a likely backlash when consumers suspend or terminate such products and then realise the consequences.

Need for more flexible products that can adapt to peoples circumstances. There is an increasing need for personalised financial planning with regular reviews (e.g. Clerical Medical with ProVision, and Allied Dunbar). Need for insurance linked to leisure activities (e.g. accident, holiday, sport insurances).

Polarisation

Predictions for the coming years suggests a society that continues to be polarised. Will Hutton suggests a 40-30-30 society: 40% in permanent and generally well paid work; 30% on part-time or contract work, or self-employed; and 30% unemployed or living of basic state benefits. People may not be permanently within any category but could drift from one to another.
 

	Large segments of society may be unable to afford adequate protection, thus diminishing the market size. Social unrest may increase insurance claims. Premiums may rise or have tight exclusion clauses, thus again diminishing demand.
	This scenario is likely to give rise to ever more complex financial requirements, many of which will be of a short term nature.

Next is Technological Advances

JS

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