Longevity risk is a business opportunity, not a burden: Marsh

The conversation around workforce aging and longevity risk in Canada has shifted. It's no longer a looming demographic challenge sitting somewhere on a distant horizon. It's here, and the employers paying attention are starting to treat it less like a liability and more like an untapped advantage.

“Our aging workforce isn't just a health issue, it's a business opportunity," said Jennifer Schmidt, partner at Marsh (formerly Mercer) Canada. "This report shows that there's a few practical interventions that can make a meaningful difference in terms of unlocking healthcare savings, both employer and public, unlocking productivity gains by helping older workers stay healthier and productive longer.”

The business case for acting on longevity risk now

Schmidt was referring to a recent World Economic Forum report on longevity that lays out the economic case for acting now. Canada's employers are sitting on $7.53 billion in lost productivity from the underemployment of older workers alone.

The cost of doing nothing, Schmidt argued, is getting steeper. In a market defined by skill shortages and competition for talent, employers who ignore the productivity and retention implications of an aging workforce risk higher health costs, earlier exits, weaker succession pipelines and lost output.

"Employers can't afford to ignore the productivity claims and they can't afford to ignore the talent implications of an aging workforce," she said. "I think the market leaders of the future are going to quantify this longevity risk. They're going to protect their productivity and they're going to turn this demographic change, into a business advantage. It’s not coming, it’s here. This is not an if, it’s a now.”

How plan sponsors can manage longevity

Schmidt defines longevity in a workplace context as not just about how long someone works - it's about whether they stay healthy while doing it. She drew a parallel between health span and lifespan, arguing that employers need to think about whether their people will have productive, sustained careers or simply long ones. That means giving workers access to health promotion tools, caregiving resources and financial wellbeing supports while also breaking down the silos between employer-sponsored programs and public systems.

"Are you going to have a healthy work life or a long work life or a healthy and long work life?" she said. The goal, as Schmidt framed it, is building the conditions for workers to bring lasting productivity to an organization, whether they're five years from retirement or five years from being hired.

“We need to think about non-linear work lives like people coming in and out. Maybe sometimes you work part time for a while and then you come back full time,” added Schmidt.

A benefits model designed for a different era

To that end, Schmidt believes today's benefits model was designed for a different workforce and a different era of health care, emphasizing the benefits model as it currently stands is too reactive, too rigid and not built to handle the realities of an aging workforce.

Instead of focusing on prevention or at least reducing the severity of health issues before they escalate, the system waits until people are already sick and filing claims. Caregivers, particularly those in the sandwich generation, notably get little support, and workers managing chronic or relapsing conditions often face a blunt choice between full disability leave and no accommodation at all.

Additionally, the World Economic Forum report found that caregiving combined with the gender pay gap reduces a woman's retirement pension by almost 25 per cent in a single year. Schmidt underscored how the response needs to go beyond reactive leave policies.

Rather than waiting until a caregiver reaches the point of leaving the workforce entirely, she suggests employers need to intervene earlier, evaluating credible digital health tools and getting them in front of workers before a crisis forces a decision. The options exist, she argued, but too few employers are putting them to use. Keeping someone in the workforce is far less expensive than replacing them, and that calculation holds for both the employee and the employer.

Meanwhile, annual maximums and inflexible program structures also compound the problem.

“There are so many ways that our traditional insured benefits model does not meet the current workforce where it's at,” asserted Schmidt. “That means it's not meeting the employer’s needs where they're at for healthy engaged workers to be productive.”

Fragmentation around silos, data remains critical issue

One of the biggest obstacles to progress, Schmidt suggests, is fragmentation especially as employers are dealing with silos between public and private health care, between occupational and non-occupational health, and between group insurance and workers' compensation - all operating in isolation from one another.

 The World Economic Forum report, she noted, illustrates the connection between financial and physical health: people who are financially secure can invest in their health, and people who are physically healthy can invest in their wealth. Still, Schmidt emphasized how these two shouldn’t be regarded as one or the other.

"We need to have overarching conversations about total rewards in general. Looking at cash comp, incentive comp, financial savings, wealth building programs and the healthcare models, [bringing them] all together because they all feed on each other," she said.

Yet data also remains a central challenge. While employers have the information they need to build smarter strategies, it's scattered across claims data, engagement surveys, disability reports and vendor platforms. Schmidt said organizations need to start pulling those pieces together to identify both quick wins and longer-term strategic moves.

The metrics that matter will vary by organization, noted Schmidt, as some will track spend and claims experience while others will look at indicators specific to their workforce and industry. An advisor's role, Schmidt said, is helping employers figure out what to measure based on where they are in the process.

Where employers should invest now

Ultimately, employers need to recognize that the demographic change is already underway and that the economic case for acting is measurable, said Schmidt. Employers need to assess their people risk profile, determine where they want the organization to be, and then evaluate how well their current programs support that direction.

On a practical level, she argued that means investing in digital health supports like physiotherapy platforms and virtual care, mental health resources, and targeted interventions for older workers like updated hearing aid coverage and caregiving supports.

On the financial side, she said wealth-building programs need to extend beyond retirement planning and reflect the reality that many older workers are still supporting dependents. The assumption that an older employee is an empty nester doesn't necessarily hold in today's housing crisis.

While there are short-term tactical moves employers can make now and longer-term strategic shifts to build toward, the key is starting to rethink what benefits spending is meant to accomplish.

"My big desire is that people consider the investment in their benefits and their well being and their financial wealth building programs as an investment towards productivity as opposed to a cost center," said Schmidt. “There's an opportunity to really take control of this situation by breaking down those silos, by assessing your risks, by discussing what you want to measure and by really changing from that reactive to proactive and flexible. Employers that do that are going to be ahead of the game.”