Until recently, the typical insurance customer was a baby boomer or Gen Xer, but that is changing. As these two generations mature, millennials – those born between 1981 and 1996 – are rising to take their place.
This emergence of a new consumer cohort comes just at the right time for insurers. The free flow of capital and technology has created a Darwinian Economy
where survival depends on an insurer’s ability to adapt. Insurers have been feeling the squeeze as deal volume declines and renewals shrink. Regulatory barriers and the push to modernize the customer experience only add to the pressure.
In this fierce battle for market share, millennials present a new source of growth. Millennial businesses, homes and families need insurance. In fact, millennials already account for
16% of vehicle insurance spending, 12% of health insurance spending and 6.9% of personal and life insurance. Those numbers will grow as millennials enter their peak earning years.
As more millennials are ready to purchase insurance products, what will they be looking for, and how can insurers capture their share of the millennial wallet?
Shaped by the Great Recession
To better understand millennials, consider the economic climate in which they were raised. Millennials grew up as the tech bubble burst and the Great Recession hit. Along the way, they amassed huge student loan debts. When they graduated, finding good secure employment was difficult.
The Federal Reserve Bank has summed up millennials’ economic position compared with prior generations. They have lower real incomes
than earlier generations did at a similar age, fewer assets and a greater debt load.
While millennials may appear to be a poor target for insurers today, their fortunes will change over the next 10 years. According to Deloitte, total U.S. wealth is expected to balloon to $120 trillion by 2030
. As the Silent Generation and baby boomer share shrinks from more than 80% to just over half, millennials will see a fourfold share increase.
How can insurers prepare to serve this new market? Millennials are frugal and savvy shoppers. They do their research before buying. Insurance for this generation needs to be transparent and economical. Provide plenty of information on your website, and consider pay-as-you-go, usage-based insurance.
See also: Millennials Demand Modern Experience
Millennials at Work
Millennials have been tagged as lazy and entitled but are more likely just misunderstood. They have a better work ethic than they are given credit for and are more financially aware than prior generations. As children of the tech boom and the Great Recession, they value entrepreneurship and the need to prepare for disaster. These experiences, above others, will drive
their future insurance preferences.
In the small business world, millennials may be the most insurance-needy generation ever. Morgan Stanley and the Boston Consulting Group (BCG) estimate that, by 2020, millennials and Gen Xers will collectively own more than 60% of U.S small businesses, up from 38% in 2016
. Millennials are emerging as a new source of growth for small business insurers.
What will attract millennial business owners to an insurer? Start with a digital customer experience. Morgan Stanley and BCG project digitally underwritten insurance will grow from $4 billion to $33 billion by 2020. They say, “going digital may be expensive and painful at first, but in the long run it will save time, cut costs and allow insurers to better tap the dynamic and growing opportunities in the small-business market.”
Millennials also value simplicity. Morgan Stanley suggests making “products less complex, with easier-to-understand terms and a less cumbersome claims process.”
The Tech-Native Generation
Millennials are the generation of instantaneous chat, purchase and socialize. From research to communicating, they are fundamentally different than their generational predecessors. Texting and smartphones are second nature.
For insurers, this means traditional channels may not be enough to engage millennials. They are online consumers and are more likely than any prior generation to purchase through a connected device. A recent study found that 85% of millennials
own a smartphone, and 53% prefer to use it to shop online.
The mobile experience you provide is critical. One study
found that perceived mobile usefulness and ease-of-use influence shopping attitude and purchase intent among millennials.
A final factor to consider is transparency. Millennials are savvy shoppers and will expect to understand a product before they buy. In a study from Label Insight, transparency ranks at the top of customer loyalty factors for millennials, with 78% valuing it
See also: 3 Reasons Millennials Should Join Industry
Explain coverages visually and complement your online experience with easy access to agents for complex questions.
Millennials are the first tech-native generation. They grew up accustomed to online transactions and instant response. They expect all the services they use to act this way. They are frugal, smart shoppers and very brand loyal when they establish a preference. Responsiveness, transparency and economy are essential if you wish to address this market. Offer products that are easy to understand, priced fairly and sold digitally, and you will capture your fair share of this new growth opportunity.
Excerpted, with permission, from “The Insurer’s Millennial Playbook.” Request a copy of the complete e-book at https://www.instec-corp.com/millennial-insurance-form.