Tag Archives: insurance buyer

The Mystery of the Millennial Buyer

For several years, I’ve heard clamor from the agency world about how Millennials’ demands are so different from previous insurance buyers. Well, as a Millennial insurance buyer, I’m here to say… we still have some work to do. We still have a lot of work to do.

According to Accenture Outlook: Who are the Millennial shoppers? And what do they really want?, Millennials are exceptionally loyal …if they feel they’ve been treated right. And, we all know it’s cheaper to keep a customer than it is to get a new one.

“Right” is an incredibly subjective term and can certainly get lost in translation in the insurance world. “Right,” in the insurance world, typically means paying exactly what is fair for losses. No more, no less. That’s understandable, and, as someone in the insurance world, I understand the sentiment.

But I’d like to help you to understand how I define “right” as a Millennial insurance buyer.

Educate, don’t sell

The days of the uninformed insurance buyer are long gone. The added value of the agent is around education. Take a step back and help the Millennial customer understand the fundamentals of risk management and see that insurance is one of many tools used to manage risk. Millennials will identify the value that you bring to the purchasing transaction and remain loyal customers rather than commodity-buyers.

Empower them to make good financial choices

You empower Millennials to make smart financial decisions through education. This also means explaining the upsides and downsides of different policy options. For example, explaining how deductibles and premiums correlate, rather than trying to get them to take the lowest deductible. Millennials expect that, when they come to you asking for help in the realm of personal finance, you’ll be looking out for their best financial interests, rather than your commission check. As soon as a Millennial believes you’re NOT looking out for her best interest and are more interested in the sale, you have just made yourself the commodity.

No more fancy terminology

We have an epidemic of insurance buyers who have no clue what they’re buying. “Limit,” “peril,” “liability,” “occurrence” – these are not words the Average Joe and Average Jane have any practical reason to know, outside of purchasing insurance. Millennials won’t settle for someone who isn’t able (or willing) to give the layman’s definition of these terms. This requires you to have a real command of the fundamentals of risk and insurance, rather than a command of policy forms and exclusions.

Embrace technology to increase service

Sure you have a Facebook and a Twitter, maybe you even post regularly, but that’s not what will retain Millennials. Make yourself and your agency available to them on their terms: phone, email, text or social media. Encourage them to take pictures and videos of all their belongings if they don’t want to make an inventory list. Send periodic, non-marketing text messages to encourage safety. (Example: “With the coming cold weather, be sure you clean off your furnace and think about getting it inspected. Build-up can reduce efficiency, which costs you more money and might even cause a fire.”) These are the types of things that will differentiate you and your team from every other agent out there.

As an aside: If you want to serve Millennials, you must make online payments easy. Most Millennials don’t own stamps and are using the same checkbook they got when they were 16 and opened their first checking account.

Humanize them at claim time

Millennials want to be treated like the humans they are when claims hit, which, in all reality, isn’t asking much. Instead of aiming for that minimum threshold, exceed expectations by doing the following when you are notified of their claim: 1) Make sure they’re okay, 2) Check in and see how they’re doing and if they’re worried about anything (lawsuits, another loss, further injury, claim not getting paid, etc.), 3) Make sure you’re communicating with them, in addition to the adjuster, 4) Explain to them how this might affect future premiums. Claims are your time to shine, and, if treated well, Millennials can be some of the most loyal customers you’ll have.

In closing …

Insurance is a paper and a promise

Without anything more tangible than that, it’s not too much to ask to be treated well, as a smart and autonomous human being. If you can show that to your Millennial customers and follow it up at claims time, you’ll crack the nut that is the Millennial insurance-buyer.

The views expressed by the author are the author’s alone and do not necessarily represent the views of Aon or its affiliates. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial or other professional advice.

Restoring the Agent-Client Relationship

There has been a lot of frustration in the insurance industry from both those who sell it and those who need it. Both camps are suffering financially, and both can do better if they get together on vital insurance protection, but they just can’t seem to hook up without jumping through hoops. In an era of hyper-information and instant communication, this disconnect may seem crazy, but it’s real. In a time of chaotic change, an online meetup service would be valuable to agents and consumers alike to repair that agent/client relationship and put the personal touch back into insurance.

Financially challenged agents and consumers

Incomes have stagnated for insurance agents and the general public alike, and the route to better times seems unclear for both sides. According to the U.S. Bureau of Labor Statistics, the mean annual salary for insurance sales agents inched up only 2% between 2010 and 2014. In 2010, it was $62,520.  In 2014, it was $63,730. Furthermore, the field has become overcrowded, with 18% more agents vying for the business in 2014 than in 2010.

The general public has fared no better. Following the Great Recession, which began in December 2007, the wealthiest Americans have done well. The “rest of us,” however, continue to struggle. The proportion of American households defined as “middle-income” remained stagnant from 2010 through 2014, at about 51%, according to a Pew Research Center study. Back in 1970, the “middle-income” percentage was 10 points higher.

The potential for pocketbook improvements

Both insurance agents and their prospects could do better financially if they could somehow get together more quickly and smoothly – through a matchmaker or intermediary.

It’s easy to see how agents could profit. With, say, a 10% to 50% increase in qualified leads per month, a corresponding jump in income could be expected. And with other efficiencies through more nuanced matchmaking, even greater income increases might be forthcoming – through enhanced referrals, for example.

It’s a little more complicated to see how connecting more smoothly could financially benefit insurance buyers. It becomes clear, though, when one goes to the heart of what insurance is for.  It’s for mitigating risk, which can be expensive. It also means personal benefits such as improved health and well-being. For example, good guidance from an agent can:

  • Make the difference between paying and not having to pay for home repairs after a type of storm damage not covered by an “economy” policy the agent advised against.
  • Preserve a family’s estate by convincing the family, early on, of the prudence of securing long-term-care insurance. This could be a financial game changer for millions of families that are now exposed. According to industry estimates, about 90% of those who could benefit from LTC insurance do not own a policy. And one of the biggest causes of bankruptcy is uncovered health expenses, especially in the later years!
  • Help keep clients safe and whole through an auto policy with safe-driving incentives. The potential benefits range from lower premiums to higher lifetime incomes because of avoiding accidents that might interrupt the ability to work.

As technology and society evolve, good guidance from an insurance agent may affect people’s pocketbooks and lives in more significant ways than ever. More and more agents can:

  • Team with financial advisers to foster sound budgeting, savings, investments and money management.
  • Influence their clients’ health by recommending policies, now starting to appear, that come with fitness incentives. The financial win here is double: lower premiums for keeping up one’s wellness routine and greater lifetime earnings through enhanced vitality and work-span.

The matchmaker solution

A good matchmaking service brings insurance agents and buyers together in very efficient, human ways. It starts with search and ends with introductions and contact.  It includes:

  • A search function to locate agents for a particular type of insurance (auto, critical illness, health, homeowners, life, long-term care, Medicare supplement) in a particular geographic area.
  • A list of agents with their pictures and names visible, for the buyer to peruse and select from.
  • Details about each agent, including:
    • Insurance lines and carriers represented.
    • Agent’s biography or background description.
    • Reviews or testimonials with ratings (usually one to five stars).
    • Link to the agent’s personal or business website.
    • Other information ranging from a location map to social media links.

Limited matching has existed for a few years. Some generic consumer rating and matching services embrace insurance agents. They include Yelp and Angie’s List. General search services, such as Google and Bing, serve as de facto matching services, but in a very spotty way. Insurance associations develop leads that are sold to agents but do not typically provide free online access to individual agents.

Robust agent-buyer matching, with all the above elements, is ready for prime time. In 2015, Agent Review, the first complete rating and matching service designed specifically for insurance agents and insurance buyers, was introduced.

Do Natural Disasters Matter To Me As An Insurance Buyer?

Does the recent string of catastrophes from New Zealand to Mid America to Japan matter to me and my Insurance Program? Should I worry about the impact and record breaking cost of these events? Currently the cost estimate is over 60 Billion dollars and counting. As with so many things in a global environment, are all of these events related and will they have serious implications for insurance pricing in the future?

The simple answer? Yes, they do. Insurance at its core is the ability to collect premiums from many businesses such as your local operation and many thousands of other small to medium size businesses and use those premiums to pay losses for the group. The insurance carrier has to charge a premium that not only is sufficient to pay smaller routine losses, but to also bank premiums for the large multi-billion dollar losses that can occur on an infrequent basis. Every carrier has to predict the potential loss that they could be exposed to from any source and make sure they have the financial strength to pay those claims. No one carrier, no matter how large, is able to take 100% of any loss or losses that might happen without facing financial insolvency. The solution to that problem is to purchase what is called reinsurance. In essence, each carrier pays a premium to another carrier for protection against a truly devastating event such as happened in Japan.

A carrier might have multiple layers of reinsurance with each policy taking a defined portion of any loss such as 5 million of coverage after the paid loss totals 15 million, and these policies each have a defined portion of a loss for a defined premium. These reinsurance premiums are then included in the premium that each policy holder pays each year. Reinsurance premiums can average as much as 15 to 20% of the annual premium you pay as a business owner. If the reinsurance carriers have to participate in the cost of a catastrophe such as Japan or New Zealand for earthquakes or hurricanes or tornadoes, then the premium they charge will increase which will increase the premiums your carrier pays for the protection and thus your individual premiums can go up. It is this ability to spread high dollar losses to numerous carriers that makes insurance work in any situation.

The reinsurance industry is absorbing losses at a record pace over the last six months, but through careful management of assets and surplus has been able to remain solvent and financially able to continue to provide protection. We are starting to see an indication that rates are going to adjust upward to replenish surplus for reinsurance carriers. Increases will be variable based on location, line of business and carrier concentration. The industry is keeping a wary eye on the upcoming hurricane season. If a large event takes place in the United States in a heavily populated area, it could be the final event that generates a rapid increase in pricing at the individual policy level. Stay tuned for further developments.