Our learnings fall into five broad areas. Whether you are an insurance carrier, BGA, FMO, insurance agency or producer, these lessons are key for the decade ahead.
Millennials are starving for life and annuity digital sales
Millennials are using Robinhood, Acorns, Betterment and other fintech apps daily and are conditioned to expect a similar digital experience in the workplace, including an advanced digital sales toolset for life, long-term care and annuities.
A consistent refrain that we hear from advisers is: “I am tired of trying to explain life and annuity products using PowerPoints and PDF brochures. Every other financial services experience is application-based. Even my 401K experience is interactive now.”
Millennials demand that there be a more visual, interactive and intuitive way to sell life and annuity products that matches their every-day fintech experiences.
Financial advisers expect a “digital experience,” and greater life and annuity adoption depends on it
Financial advisers today have already completed the shift to digital financial planning platforms. Whether it is EnvestNet Money Guide Pro (MGP), eMoney, RightCapital, AssetMap or RetireUp, the financial planning experience today is managed through a fintech platform. These platforms have simplified the discussion and engagement between the financial adviser and the client, making it easier to understand financial options and their benefits for the overall financial plan.
This is the expectation – digital, visual, interactive and easy to understand.
If life and annuity carriers and distributors want to return to growth – and increase sales within advisory channels – they will have to “speak the language” of the market, selling and servicing products through modern digital delivery.
Experience is everything
The adage, “Experience is everything,” has become, “Digital experience is everything.”
We increasingly talk about the paramount importance of the customer experience (CX) and the user experience (UX). Each sits at the forefront of organizational strategy and service delivery. And nearly every financial services product class has already shifted onto this agenda. Even cars are now designed and ordered through an online digital experience.
Unfortunately for the life and annuity sector, the sales experience remains entrenched in a legacy model – static, 45-page PDF illustrations; long PowerPoint decks; and traditional, print-oriented “brochureware.”
Without modernizing the pre-sale to in-force digital customer engagement (for a world where “experience is everything”), the life and annuity sector stands little hope of returning to sustainable long-term growth.
The chief learning from over a million digital sales presentations?
A legacy sales experience today undercuts the sales effectiveness of wholesalers, advisers and agents and ultimately reduces closing rate and top-line sales numbers across the P&L.
RIAs, BGAs, financial advisers and insurance producers are “de-localizing”
One little-noted potential long-term outcome of COVID-19 and the transformation shift to remote work is the “de-localization” of RIAs, BGAs, financial services firms and financial professionals.
Historically, financial services firms have focused their services on a local market or region, so they could meet and serve their clients, face to face, at the office or in the home. COVID-19, however, broke this model.
First, the permanent shift to virtual client engagement (e.g. via Zoom or Microsoft Teams) has proven that the face-to-face relationship can be retained even when in-person meetings cannot.
Second, the growing relocation of individuals over the past year has meant that many financial professionals are having to virtually follow clients to retain them. Finally, as firms have gotten smarter about lead and client acquisition driven by data, the opportunity of digitally targeting new clients — at a micro-individual level — in new cities or regions has become a reality.
What might this trend lead to over the long term?
It is possible that the trend may spark a new era of innovation in the advisory space, as “niche specialists” are able to digitally scale their service proposition.
Transformation of the wholesaler model is well underway
Wholesaler demand for digital sales enablement and marketing tools is growing by the day.
What digital sales enablement capabilities are wholesalers crying out for?
In our experience, this has been concentrated around three critical areas:
Digital, interactive product analysis tools that support virtual sales engagements
Modern platform-based product training, education and marketing experiences
Real-time data insight to drive case and account follow-up
While the digital hybridization of the adviser-client discussion has already been underway for several years, the wholesaling shift is just now taking off.
If you are a life and annuity carrier or distributor, start now. Not only will your GenX (age up to 55) and millennial (age up to 40) wholesalers double their sales effectiveness, they will also personally thank you, as will the advisers you serve.
It has been a long time since I took chemistry as a pre-med student in college – yes I was pre-med before switching to a math and computer science major! I loved science, and I remember the experience. I can’t recall many of the formulas or compounds. But I remember the labs – especially the all-night ones. I remember mixing chemicals, and I remember the role of the catalyst. No matter what you had in the tube or the beaker, we always had to watch out when we added the catalyst. It was the game changer. It was the one that could set the classroom on fire. The catalyst took all of the primary chemicals and created a quicker reaction. Poof.
A catalyst accelerates a chemical process without itself being affected. If you think about it, COVID-19 has acted as a sort of digital demand catalyst.
In an earlier blog, we talked about reading the signs of what is to come in the life insurance industry, and we talked about connecting the dots. If we look at the trends closely, we can make out a picture of where the life insurance industry seems to be headed. Too much is changing not to notice. COVID-19 has added an extra variable – a catalyst – that has accelerated and pushed insurance to the point of reaction.
No test scenarios could have accomplished what COVID has accomplished in seven short months. In fact, Microsoft CEO Satya Nadella stated in April, “We’ve seen two years’ worth of digital transformation in two months.” COVID has compressed time frames for digital utilization as it has ignited a rush for digital capabilities. It is speeding up a demographic and customer engagement shift. That is a catalyst!
We have not seen such a rapid shift like this in our lifetime, one that will demand core systems that will adapt to customer needs and behaviors – moving between jobs regularly, seeking on-demand offerings, looking for value-added services, buying benefits that can port to individual insurance and full digital engagement. These trends are tied to the new dominant insurance buyer of the digital era.
Who are the new dominant insurance buyers? How will they change the nature of insurance?
In Majesco’s latest thought-leadership report, Rethinking Life Insurance: From a Transaction to a Life, Health, Wealth and Wellness Customer Experience, we use our recent consumer survey to paint a picture of this dominant insurance buyer as we chart the similarities and differences between demographic groups. For the purposes of our reporting, we place the segments into two large “super segments.” Gen X and Boomers fit into one segment – the older generation that has been the foundation of growth for 50-plus years. And the younger segment — Gen Z and millennials, who represent the next generation of buyers and who expect digital-first engagement, products and business models.
Some interesting insights regarding the younger generation set the stage for a different view on expectations and engagement. Currently, the younger generation rents at twice the rate of the older generation and is two times more likely to live with parents/family or friends/roommates, as seen in Figure 1. However, the younger generation is also 80% more likely to have children under 18 in their household. Yet, they represent a strong segment increasingly ready for insurance as they form new households and raise their families, replacing the older generation as the coveted insurance buying segment.
Figure 1: Demographic profiles of the generational super segments
These segments identify how insurance’s dominant buyers are changing, particularly their expectations, usage and perception of life insurance. The urgency of adapting to millennials and Gen Z is reaching a tipping point. Next year, millennials will overtake the older generation. And by 2025, the combined Gen Z and millennial generations will dominate the 30- to 60-year-old sweet spot for insurance — a complete flip in dominance in the next five years.
Insurers unprepared for this new dominant insurance buyer and their extremely different needs and behaviors will increasingly find they are no longer relevant.
As we have been pointing out recently in our webinars and blogs, insurance’s focal shift from transactions to experiences is going to result in a wide range of growth opportunities. The younger generation seems to understand the value of insurance and wants it. However, they expect something that is personalized to them. To get this, they are more willing to share personal data like health and exercise data (including in real time) to underwrite their policy. They want services. And they expect a seamless, digital process.
You may not realize it yet, but this is the generation we’ve all been waiting for! The only drawback is the lack of preparedness and the swiftness with which this is unfolding…now accelerated by COVID-19.
While L&A insurers needed to operationally improve prior to COVID-19, they are now more pressured to do so, both during and after the crisis. The pandemic is rapidly exposing less-than-desirable customer experiences, as insurers deal with paper-bound processes, non-digital post-service transactions, a rise in “fluidless” online life insurance purchases through new competitors and the need for extra caution due to fraud. At the same time, risks have emerged that demand new products such as “pay gap” for employees unable to work during a shutdown, various health products and simple life coverages – either as individual products or voluntary benefits.
To retain the customer and revenue, insurers must rethink their scope away from a life insurance transaction to a broader lifestyle experience across health, wealth and wellness that includes:
Insurance Product:Product (risk, services, experience) redefined but requires insurance to participate and play within ecosystems, rather than simply existing as a product unto itself.
Lifestyle – Health, Wealth and Wellness: A unified view to cover all aspects of life from health, wealth and wellness for banking, insurance, wellness activities, brokerage account 401K accounts and more, in a holistic way instead of separate transactions or policies for each.
Services:Provide services such as wellness discounts, preferred access to gym memberships and access to online brokerage accounts that provide a powerful, single engagement, eliminating points of friction between the different participants of the ecosystem.
Continuous and Fluidless Underwriting:Constantly updating the risk profile of an individual or thing that changes the terms and pricing that are influenced by the continuous flow of data and use of the data to avoid fluid-based underwriting for a range of life insurance products.
Highly networked, data-driven business models are emerging, within and outside of insurance. They are redefining the customer journey, and the entire customer relationship, across a broader set of health, wealth and wellness options.
The viability of the insurance industry is vitally connected to demographic and market trends, customers’ expectations and their adoption of new technologies. The combination of these factors will pressure the insurance industry to develop products and services that are more affordable, tailored to very specific needs, digital-first, simpler and grounded in trust that not only protect lives but also enhance those lives across a wide array of areas beyond insurance, as reflected in Figure 2. They will also be looking for consolidation. “Can I meet more than one need with this one relationship?”
Customers will expect a different experience that brings solutions to all of these needs together.
Figure 2: Elements of a holistic lifestyle ecosystem
Protecting Themselves and Their Lifestyles
Numerous research studies, including our own primary consumer and SMB research, have highlighted customers’ view that insurance is complex and difficult and unpleasant to deal with. From the multi-page, fluid-oriented applications to the multi-page contracts full of confusing legal terms and exclusions and a variety of different riders, traditional broad policies exacerbate the problem. Understanding what is covered and how much can be like a maze, where the “truth” is difficult to determine, creating frustration and lack of trust.
In contrast, newer coverage options remove complexity, because they are simple, specific coverages for specific needs and time frames. Simplification of the life insurance process and policy has been a major focus of startups like Ladder Life, Haven Life, Bestow, Fabric, Health IQ and others – driving their growth and loyalty with customers. But simplification may also mean a broader approach.
As we mentioned in our recent blogs on mobility ecosystems, organizations are expanding their brands to offer simplicity through tools that meet multiple needs at once. With life insurers, this kind of ecosystem will begin to look much more like a comprehensive life, health and lifestyle management process. Insurance will always be a part of it. The experience created by the insurer, however, might look dramatically expanded and radically simplified. The result will be straightforward – insurers will be contributing, not just to the security of individuals and families, but to holistic life improvement.
Connecting to Better Life, Health and Wellness
Technologies like IoT and wearables have rapidly matured from emerging technologies over the past five years. Fitness trackers and other connected wearables are becoming important connections and hubs for new ecosystems that provide value-added services or insights for people to manage their health and wellness. A 2018 study commissioned by Vitality found that adults who used fitness trackers tied into a rewards scheme could add two years of life expectancy, on average.
Scientists and tech companies are realizing the potential of these devices beyond their original fitness tracker role to predict possible adverse health conditions, including COVID-19. In the 2020 Innovation in Insurance Awards sponsored by Efma and Accenture, a submission by PZU in Poland used a wearable device to measure oxygen and pulse in real time to reduce transfer infections of COVID to medical staff in hospitals.
Michael Snyder, chair of genetics at Stanford School of Medicine, noted that smartwatches and other similar connected devices make at least 250,000 individual measurements a day. This continuous stream of data, fed into powerful predictive algorithms, can be more effective than traditional methods at detecting health issues. For example, Scripps Research Institute found that changes in heart rate caused by an infection can get detected four days before a conventional temperature check detects a fever. Recognizing the health and wellness potential of these devices, Apple has been researching how its watch can be used to detect heart problems, and Fitbit is conducting 500 research studies on issues like cancer, diabetes and respiratory conditions.
These innovations fit the younger generation. Gen Z and millennials who own a connected device are nearly three times more likely to say they received an insurance discount or free/discounted products or services as part of the device as reflected in Figure 3. Whether these discounts are real or perceived, it’s clear that the younger generation wants a stronger connection between these devices and related products and services – an example of ecosystem thinking. Just as these generations grew up with digital technology as a defining factor of their youth, ecosystem engagement is a defining influence on their behaviors and expectations (just look at Apple and Amazon engagement) as they become the dominant buyers of products and services to protect life, health and wealth.
Figure 3: Discounts and benefits bundled with smart devices
But the use of these devices is not just for wearables; it extends to home IoT as well, offering an opportunity to create a bridge from P&C and home security into home health and wellness. As health awareness technologies arise, IoT home devices can add value to those who choose to age in place, creating an all-in-one connected home and health offering.
So, if we follow the digital thread properly, the same capabilities that are desired by the younger generation are going to be used to assist the older generations with their health, security and lifestyle during retirement. With more than 10,000 Baby Boomers retiring each day, this is a huge market opportunity. Life insurance’s “new occupation” may be far broader and far more helpful than insurers had ever imagined. In targeting millennials, insurers may find themselves better prepared to meet the needs of all generations.
The Mood to Move
Motivation is the key to insurance sales. Is the new dominant generation motivated to seek life insurance, and are our sales processes advanced enough to capture them at the point of need?
Nearly every time you turn on a light switch today, you are witnessing the power of trends upon shifting markets. Though lighting isn’t going away, the types of bulbs we use and their supply chain has been in flux for the past two decades.
On May 27, 2020, General Electric stopped making light bulbs entirely (after 130 years), selling its lighting division to smart home company Savant Systems. All of the other major lighting players have also been negotiating a market and industry in the midst of change. Government mandates for lower energy bulbs have removed most incandescent bulb manufacturing operations from the market. LED bulbs not only use much less energy, but the bulbs last far longer — so the sales of bulbs will drop over time.
Philips Lighting, another stalwart industry player (125 years old), decided that instead of leaving the business it would develop Philips Hue, a connected lighting solution. Smart homes have now given rise to smart lighting, including smart bulbs — digitally driven bulbs that can adapt themselves to the experience that a customer wants. Many can be controlled via home networks and mobile phone apps. Philips also chose to spin off a whole new brand, Signify, that would embrace sustainability and energy-efficient lighting.
Auto insurers are going to have choices like this to make. Auto insurance, coincidentally, is also a 120-year-old “established” industry, based around a policy transaction. Will insurers continue to provide traditional insurance in traditional ways until they are forced down a dead-end path, or will they embrace new trends, new technologies, new services and perhaps a new mobility ecosystem approach? Will they reinvent themselves to become next-gen mobility customer experience providers?
What are the trends pushing auto insurers to adapt their business models?
Why should auto insurers begin creating mobility ecosystems and customer experiences that will transform their purpose and their profits?
We consider five trending points that are driving change, including:
The Auto Insurance Buyer – A Shifting Demographic
New Data Sources
Ownership vs. On-Demand Mobility
New Auto Insurance Sources and Providers
Let’s briefly consider these trends and how they may affect auto insurers.
Trend 1: The Auto Insurance Buyer
For purposes of simplifying analysis within the Mobility Survey, we created two generational “super segments” by combining two different age groups, Gen Z and millennials and Gen X and Boomers. As expected, the Gen X and Boomer segment is more active than their younger peers in buying or influencing purchases of household services, insurance and financial products. Three exceptions were in individual life insurance and voluntary benefits, where the segments purchased at equal rates, and Amazon account usage, where Gen Z and millennials have a slight lead.
The older super segment has sizable leads in personal lines P&C insurance (auto and home/renters), employee benefit health insurance, investments and annuities. All of these products are good fits for the 30- to 60-year-old “sweet spot” for insurance and financial products, given they are at a life stage with the greatest insurance and financial planning needs as they establish households and families and accumulate wealth and possessions that need protection.
In 2021 – one year away – millennials, all by themselves, will meet and begin to surpass the older super segment. The young super segment’s dominance will accelerate four years later when the first members of the Gen Z generation also turn 30, vaulting this new generation to buying dominance. Providers of household services, insurance and financial products that have not adjusted their business models, products and customer engagement experiences to meet the needs of this new “sweet spot” buyer market will find themselves challenged and left behind.
The insurance industry will need to adapt to this new super segment of new customers.
Figure 1: Insurance buyer “Sweet Spot” populations by generation in 2000 vs. 2020
Trend 2: Advanced Technologies for Vehicle Safety
Nearly 60% of Gen Z and millennials and half of Gen X and Boomers who own or lease a car have at least one type of newer safety or convenience technology in their vehicle. Navigation systems and blind spot detection are the most popular among both segments. The Gen Z and millennial vehicles have higher rates of collision avoidance systems, surround view systems, automatic braking and automatic parking.
These technologies were expected to depress auto insurance premiums thanks to fewer accidents. However, insurers’ experience to date has not matched this expectation. The cost of repairing or replacing these more sophisticated vehicles with advanced technologies is greater than the savings derived from lower frequency. Some of these technologies have indeed shown benefits, but the translation to lower premiums has been minimal. For example, NAMIC found that electronic stability control saves a customer an average of only $8 on the annual premium. And, “those who pay for blind spot warning, driver alertness monitoring, lane departure warning, night vision or parking assistance systems save nothing at all.”
Is it possible that eventually the impact of these technologies will overtake the cost of maintenance and repair? In theory, yes. The greater number of high-tech vehicles that are on the road, including the autonomous vehicles of the future, the greater the chance that vehicular accidents will drop. There are, of course, an unknown set of circumstances related to COVID-19 and auto use. Will a significant percentage of the workforce stop commuting? Will public transit commuters begin to use their vehicles to avoid exposure? Or, will technologies such as driverless vehicles create an entirely new commuting scenario? Lilium, a German aviation startup “unicorn,” has plans for bringing flying taxis to the skies by 2025, which will further change the mobility options. The answers may lie in the rise of mobility ecosystems, which we’ll examine later.
Trend 3: New Data Sources
Connected devices (and other data sources) are enabling underwriting and pricing based on mileage, location and driving behavior, which could lower premiums, while also making them potentially less predictable. Surprisingly, there are very similar levels of interest in these new data sources between the two generational super segments.
The COVID-19 shelter-in-place actions slashed the number of miles driven – by an estimated 50% between mid-March and mid-April. This is spurring speculation and debate about the pandemic’s longer-term effect on mileage-based or usage-based insurance. Although streets and roads have fewer vehicles on them, numerous states and cities have reported increases in speeding and reckless driving and fewer but more severe accidents. From an insurer perspective, broader usage-based/UBI models would be the preferred approach post-COVID-19, rather than simply tracking miles driven.
Despite the growing acceptance of new data sources, with the potential for variable premium by the month, the traditional six-month term with a set premium is preferred by both generational groups. However, Gen Z and millennials have a higher interest in a usage-based model that is automatically triggered by sensing when the car is parked or being driven.
Within the Gen Z and millennial segment, 28% of respondents indicated they have used a device or app to record their mileage or driving behavior as compared with only 15% of the older super segment. Both generational super segments showed strong interest in a smartphone app that provides real-time alerts and advice about driving behavior and conditions. Interest is even higher if following the advice leads to discounts on the next insurance bill.
Trend 4: Ownership vs. On-Demand Mobility
There is growing popularity and use of non-owned vehicles and alternative mobility options like rideshare, rentals (traditional and shared economy) and other local or urban rental options like scooters and bicycles. With their increased usage comes the threat of an offsetting level of private vehicle ownership and leasing, leading to a declining need for personal auto insurance. This declining ownership could accelerate if more people work from home, eliminating the need for the traditional “two-car family” and using alternative, on-demand mobility.
All-inclusive vehicle subscription services are a relatively new mobility option offered by several auto manufacturers (currently, most are luxury brands) and third-party services. Most allow the customer to switch vehicles on a periodic basis and pay a set monthly fee that covers the vehicle, maintenance and insurance. A surprisingly high number (30%) of Gen Z and millennials indicate they are using or have used a service like this – nearly four times higher than the older generation, indicating interest in different access to mobility options as compared with “owning” a vehicle. Some of these users likely correlated these experiences with micro-term car-sharing company’s such as Zipcar.
Nearly 26% of Gen Z and millennials and 20% of Gen X and Boomers indicate they would or definitely would consider a vehicle subscription the next time they go to purchase a vehicle. When you add in the “maybes,” these numbers jump to 71% and 61%, respectively.
Figure 2: Usage of mobility technologies and participation in mobility trends
Gen Z and millennials use car-sharing services more frequently than Gen X and Boomers. Over a third (35%) traveled this way for five or more days in the previous month, compared with only 18% of Gen X and Boomers. Clearly, this is an established mobility preference within the younger generation that will fuel a growing market for on-demand rideshare coverage and indicates, once again, the potential decrease in car ownership by this younger generation.
Trend 5: New Auto Insurance Sources and Providers
Most of the consumers we surveyed said they still own or lease one or more vehicles. The traditional purchase methods for auto insurance are still the most preferred channels — agents/brokers or direct via an insurer’s website. This is consistent from the last couple of years from our consumer research.
However, Gen Z and millennials also indicate strong interest in insurance embedded in the purchase cost of a vehicle, or buying insurance from a vehicle manufacturer’s website, an affinity group, car dealership, or car shopping website – about 25% higher than the older generation. Interestingly, this group also showed strong interest in purchasing insurance from three of the “tech giants,” Amazon, Google and Facebook – a wake-up call for both insurers and those selling vehicles. For a better glimpse, see Fig. 3 below.
Figure 3: Interest in traditional and new sources of auto insurance
If we look at all five of these trends in aggregate, auto insurers are facing a light bulb moment. Many of these trends will likely accelerate as we reconsider our work lifestyles moving to the home coming out of COVID-19. If changes are going to occur in demand levels, channel types and service offerings, can auto insurers compensate by bringing the right kind of change to the market? Can they invent their own supply chains of opportunity?
In our next mobility blog, we look at this supply chain in depth. Auto insurers are redefining themselves as mobility companies and in the future will be seeking to own the mobility experience using a vast mobility ecosystem, ideally building those ecosystems around their brands. Those who will lead the mobility shift are the ones who have prepared their business systems and models that will focus on the customer mobility experience and foster non-traditional products and services.
Does the name Ned Ryerson sound familiar? Perhaps just vaguely familiar, but you can’t quite remember where you’ve seen or heard the name? I’ll give you a hint: BING! How about now? Still don’t remember? Did you see the Harold Ramis film, “Groundhog Day”? BING!! Remember the annoying insurance salesman who torments Bill Murray’s character, Phil Connors, every morning, claiming to have attended the same high school when they were kids? BING!!! Remember how he shouted his cheesy, personalized catch-word as he badgered Phil to buy nearly every type of insurance known to man? BING!!!! “Needlenose Ned”? “Ned the Head”? BING!!!!! That was Ned Ryerson. (I’ll spare you the catch-word this last time.)
For the five people on the planet who have not yet seen this comedy classic, a supernatural event forces a self-absorbed TV weatherman covering the annual Groundhog Day event in Punxsutawney, PA, to repeat the same day over and over again. Each morning, weatherman Phil Connors awakes on Feb. 2 and re-lives the same set of events, interacting with the same people, including the cringe-worthy Ned Ryerson. The first three or four times Phil encounters Ned, he does his best to avoid him. By their fourth encounter in the movie, Phil flattens Ned with a vicious punch before he can once again launch into his déjà vu sales pitch.
After repeating the same day for the hundredth, thousandth or possibly millionth time, Phil Connors undergoes a personal transformation from egotistical jerk to a kind, caring person, thus allowing the calendar to finally turn to Feb. 3. And, yes, part of that penance included a purchase of insurance coverage from Ned Ryerson. After all, what greater demonstration of humanity is there than to be nice to an insurance salesman?
Houston, We Have an Image Problem
Ned Ryerson is the fictional embodiment of nearly every insurance stereotype in a single person. Unable to turn his “whistling belly button trick” from the high school talent show into a professional career, he did the next best thing; insurance. He’s creepy. He’s annoying. He tells bad jokes that only he finds funny. He never takes a hint. He’s relentless. He displays many of the worst traits perceived in our industry, and, sadly, he is one of the more positive depictions of the insurance industry that has appeared on the big screen.
Consider the alternatives. In the Denzel Washington movie “John Q,” a desperate father holds a hospital wing hostage and forces doctors to perform a potentially life-saving surgery on his dying child because his insurance company will not authorize the procedure. “The Rainmaker,” a screen adaptation of the John Grisham novel, follows a lawyer suing an insurance company for denying a bone marrow transplant to a young man who later dies as a result of the company’s “deny all claims” directive. “Sicko” offers a scathing (albeit slanted) view of the American health insurance system that takes billions of dollars from individuals and then refuses to provide them coverage.
If we are to believe Hollywood, the insurance industry steals hard-earned money from people who can least afford to lose it, seizes every opportunity to deny benefits to those in need and condemns children to death to protect profits. By contrast, Ned Ryerson is practically the patron saint of the industry.
So what does Ned Ryerson have to do with the future of insurance? The Bureau of Labor Statistics projects the insurance industry will need to add nearly 200,000 jobs in the next five to six years to match projected demand. Brokerage firm Guy Carpenter projects that as much as 25% of the insurance industry will have reached retirement age by 2018. With so many stable, well-paying insurance careers available, it would seem the insurance industry should have no issues filling its employment coffers. And yet we do. In fact, we may be approaching a crisis-level talent gap. Why? Perhaps it’s because so few young people have had a positive introduction to the insurance industry. Maybe it’s because there are only a handful of universities offering insurance programs. Or just maybe, college students simply don’t want to envision their future selves as Ned Ryerson.
No Degrees of Separation
Insurance is one of the only major industries in the world that does not require or even encourage prospective employees to have an educational background in the field. There are insurance professionals who hold diplomas in English, finance, economics, liberal arts and a myriad of other disciplines but virtually no insurance degrees. When people learn that some universities offer insurance as a degree program, their reactions usually fall into one of two categories:
Sasquatch sighting: I’ve heard rumors such things exist, but I’ve never actually seen one in person.
Unstable personality concern: You mean people actually WANT to do this for a living? Perhaps these lost souls should consider seeking professional treatment for this condition….
Why is it so surprising that an insurance professional would have an insurance degree when it’s commonplace for others to hold degrees in their chosen fields? Attorneys attend law schools. Mechanics go to technical training schools. Doctors go to medical school. Why wouldn’t an underwriter or broker study insurance? Think about it. How would a patient react if he learned his neurosurgeon attended culinary school? Would an accounting firm hire someone who studied ballet? What if the electrician re-wiring your home offered his undergraduate degree in physical therapy as proof of qualification? Wouldn’t that be strange and possibly a little unsettling? Yet this is how most of the insurance industry operates.
Professionals with educational backgrounds outside of insurance aren’t necessarily less qualified than those with insurance degrees. There are many exceptional people in our industry who did not pursue insurance as a course of study but still found their way to an insurance career. Yet how many talented young people do we miss every year simply because insurance is not offered as a career choice at the schools they attend?
If we are to solve the long-term issue of youth and talent acquisition facing our industry, we will need to make insurance a more desirable and available option for college students. To do so, we need to help more colleges and universities across the country develop meaningful insurance programs. Unless the insurance industry supports college degree programs, students aren’t likely to consider insurance as a career path worthy of their time and talents
A Bridge Under Troubled Waters
According to a 2015 study published by Business Insurance, Temple University hosted the largest insurance program in the country with 475 undergraduate students in 2014. On the surface, this number may seem impressive but when compared with the enrollment in other courses of study and the projected needs of the insurance industry over the next few years, a very different picture emerges.
Of the nearly 28,000 undergraduate students attending this university in 2014, less than 2% chose insurance as a potential career; fewer than those pursuing music and dance. If we assume half of the undergraduates studying insurance would be graduating in any given year, this particular program would fill fewer than 1,200 positions over the next five years.
Gamma Iota Sigma, the insurance industry’s lone national professional fraternity, has active local chapters in just 50 of the 3,000 or so higher education institutions in the U.S. offering four-year degree programs. This means insurance is available as a course of study in just one out of every 60 colleges and universities across the country. In 2014, the top 20 schools offering insurance as a major had roughly 3,400 undergraduate students enrolled in those programs collectively. If the Bureau of Labor Statistics’ projections are correct and our industry will have about 200,000 jobs to fill within five years, there won’t be enough insurance graduates to fill the job vacancies left by those who are retiring, let alone the new positions.
To bridge this impending employment gap, our industry will need to look to other non-insurance graduates to fill the void. For some of these individuals, insurance will provide a challenging and rewarding career, but for others it will be an option of last resort. The best and brightest of those pursuing other fields of study will likely have found homes in their chosen career paths. Insurance will get the leftovers. If the insurance industry is to continue to evolve and improve at the same rate as those we insure, something will need to change.
The Lesser of Two Evils
In recent years, a great number of studies have been published on the attitudes, values and work ethics of millennials. A 2011 report issued by PricewaterhouseCoopers (PwC), Millennials at Work; Reshaping the Workplace, indicates personal development opportunities, organization reputation, work/life balance and opportunity to make a difference are some of the key factors millennials consider when choosing a job. Compensation was also a factor but was not among the top three criteria millennials used to make career choices.
The insurance industry would seem to meet most, if not all, of the essential criteria millennials use to judge prospective employers. There is an enormous opportunity for personal development and advancement for young people entering the insurance industry over the next few years. Likewise, many employers in the insurance industry have moved toward flexible working hours and work-from-home arrangements to accommodate a better work/life balance for their employees. Lastly, the insurance industry undoubtedly makes a difference for many people. Insurance allows people to buy homes, operate businesses and recover from life-threatening injuries without fear of possible financial ruin. It even helps people care for their families after they die.
If not for one glaring exception noted in the PwC study, the insurance industry would appear to be a nearly perfect fit for millennials seeking professional employment opportunities. But to quote the great sage Ned Ryerson, that one exception is a DOOOZY. When asked if there were any specific industries millennials would not consider based on reputation alone, insurance ranked second behind only the oil & natural gas industry. Even Ned would have a tough time spinning that one to a prospective millennial. You may hate us, but our carbon footprint is really small… How’s that for a rebuttal and recruiting pitch?
School is Back in Session
The reality for most insurance industry recruiters is that the battle for millennial talent historically was lost before it even began. Not only do we not have an extensive network of colleges and universities providing insurance as a course of study for incoming students but most prospective millennial candidates decided against insurance as a potential career option long before they even chose a college to attend. If the insurance industry is to reverse this trend and attract talented youth, we will need to develop a strategy to engage young people before they begin pursuing a profession.
Traditional career days and fairs at most high schools and colleges generate a relatively high attendance but typically offer little in the way of meaningful interaction with individual students. The likelihood of convincing someone to consider an insurance career in a two or three minute conversation is minimal. A guest lecture lasting 30 minutes (or more) provides much better odds. Many high schools now offer business classes as electives to their students. Some of these schools will occasionally invite guest lecturers from local businesses to speak in their classrooms. A guest lecture that presents an insurance career as a positive and challenging opportunity could be the first introduction to a rewarding career path for some students.
Not sure if your local high school offers business classes as part of the curriculum or if they allow guest lecturers into their classrooms? Why not pick up the phone and ask? We call on prospective clients nearly every day asking them to place their business with us. Shouldn’t we put forth the same effort to secure the future of our industry?
Supporting existing college insurance programs will also be a critical component to securing top notch talent in the future. For companies that want to participate in scholarship and grant programs without the administrative responsibilities of operating those programs, there are options available. Organizations like the Spencer Educational Foundation provide scholarships from donor companies and individuals to students pursuing careers in risk management and insurance. These scholarships provide real incentives for talented students to choose insurance as a career. Individuals can likewise help aspiring college graduates by participating in mentorship programs that pair graduating students with experienced professionals. Having a mentor available may make the transition from college to professional life easier and possibly improve the chances of those students remaining in the industry for the long term.
Lastly, while there are only about 50 colleges and universities with established insurance programs nationwide, that leaves about 3,000 opportunities to develop new insurance degree programs. It is likely that at least a handful of the multitude of retiring insurance professionals may simply be looking for a change of scenery rather than a complete departure from the working world. A new career as a college professor could be an option for some. If just one college in every state were to create a small staff of adjunct professors from the pool of retiring insurance professionals, the number of colleges in the United States offering insurance as a degree program would nearly double. This wouldn’t eliminate the talent gap on its own, but as Ned Ryerson would likely agree, it sure as heckfire would be a step in the right direction. Am I right or am I right?
It’s no secret that millennials don’t care much for insurance companies. In fact, recent Bain & Co. research found that 80% of millennials say they would move their insurance business to new entrants that are capable of creating and delivering more value than incumbent insurers, leaving incumbents especially vulnerable to insurtech startups. But when it comes to millennials, what exactly is value, and how do insurance companies make good on it?
Over the last year, Cake & Arrow has been conducting research with millennials to help the industry better understand this elusive demographic, and in doing so to answer precisely this question. In our research, we found that when it comes to insurance, creating and delivering value for millennials goes far beyond price and convenience–the two areas where insurance companies have been especially focused as they invest in their digital transformation efforts. 2016 research (also by Bain & Co.) suggests that value exists in a hierarchy, and falls into four distinct categories: functional, emotional, life-changing and social impact. Price and convenience both fall into the functional category, the lowest level of the hierarchy, meaning that, while they are important (and, according to the hierarchy, prerequisite for delivering higher-level value), they fail to deliver the highest-impact value–emotional, life-changing and social impact.
When we studied millennials, one of our research hypotheses was that to deliver value at the highest levels means resonating with millennial values, that is, the important and lasting beliefs that influence their behaviors, attitudes and priorities. Our research identified three key values driving millennials: Community & Authentic Connect, Interdependency & Social Good, Transparency & Autonomy. Through a sequence of ideation, design and user testing, we were able to validate that insurance products that resonate with these values ultimately deliver more value (and higher-level value) to millennials than traditional insurance products, fundamentally changing the way they think about insurance.
Looking at the industry at large, we found that there are a handful of insurance companies, mostly startups, that are taking these values to heart and designing solutions that not only address millennial needs and concerns but also resonate with their values to deliver value at the highest levels.
Eusoh actually isn’t insurance at all. It’s community-based cost sharing, offering an alternative to insurance. A small, little-known startup, Eusoh has built a cost-sharing platform for pet-related veterinary expenses. Unlike traditional insurance, Eusoh customers don’t pay monthly premiums. Instead, they pay a $10-a-month subscription fee to join a cost-sharing community group with like-minded pet owners (there are currently groups for Jewish Dog Lovers, Urban Dog Owners, Large Cats, LGBTQ+ Cat Lovers and more). Community members pay for their vet visits up front and submit veterinary expenses; these costs are then shared among the group, and members get reimbursed. Members are also able to see how their funds are being distributed among the group through a dashboard that displays all the different expenses submitted for different pets and how much money each member was reimbursed. Eusoh also promises significant savings to its members, with the average cost of traditional pet insurance being around $800 for 10 months and Eusoh averaging only $133.
What we like about Eusoh:
Traditional insurance isn’t all that different from Eusoh’s cost-sharing model. At the fundamental level, both are about distributing expenses and risks among a group of people to lower costs for everyone. The big difference is that, in traditional insurance, customers pay their monthly premiums, and, if they themselves don’t have a claim, they have no idea where their money goes. What we like about the Eusoh model is the way it surfaces the community aspect of insurance so that customers can see how their contributions are going to help others. In our research with millennials, we learned that being able to see and understand how the money they were paying to their insurance company was being used to help other members of their community made insurance feel more valuable to millennials, and more worth the money. By charging a subscription fee, and then only billing members for the actual costs incurred by the community, Eusoh is able to resist a problem that has long plagued the industry–customers feeling like their insurance companies are just trying to rip them off.
2. Life by Spot
Life by Spot offers flexible, short-term life insurance with one- to 30-day policies starting at as low as $7 a day. The insurance is geared toward travelers, athletes and other risk-takers. Life By Spot applicants are instantly approved, and there are few exclusions (Spot is like your cool older brother who “approves of the activities your mom wouldn’t”). While short-term life insurance might seem gimmicky at first, the founders see orienting life insurance around experiences (like skydiving or a surf trip to Brazil) rather than more traditional major life events (i.e., marriage and children) as a means of introducing millennials (who are increasingly prone to delaying traditional life events) to life insurance earlier on in their journey, creating a funnel for bigger life insurance policies down the road. Life by Spot also has plans to deepen its ties to outdoor and athletic communities with a new injury protection policy starting at $5 a day that would cover policy holders with high-deductible insurance plans who are injured up to the amount when their health insurance kicks in. Set to officially launch later this summer, the new product has already proved promising. The company recently soft-launched the product with the Austin Marathon with impressive results, offering the policy as an add-on to runners when registering for the marathon. While supplemental coverage like this is nothing new, the distribution approach is fresh and highly relevant to its target consumer.
What we like about Life by Spot:
Our research showed that people are more open to sharing costs and risks (as well as data and other information) when it is with a community of people they identify with. While Spot may seem niche, this is precisely what we like about it. We like that Spot takes a traditional product and spins it for a specific community, one with unique values, risks and behaviors. The spin on life insurance is more than just a marketing message (millennials can see right through this, according to our research); there is a change at the product level that corresponds with the values, risks and behaviors of this particular community, creating a sense of authenticity and trust in an industry where these things are increasingly difficult to come by. By making policy holders feel like they are involved in protecting a like-minded community and the kind of lifestyle this community values, Spot is able to create more value for millennial consumers, beyond what traditional insurers currently offer.
3. Toggle Insurance
Toggle is a new, millennial-focused insurance brand launched by Farmers Insurance late last year. Currently a renters insurance product, with adds-on like credit building and coverage for pets and side hustles, Toggle has plans to expand its insurance offering to create an entire ecosystem of modern insurance products geared toward millennials. The name Toggle refers to the customer’s ability to “toggle” different coverages on and off, and coverage levels up and down, to create completely customizable insurance that befits the individual customer’s budget, lifestyle and coverage needs.
What we like about Toggle:
One of the mistakes we see players in the insurance industry make is to assume that simply having a digital product is enough to capture millennial consumers. For these players, innovation often ends here – at direct-to-consumer digital products that, while making buying insurance simpler and easier, fail to deliver value at the highest levels. What we like about Toggle is that they understand that a digital product is simply a foundation. To deliver value to millennials requires going beyond digital. In fact, our research found that in the age of Facebook, data breaches and digital burnout, millennials are increasingly wary of new digital products, and autonomy and transparency are more important than ever to securing their loyalty and trust. Toggle takes both autonomy and transparency to the next level. Rather than simply packaging various coverages at different price points for customers to choose from, Toggle provides consumers with true autonomy, allowing them to select exactly which coverages they want to include (and those they don’t), and giving them control over precisely how much coverage they want. As far as transparency goes, the product goes above and beyond to ensure that customers are never caught off guard by any “gotcha moments.” Rather than burying limits and exclusions in the fine print, Toggle calls them out from the get-go and allows customers to “toggle” on more coverage where it might be needed.
Jetty is just one of a handful of new renters insurance startups geared toward millennials. Founded in 2015, Jetty has set out to not only make renters insurance easier, faster and more affordable, but to make the overall experience of renting simpler, safer and more accessible for everyone. What makes Jetty unique from other startups in the renters space is the way the company is going beyond insurance to solve the most pressing problems for renters. In addition to a renters insurance product, the company also offers Jetty Deposit, a way for renters to bypass the financial burden of coming up with a security deposit by paying a one-time percentage fee of the would-be deposit amount, and Jetty Lease Guarantee, a service by which Jetty will act as a renter’s guarantor, for a small percentage of the yearly rent. In May, the company launched Student Housing Express, which enables student housing properties to “instantly approve qualifying students who aren’t able to get a traditional guarantor.” While Jetty may not be the cheapest renters insurance on the market (most policies start around $9-10 a month compared with Lemonade’s $5), the company’s service offerings beyond insurance demonstrate an understanding of the more holistic experience of being a renter, building loyalty with renters before they even start thinking about insurance.
What we like about Jetty:
Jetty first caught our attention a little over a year ago when we learned about Jetty Deposit and Jetty Lease Guarantee. To us, these products appeared to be novel solutions to the significant financial hurdles facing millennials (about 70% of whom are renters) and unlike anything other players in the industry were doing. At the time, a lot of the millennial-related insurance products we saw on the market seemed to ignore the financial realities of millennials, many of whom are burdened with student debt, have little money saved (millennials under 35 have a median savings of just $1,500 ) and haven’t had opportunities to build credit. While many of these insurance products were catering to elite millennials with disposable income, when we surveyed millennials last summer, we found that the two greatest challenges they face are financial security and stability and uncertainty in the future. While insurance products can certainly help create more certainty, Jetty’s supplementary products truly address the challenge of financial security and stability in a way that few other insurance products are able to do, freeing up capital that might otherwise be spent on a security deposit to help millennials do things like build up their savings, pay down debt or save for a major life purchase.
While all of these products boast seamless digital experiences that make buying insurance faster, easier and more convenient, what makes these four companies special isn’t fancy technology, low prices or convenience, but the way they connect with higher-order millennial values to offer tangible solutions to real-life problems, ultimately cutting through the digital din to deliver more value to millennial consumers.