The largest force disrupting the insurance industry right now is millennials. These people are connected, empowered, and calling for change. So just who are millennials and what is it they want? Why will insurance companies need to change in order to serve these millennials
Millennials are also known as Generation Y and are typically classified as young adults between 18 and 34. Almost a third of US citizens fall into this age bracket, which means the time of the baby boomer is ending. The latest US Census suggests there are now 80 million millennials, which is more than the number of baby boomers.
Along with the size of the millennial market comes the estimated purchasing power of this group. It’s being reported by Forbes that millennials are set to spend over $200 billion in 2017, with Ad Age suggested the millennial generation will spend over $10 trillion during their lifetimes. Given the size of this communal wallet the world could be defined by the expectations of the millennial, including the way that insurance will work in the future. With this in mind it looks like whether an insurer lives or dies depends on their ability to reach out to and delight the most technologically advanced generation ever.
Millennials are the proverbial canary in the coal mine. The good news is that when you make them happy you make everyone happy, but some insurers find it a challenge to please millennials. They aren’t attracted to legacy insurance and you can’t use the old ways of selling insurance with millennials.
The reason for this because millennials are something new. That means insurance companies have to offer something new if they want to survive.
The first way that millennials are different from baby boomers is that they aren’t interested in their parents’ insurance.
Millennials aren’t interested in the same insurance policies that baby boomers use because the household of a millennial is different from a baby boomer one. The Pew Research Center says that only a quarter of millennials are married. Almost half of all baby boomers were married by the time they reached the age millennials are these days. There is such a major difference that the average millennial household was described by Houston Magazine as being four buddies with a dog.
This makes it difficult to sell millennials life insurance. Forrester say that less than a quarter of millennials currently have life insurance; much lower than baby boomers where over half of that generation have such insurance. “Less than a fifth of millennials,” said Brian Greenberg, founder of TrueBlueLifeInsurance, “say they are likely to ever purchase life insurance. It’s harder to sell life insurance to millennials that don’t have kids or are purchasing a house. When they do buy insurance they go online to buy it. They also overwhelmingly by term life insurance instead of permanent cash value policies meant for investment purposes.”
There’s another way that the household of millennials is different. They don’t really want to own things. Millennials created the sharing economy. They may need cars and somewhere to live, but many are unwilling to own these things. TechCrunch says that even though 85% of non-millennials make use of rideshare companies such as Uber almost a third of millennials are using them on a regular basis, including some who use them every day. When millennials aren’t sharing rides they are sharing their cars. Almost a third of millennials will rent cars on a short-term basis when they need them compared to the 3% of non-millennials who use services such as Zipcar. There is also evidence that suggests more millennials wold join this sharing economy if they were just given access to it. Goldman Sachs say almost two-thirds of millennials prefer renting things to owning them, including cars and homes.
Because millennials rent their homes they don’t buy homeowner’s insurance. The result is that insurers will need to put a heavier emphasis on renter’s insurance. There is some good news; millennials are often under-insured. The peer-to-peer sharing that millennials love so much also provides opportunities for insurers to come up with creative and innovative ways to provide insurance to fill gaps in coverage.
Almost all millennials also prefer usage-based insurance (UBI) over coverage based on the more conventional determinants including age and gender. Millennials are also comfortable with the idea of technology knowing what they do. They will be willing to trade their personal information in change for a discounted price and there’s more to the interactions between millennials and technology than just this. 84% of millennials have said they would change how they drive to get cheaper rates on their car insurance, which is higher than the number of non-millennials; roughly half.
Millennials are also shopping for insurance differently
Millennials won’t purchase insurance from a local agent. The days of an insurance agent coming to your home and having a discussion about the insurance needs of the family are long gone. Property is a prime example of this as Casualty 360 reports millennials are currently the least likely group to get their insurance from an agent. Only a quarter of millennials purchased insurance from an agent compared to the 50% of baby boomers.
This could be because millennials thank that the insurance industry needs to get with the times. This is an understandable position given the average human face of local insurance is 60 years old.
Millennials prefer to shop for insurance online. Around half of millennials in the UK say that they use price comparison sites to find insurance while the other half say they just search online. Don’t be all that surprised if your website doesn’t show up in their online research because millennials also just don’t trust insurance companies. An IBM Institute for Business Value survey says that 89% of millennials will believe their friends over company claims and that 93% of millennials will read reviews before purchasing anything.
Millennials are buying insurance online as well as just shopping for it. A Gallup poll from 2014 showed millennials are twice as likely to purchase insurance policies online instead of dealing with local agents.
This sends a clear message to insurers; you need to get out of the kitchen and get online.
This all means that millennials have already made an impact on the insurance industry
The needs and behaviours of millennials is clearly different than that of non-millennials. Unfortunately insurers aren’t adapting to these differences very quickly. There are new competitors coming in to take the money of these millennials. A lot of money is being poured into insurance-tech. A report from TechCrunch says that investors have spent over $2 billion investing into insurance-tech since 2010. The investors are making a huge gamble that a start-up will come along and take the business of millennials from right out under legacy insurers. So it’s time for insurance companies to shake up or buy these start-ups.