March 2, 2015 | Written by: Wyatt Urmey
Categorized: InsurTech | News & Events
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At InterConnect last week, there was a great emphasis on insurance in the critical areas of Cloud and Mobility with sessions and content from State Farm, Aetna, Primerica and Nationwide – among others.
In addition, I had the privilege of seeing a great session — that was standing-room only — to see the first Mobile Apps for iOS for Insurance.
There was also great thought leadership sessions, including one on insights into generational shifts, in a study presented on Myths, Exaggerations and Uncomfortable Truths. First, I say great because it was based on very recent data and real surveys across a large sample (n=+1700) comparing generations to one another. The timing is auspicious as this year is the year that the millennial generation is projected to surpass the total size of the baby boom generation within the US, according to the Pew Research Center. At first glance, this might seem a strange topic for a business technology company, like IBM, to address in deep research — however, the generational changing of the guard is a major macro-trend with large implications for the work environment, customer experience and for financial services and insurance as a whole.
The findings of the study were not surprising so much as clarifying, because it turns out the generational differences projected upon some of the newer members of the workforce may be mostly illusions. Like most sweeping generalizations of any age group, the truth of the matter is that they are far more similar to us than different. For instance, the comparison of millennials engagement at work ends up mostly on the same level as prior generations, with few remarkable differences. Still, it is interesting to me that on these attributes, they are far more closely aligned with the baby boomers than the chronologically closer Generation X.
The insurance community has taken note of this millennial generation, and the fact that it is a tough nut to crack. Roughly 64% have car insurance, 10% have homeowners insurance and 13% have renters Insurance, according to Propertyandcasualty360. Further, millennials confess that their knowledge of the insurance industry is slight, with only 5% of students polled by the Griffith Insurance Education foundation saying they had familiarity with insurance. Yet, with healthcare insurance specifically, millennials make choices that cost them more in the short-term and provide better protection long term, as did other similar groups – so they are open to spending on insurance to protect themselves more.
Other aspects of generational comparison are environment, and no one refutes there are real differences in millennial’s educational depth as well as the work environment they find themselves within – and these have implications for insurance and financial services, too. A Fidelity survey quoted by the US national news indicates that ’44 percent of job changers in their 20s cashed out of some or all of their 401k plans, and 38 percent of job switchers in their 30s did the same. This is essentially starting retirement savings from a deficit. The fraying strings of the safety net of Social Security and Company Pension plans are likely to give way before this generation retires. The expected retirement age for this generation, if it ever comes, is expected to be around 73.
The optimistic side of this challenge is that they truly need the guidance of canny financial planning. As Generation Y still has the benefit of a key part of saving and investing: an abundance of time. While generations before may have saved for more material possessions at the start, it would be wise for this Millennial generation, and those after to put money into retirement from the very first dollar they earned. Also, optimistic is that this message is already taken to heart by many as there is indication that millennials are starting retirement savings younger.
Now here is the great opportunity for insurance, there is more potential with millennials overall. The approach to the millennial client should be transparent and simple. It should incorporate social in both advocacy and outreach, and mobility through industry specific applications. I’ve found no industry to communicate in more convoluted ways with its clients than insurance – and this current path can’t hold continued prosperity in a more competitive world, where the next threat can branch in from any industry at any moment.
Which company is likely to find success with selling financial services, retirement planning and P&C with millennials?
I’d venture to guess the answer may surprise us all – and may be a well-known incumbent from a totally different industry altogether, but one that has a brand that is trusted by the millennial generation. That is, unless the traditional players in insurance are willing to embark on a very specific change in approach to this new generation.