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What is the single largest force disrupting insurance? Millennials! They’re empowered, connected, and leading the charge for change! So, who are the millennials? What do they want? Why do insurance companies have to change to serve them?
Most definitions say millennials (aka generation Y) are young adults from ages 18 to 34. They account for up to a third of the U.S. population. Move over baby boomers! Our time in the driver’s seat is ending! According to the US Census Bureau, at 80 million strong, millennials are even more numerous than we are.
Commensurate with their size is millennials’ estimated purchasing power. TechCrunch reports that millennials will spend more than $200 billion in 2017 and Ad Age says they’ll spend $10 trillion throughout their lifetimes. Driven by their communally large wallet, millennials’ expectations will define how our world works, including what insurance looks like in the future. As a result, the success of every insurer is dependent upon reaching and delighting this largest and most technologically savvy generation in history.
Millennials are the canaries in the coal mine. So, here’s the good news—if you can make them happy, you can make all of your customers happy. But pleasing millennials will prove to be quite a challenge for insurers. Legacy insurance products aren’t attractive to them and historical ways of selling insurance won’t work either.
Why? Because millennials really are different from the rest of us! Which means insurance companies have to change—or shrink.
How are millennials different from baby boomers? They don’t want their father’s insurance!
Millennials don’t want the same insurance products Baby Boomers do because millennial households don’t look like ours! According to the Pew Research Center, only about a quarter of millennials are married. Back in the day, half of Baby Boomers were already married at the same age millennials are now. This difference is so profound that a Houston magazine described millennial households as “Four Buddies and a Dog.”
This means that it is hard to sell life insurance to millennials. According to Forrester, less than a quarter of millennials have term or whole life insurance compared with over half of baby boomers. As for purchase intention, according to LIMRA, less than a fifth of millennials say they are likely to buy life insurance. So, unless millennials are pregnant, already have kids or are buying a house, it’s going to be tough selling them life insurance.
Here’s another way millennial households are different. Millennials don’t necessarily want to own stuff! They have famously spawned the sharing economy. Sure, they need access to cars and places to live, but many of them don’t want to own them. According to TechCrunch, even though 85% of non-millennials never use rideshare companies (like Uber), approximately a third of millennials use them frequently, including daily. When millennials aren’t ride sharing they are car sharing—almost a third of millennials are willing to rent a car on a short-term basis (think Zipcar) versus only 3% of non-millennials. Furthermore, there’s evidence that more millennials would join the sharing economy if they had access to it. Goldman Sachs reports that 60% of millennials would prefer to rent things like homes and cars instead of owning them.
Because many millennials are renting, they aren’t buying homeowner’s insurance. As a result, insurers will have to shift their focus to offering more renter’s insurance. The good news for insurers is that many millennials are under-insured. Besides which, millennial peer-to-peer sharing provides an opportunity for innovative insurance services that fill coverage gaps.
Speaking of innovation, 88% of millennials prefer usage-based insurance (UBI) to coverage based on conventional determinants, such as age and gender, according to Towers Watson. Millennials are comfortable with technology knowing their personal business. They are willing to trade personal information for a price discount. And, millennials’ interaction with technology goes further than that. 84% of millennials say they would change their driving behavior in order to obtain cheaper car insurance (compared to only about half of non-millennials).
Another difference. Millennials don’t shop for insurance the way mom does!
Millennials don’t purchase from local agents. Gone are the good ol’ days when a trusted insurance agent showed up at your parent’s house and sat down at mom’s kitchen table to discuss the family’s insurance needs. Case in point: Property Casualty 360 reports that millennial renters are the least likely group to purchase insurance from agents. They found that while 50% of baby boomers bought home insurance policies from local insurance agents, only a quarter of millennials did.
This may be because millennials think that the insurance industry is behind the times. This is understandable when you realize that the human face of insurance is a local agent whose average age is pushing 60!
So, how are millennials shopping for insurance? Online! A little over half of UK millennials say that “comparison web sites” most influence their insurance buying decisions, while just under half say that “searching online” does. And, don’t be surprised when online research doesn’t include your website—at least, not at first. Millennials overwhelmingly don’t trust insurance companies. An IBM Institute for Business Value survey reports that, “89% of millennial consumers believe friends’ comments more than company claims” and “93% of millennial consumers usually ready reviews before making a purchase.”
Millennials aren’t just shopping for insurance online, they are buying there too. A 2014 Gallup poll found that millennials are twice as likely to buy their policies online instead of dealing with a local agent.
The message to insurers is clear. Untether the sale of insurance from the kitchen table!
What does all this mean? Millennials are already impacting the future of the insurance industry!
Clearly, millennial needs and behaviors are different from non-millennials. Unfortunately, insurers have been slow to adapt to millennial demands. As a result, new competitors are rushing in to make a bid for millennial insurance business. Investment money is pouring into an area called insurance-tech. TechCrunch reports that “since 2010, investors have funneled more than $2 billion in venture capital into the insurance-tech industry.” These investors are betting big money that a start-up will steal millennial business away from legacy insurers. Established insurance companies should be quaking in their boots—or buying the start-ups.