Millennials, the force disrupting insurance
Millennials are currently the largest force disrupting insurance. The young adults from ages 18 to 34 are empowered, connected, and lead the charge for change and insurance companies have to find new ways to serve them.
According to the U.S. Census Bureau, millennials account for up to a third of the U.S. population. Commensurate with their size is their 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 lifetime. No wonder their expectations will define how the world works, including what insurance looks like in the future.
Pleasing millennials is not an easy task; legacy insurance products aren’t attractive to them and the old ways of selling insurance won’t do the trick, either. Millennials’ households look completely different from those of Baby Boomers, so insurance products need to change.
According to Pew Research Center, only about a quarter of millennials are married; back in the day, Baby Boomers were already married at the age millennials are now. The gap between these generations is so wide, that the millennial household was called (among other names) “Four Buddies and a Dog.”
Selling life insurance to millennials means that the millennials are pregnant, already have kids or are buying a house. Car insurance? Millennials don’t really want to own cars. Yes, they need access to cars and places to live, but many of them don’t want to or can’t afford to own them.
TechCrunch notices that even though 85 percent of non-millennials never use rideshare companies (like Uber), approximately a third of millennials use them with high frequency, including daily. Furthermore, they are also car sharing—almost one third of millennials are willing to rent a car on a short-term basis (like Zipcar) versus only 3 percent of non-millennials.
Goldman Sachs reports that 60 percent of millennials would rather rent things (cars, homes) than own them. As a result, insurers need to shift their focus to offering more renter’s insurance and it’s known that millennials are under-insured, thus there is room to grow.
According to Towers Watson, 88 percent of millennials prefer usage-based insurance (UBI) to coverage based on conventional elements such as age and gender. This generation is comfortable with technology knowing their personal business, and more so, they are willing to trade personal information for a price discount.
Insurance companies discovered that millennials don’t purchase their policies from local agents. Could be that they think that the insurance industry is behind the times. Where would they rather shop for insurance? Online. According to surveys, “comparison websites” are the most powerful influencer in their insurance buying decisions, followed by some time spent researching for the best insurers online.
A 2014 Gallup poll discovered that millennials are twice as likely to buy their policies online instead of from a local agent. The days of selling insurance door to door are long gone.
It’s obvious that millennial needs and behaviors are different from their predecessors. It’s unfortunate that insurers have been slow to adapt to their demands. This led to new competitors rushing in to make a bid for the industry. Investment money goes to insurance-tech—“since 2010, investors have funneled more than $2 billion in venture capital into the insurance-tech industry,” reports TechCrunch. In other words, these investors are betting big bucks on the idea that a star-up will rob legacy insurers of the millennial business. A possible solution? Either be very afraid, or jump in and buy them.