The millennial generation is the name given to the group born between 1981 and 1997. This entire generation has reached adulthood, and they account for nearly one-fourth of the U.S. population. As such, they present an important market segment for the financial industry.
Millennials show a preference for shopping and buying online. As a result, businesses are developing innovative technologies to improve their penetration of the millennial market. The life insurance industry has an opportunity to tap into this market by focusing on millennials’ shopping and purchase preferences.
Millennials want simple online methods for accessing life insurance information and purchasing policies. Their benchmarks for these capabilities include Amazon and Uber, which means millennials have high service expectations and they want the same type of user experience from financial service providers.
Yet, online capabilities may not be the most important consideration when marketing life insurance to millennials. The 2017 Insurance Barometer study, conducted by LIMRA and Life Happens, identified a number of factors that negatively affect life insurance ownership among these young consumers.
» Half of millennials who looked into buying individual coverage online still do not own coverage. The main reason is because they do not see value in the protection. This suggests the value proposition for life coverage is a critical element in marketing to millennials online.
Misconceptions also play a critical role in marketing effectiveness. For example, younger adults are the age group most likely to qualify for life insurance and to have the lowest premiums per dollar of coverage. Yet, many millennials believe the opposite is true.
» Three out of four millennials (73 percent) overestimate the cost of life insurance. On average, they expect life insurance to cost three times more than it does. This is a significant barrier to purchasing — 78 percent of millennials who are without life insurance think it is too expensive.
» Almost half of millennials (42 percent) think they won’t qualify for life insurance. This assumption may prevent millions of millennials from exploring their life insurance options. This mistaken belief must be addressed before marketing effectiveness will increase in this segment.
Millennials were born into the information age. They are accustomed to finding answers to their questions online. The life insurance industry can leverage interactive online tools to correct misconceptions and build a better appreciation of the value in having coverage.
What Else Millennials Have Taught Us
The millennial generation has challenged product design and marketing across industries. They are attracted to simple and clean applications, and they want to be guided seamlessly toward their purchase decisions. The life insurance industry has a great opportunity to learn from millennial attitudes in order to anticipate the needs of the next generation (Generation Z), whose members are even more inclined to use technology.
» Mobile access is required. In 2014, the number of mobile devices exceeded the global population. The anticipated average annual growth rate of mobile payment transaction volume from 2016 to 2021 is 62 percent, according to the 2017 Digital Economy Compass by Statista. Easy access to making payments via a mobile device is an important factor when considering the purchase of life insurance.
» Digital social interaction is important. Peer-to-peer (P2P) models are designed to provide a community-like experience where users feel connected to other insureds. With the amount of time millennials spend on their phones (ranging from just under two hours to more than two and a half hours per day), the appeal to social media and P2P platforms for easy peer interactions and listening to personal testimonies is an important factor for purchasing life insurance for more than half of these individuals.
» The demand for simplified issue products will continue to grow. Fifty-three percent of millennials find the ability to avoid face-to-face interaction an appealing benefit of simplified underwriting. Seven in 10 respondents (71 percent) would be likely to purchase life insurance priced via personal data — without having to submit to any medical testing.
While industry marketers and financial professionals need to focus their resources on their best sales prospects, much of the information in the Insurance Barometer study suggests millennials are better prospects than many expected. These findings will open the door to great opportunities in the marketplace.
Lauren Finnie is Senior Analyst, Markets Research, LIMRA. Lauren may be contacted at [email protected]