My grandmother is 94 years old. When she was born, her grandmother took out a $1,500 (£1,236, €1,404) life insurance policy on her. When my mother was born, her grandmother did the same, By the time I came around in 1974, no one felt the urgency to buy a life insurance policy, writes Samantha Chow, life and annuity sector leader at Capgemini.
The economy was booming, and we were financially secure. Many had savings in the bank, the fear of early death had vanished — and so had necessitating protection for a “what if” moment. Life insurance habits engraved in previous generations die out with them.
To grab market share with Millennials (born 1981 – 1996), now 27 to 42 years old, our conversations about the benefits of life insurance, both as a means of protecting a growing family and as an investment platform, must change with the times as well. For those life insurers that can adapt, the benefits will be great.
Nearly half of Millennials, or 34 million US adults, say they need — or need more — life insurance. Only 10% say they currently have enough to protect their family. Similarly, in the UK, only 26% of British millennials have life insurance and an estimated 1.5 million millennials lack protection.
Roadblocks to attracting Millennials to life insurance
While cost is always a barrier, the friction with Millennials is more around product misconceptions and a lack of knowledge in how life insurance can benefit even those without children.
There are three roadblocks to attracting Millennials to life insurance:
- Lack of education – When I was 21 years old, I purchased a universal life policy and used it to buy my first house seven years later. I still have that policy. Because I was in the industry, I had peers educating me on how to invest and the best ways to cash in those investments when the time came. Just like I didn’t learn that from my parents, today’s millennials aren’t learning about life insurance and other forms of income protection, like critical illness policies, by osmosis either. As many as 9 in 10 Millennials in the UK overestimated the cost of life insurance, and 44% of them didn’t realize a life insurance policy could be used to pay off a mortgage in the event of their death;
- Lack of demand – In many countries, individuals are required to purchase life insurance to buy a home. The idea is that the policy will back the mortgage company if the homeowner forecloses and will eventually leave decedents whole, regardless of the homeowner’s real debts when they pass on. In countries without this requirement, like the U.S., there’s no financial protection for a loan default. Millennials also have a strong desire to save their income, whether for a special expense or a rainy day and don’t yet feel compelled to invest their savings; and
- Ease of use – Millennials came of age in a digital world. They value the flexibility, ease of use and customer experience that digital purchase tools offer. And while they want to do their own research online, they also seek the chance to either meet face to face with someone or pick up the phone and inquire live about a product or service prior to purchase.
So, how can carriers meet millennials where they are?
As the dissemination of real-time information through digital channels increases, it is possible to impart to younger populations that life insurance can be a valuable vehicle for investments, financial planning and protection for a rainy day.
Life insurance carriers can help grease the wheel for millennials when it comes to investing in life insurance in the following four ways:
- Education – We must educate Millennials and younger groups on just how to use life insurance as an investment strategy, how it protects a growing family and when is the best time to take the plunge. From social media and podcasts to live speaking engagements with local agents and advisors, all hands must be on deck to dispel misconceptions across coverage and product lines;
- Simplify the application process – Complexities in purchasing life insurance, including requiring a medical examination before policy issuance, act as a deterrent to purchase for millennials. In fact, 24% of US citizens said not requiring a medical exam was the most crucial factor in choosing a life insurance carrier. Simplifying the purchasing process to make it more convenient and requiring fewer application questions that lead to faster underwriting, approval and policy issuance, can go a long way in attracting millennials;
- Go digital – Millennials, like an increasing number of us, value self-service purchases where user experience is king. To attract young, tech-savvy customers to life insurance, it must be convenient — available where and when they want it. As we grow more accustomed to digital shopping for just about all purchases, insurance will follow suit. The self-service insurance market’s compound annual growth rate is expected to increase by almost 21% through 2029; and
- Develop focused solutions for the millennial demographic – From digital wellness subscriptions to one-year term products for first-time life insurance buyers, flexibility and purchase convenience are key. Easier-to-buy innovative insurance solutions can help carriers meet millennials needs as they progress through various stages of life.
While there is no one-fits-all solution to educating millennials on the benefits of life insurance and income protection, if we do it right, we just may be able to break the cycle and influence generations to come on why they should get started today too.
This article was written for International Adviser by Samantha Chow, life and annuity sector leader at Capgemini.