In today’s complex macroeconomic environment, the life insurance industry is faced with the unique challenges of slow growth, increasing volatility, high inflation and rising interest rates – all combining to present an insurmountable obstacle. And yet, in the face of this seemingly impossible task, I believe the industry will continue to strike to boost its relevancy. This evolution relies on staying closely connected to policyholders, which can only be achieved through understanding the behaviours and motivations of critical customer segments – namely millennials (born between 1981 and 1996) and Generation Z (1996–2010).
To do so, I anticipate that many life insurers will be focused on accelerating their digitalisation journey to create more robust customer-centric products and offerings – derived from personalised engagement, which is only unlocked through cutting-edge technologies.
As it stands, many of those potential customers from younger generational demographics are unsatisfied with current insurance processes, products and business models. They expect better options to seamlessly shift between digital and human channels. Additionally, their life journeys have not followed the more traditional paths of their parents and grandparents. For example, many are postponing personal partnerships and marriage by choice because of financial circumstances and are less likely to purchase real estate. As millennials and Gen Z pivot away from the lifestyles of past generations, they encounter new risks that require bespoke insurance solutions.
Saving for the future
After discussing with insurance executives globally and considering insights from industry analysts, it is clear that cost-conscious millennials and Gen Z are thinking of the future with investment products and savings accounts, without including life insurance policies. They view it as expensive and complicated, unable to see any tangible value to those without dependents. In fact, some millennials consider life insurance a burden rather than a necessity.
To change this perception, life insurers are modernising platforms by offering an intuitive, personalised customer experience and faster underwriting processes. By providing more relevant customised products and digital experiences, they aim to engage younger demographics and change their perspective on life insurance. For example, Canadian insurtech Walnut Insurance introduced digital wellness subscriptions that are quick and easy to obtain, designed specifically for younger demographics currently underserved in the market.
Similarly, life insurers are innovating products and value-added services to meet the needs of millennials and Gen Z who are seeking a more holistic customer experience, while remaining cost-conscious. Interestingly, this demographic is willing to share personal data in exchange for discounts and personalised policies, creating a unique opportunity for insurers to deliver tailored and customised experiences.
One example is how UK insurtech firm, YuLife, offers incentives through their ecosystem’s currency YuCoin, that encourages policyholders to exercise or meditate, which can be redeemed for shopping vouchers. Users can also then compare their wellness progress with friends for some healthy competition. The company reported that more than a third of policyholders use the gamification YuLife app daily, and 87 per cent said their wellbeing has improved.
This approach is becoming increasingly common amongst insurers, with many products on offer today including some form of savings component – which has even greater resonance for younger demographics, particularly in this current economic market. In this same vein, life insurers are developing focused solutions and simplifying the process of buying life insurance to better target millennials and Gen Z. For example, in the US, Progressive Insurance and Fidelity Life partnered to launch a one-year term-life product for first-time buyers and those seeking protection without a long-term commitment – offering young customers flexibility and convenience.
Bridging the gap
To further simplify the process of making purchases, and offering greater convenience for younger generations, insurers will need to bridge the communication gap between customers and agents. This relies on empowering agents with advanced digital capabilities and tools to help handle millennial and Gen Z requirements quickly and efficiently.
Carriers must devise simplified ways to get in front of millennials, which could be through digital or embedded means. For example, coverage can be embedded at the time of a significant purchase, or carriers can partner with banks through their mobile apps and personalise offers based on data.
Covid-19 has also changed the way people perceive life insurance, with a LIMRA survey finding that 45 per cent of millennials are more likely to buy life insurance due to the pandemic. It’s clear to see a growing appetite for insurance products and offerings, but greater education is needed.
By continuing to teach younger segments about the benefits of life insurance, insurers can create increased positive awareness. Social tools and digital media are ideal methods of promoting products that stimulate interest further. Many future-focused life insurers collaborate with ecosystem players to foster awareness of financial wellbeing amongst younger populations.
Life insurers are adopting new approaches to attract and retain next-gen policyholders
Financial insecurity is a key problem that transcends generations, but it is highest among millennials (44 per cent) and Gen Z (42 per cent) in 2022, according to a LIMRA study. However, young and childless individuals are more sceptical of whether life insurance makes sense to them. To tackle this situation, carriers should focus on providing uniquely tailored products and solutions.
In 2023, I expect market volatility to act as a main catalyst to the life insurance sector, as industry leaders shift their focus to prioritise product innovation – with firms exploring novel business models to capture next-gen policyholders. For those more strategic insurers hoping to get ahead of the curve, and not only weather the current market volatility but continue growth beyond, they will quicky adapt their business approach to meet the strikingly different generational needs, demands and expectations of these younger demographics.