Latest opinion piece is by Bob Meier; EIS’ product solutions manager for benefits and healthcare.
He has more than 25 years of experience in healthcare insurance, as well as a master’s and a bachelor’s degree in computer science. Here, Bob takes a look at the insurance future where more people under 40 will rent their lifestyle, rather than own anything.
It’s hard to overstate the importance of millennials to insurers. They account for roughly half of the workforce in the UK, and nearly 40% in the U.S., a number expected to grow to 58% by 2030, according to CNBC.
However, a survey of British millennials – now between 26 and 41 years old – found that just 26% owned life insurance. The reason, they said, is that other expenses, including bills, holidays, and debt, must come first. One in 5 joint mortgage holders without cover said subscriptions like Netflix were more important than life insurance. Ahh… “Stranger Things”….
While somewhat better in the United States, the ownership gap also is startling. A 2021 report from LIMRA found that life insurance levels were at an all-time low. Across generations, just 52% of American survey participants had life insurance compared to 63% a decade ago. For millennials, that number was 45%.
Potentially aggravating this growing insurance gap is the looming threat of global economic recession, resulting layoffs, and the impact of the Great Resignation, when workers sacrificed their workplace benefits for the freedom and flexibility of self-employment. According to “The Deloitte Global 2022 Gen Z & Millennial Survey,” 24% of millennials and 40% of Gen Zs said they would like to leave their jobs within two years. Even more concerning is that more than 30% of each generation said they would be willing to leave their job without another lined up.
This is an unfortunate confluence of trends, especially given that, according to the “Monthly mortality analysis, England and Wales: May 2022,” the mortality rate was 15.6% higher than the May five-year average. In the U.S., crude death rates for all causes continue to rise, according to the National Center for Health Statistics, and the Coronavirus pandemic continues.
So, what can insurers do to increase their appeal to millennials? In addition to raising awareness that the time to secure inexpensive coverage is while you’re young and healthy, insurers need to be more digitally available. And in doing so, establish more-active long-term relationships with their insureds and offer a more comprehensive insurance experience with personalized products and bundles and, ideally, establish insurance portability.
Convergence, Partnerships, Bundles, and Portability
Ambitious insurers are meeting millennials where they shop: online, and by entering ecosystems and partnerships to increase their visibility. Some are even sharing customer data, a phenomenon dubbed “the great crossover” by Donald Light, a director in Celent’s North America property and casualty insurance practice.
By converging on customers and customer data, insurers hope to increase their customer knowledge, grow market share via personalised products, services, and discounts, and increase customer retention. Appropriate customer details can be securely shared with partners, CSRs, brokers, and agents to service their customers’ changing needs as they marry, change jobs, have children, buy homes and cars, start businesses, switch jobs, and save for college and retirement.
This increased ability to access and move data also opens possibilities for more portable insurance. Whether they are changing jobs or leaving the workforce due to layoffs or retirement, most people would welcome the option to take their employer-provided insurance with them. For them, insurance portability could significantly reduce their insurance costs and increase their sense of security. More importantly, they wouldn’t have to shop and qualify for equivalent benefits or fear denial or premium increases.
Insurers would benefit from millennial customers who could continue to purchase from them over a lifetime. They’d also increase their attractiveness to their employer clients by helping them attract and retain talent with this valuable benefit. Insurance portability is a winning proposition for all and will be a huge part of the future of insurance. But only if insurers are equipped to administer multiple types of insurance policies or partner with ones that can.
As we saw with open finance, the bankers that worked with regulators benefited from a wave of creative and connected financial solutions. Likewise, insurers that take similar initiatives can make the most of their early adopter status and are more likely to benefit from customer and transaction data, secure a competitive advantage, and leave less visionary insurers far behind.
The power of data in the customer experience
The need for insurance’s digital transformation has been evident for more than a decade. Now it’s urgent. While the “digitally native” millennials are leading expectations for online sales, service, and self service, those capabilities increasingly are table stakes for insurtechs, greenfield innovators, and insurers from other segments that are beginning to muscle in on the lucrative but stagnating life insurance market.
Perhaps the most urgent opportunity is to simplify and accelerate the purchase process. Given their experiences with retailers and banks, weeks-long paper-based and face-to-face sales cycles are out of the question. Further, they expect insurers to simplify their choices, bundle appropriate options, and accelerate the shopping experience from days or weeks to moments.
All of which is doable, at least for those insurers leveraging cloud-native, open-API insurance systems. Thusly equipped insurers can access and act on data from internal and external sources, including insurtechs and other partners. For example, readily available demographic,
geographic, motor vehicle records, prescription, and other data sources make it feasible to prefill quotes and applications with highly accurate data for immediate rating and pricing. And many insurers are taking the next steps: using artificial intelligence and machine learning to suggest bundles of life, wealth, and wellness insurance and even including auto, rental, or homeowner’s policies that address their individual circumstances.
From the buyer’s vantage, the experience is smooth, fast, and informed. By leveraging what insurers know about individuals, they can cut through the marketing noise with relevant products, filtering out those products that don’t fit based on age, marital status, income, demographics, and other information.
Creating life-long customers for insurance
In addition to the positive impact that technology can have on insurance sales, it can have an even greater impact on customer retention. In short, with better data access and utilization, insurers can know their customers better and act like it.
Just as insurance agents and brokers establish long-term relationships with insureds, insurers themselves have the opportunity to develop similar relationships and leverage the data collected to offer more protections as their circumstances change. Each of those interactions and purchases then contributes to an ever-more detailed portrait of the customer and their preferences, offering real value to the insured.
This would be especially true with portable insurance benefits. Essentially, an ambitious insurer could hook a customer early in their insurance lifecycle and, by virtue of personalised products and excellent service, make it very difficult for others to lure them away.
From the insurer’s perspective, rehumanising insurance through more frequent communication – via mobile apps, text, portals, and dashboards – can create closer relationships and new revenue opportunities by mitigating risk, rewarding and influencing behavior, lowering insurance and operating costs, and reducing marketing noise.
In order to be effective, insurers must meet the millennials where they are and build a compelling case that economic peace of mind is more valuable than a streaming service!
Why many insurers will struggle
For many carriers, their insurance core systems will present enormous challenges to achieving this vision for an open, customer-centric digital future. Most legacy insurance systems were built specifically to support just life insurance policies or just general insurance policies, thus impeding convergence and innovation. With their closed architectures, even more-recent insurance systems restrict the ability to share customer data and are unlikely to support the volume, variety, and velocity of customer data generated in ecosystems.
However, contemporary cloud-native architecture and customer-centric data models address these limitations and liberate insurers in several important ways. For example, application programming interfaces (APIs) and microservices facilitate quick-change and in-flight integrations, making switching partners in and out comparatively easy. In addition, cloud-native architectures improve analytics capabilities with scalable, native AI, enabling product suggestions based on activity and life circumstances. Also, subscription-based pricing can significantly increase palatability to the C-suite.
Ambitious insurers can cross the ownership gap and meet millennials with the simple, data-driven digital customer experiences all of us, now expect. Success will require more positive, valuable, and frequent customer interactions and much more data and data mobility than the insurance industry has been capable of. Until now.