In order to target younger segments, Life insurers will need to revitalise their business approach, offering next-gen products and a customised, truly digital customer experience, says Samantha Chow, Life and Annuity Sector Leader at Capgemini Financial Services.
In the current complex macroeconomic environment, characterised by slow growth, increasing volatility, high inflation, and rising interest rates, I believe life insurance evolution will continue as the industry strives to boost relevancy. This evolution relies on remaining closely connected to policyholders despite these market pressures, which can only be achieved through thoroughly understanding the behaviors and motivations of today’s critical customer segments ─ millennials (born between ~1981 and 1996) and Generation Z (~1996 to 2010).
Despite these new challenges the Industry faces, I anticipate that life insurance will continue to accelerate its digitalisation journey to create more profound customer-centric propositions built on personalised engagement enabled by cutting-edge technologies. Therefore, expect firms to invest in intelligent automation, distribution, and cloud solutions to meet the needs of younger generations and reach cost optimisation goals.
CUSTOMER EXPECTATION VS REALITY
These youthful segments are currently dissatisfied with traditional insurance processes, products, and business models. Instead, they expect better customer experiences and options to shift between digital and human channels seamlessly. Their life journeys have not followed the 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.
Based on my conversations with insurance executives worldwide – and insights from industry analysts ─ cost-conscious millennials and Gen Z are preparing for the future through savings accounts and investment products alone, without including any life insurance policies. They consider life insurance expensive and complicated, believing it doesn’t offer tangible value to those without dependents. As it stands, some millennials see life insurance as a burden, not a necessity.
Therefore life insurers are modernising their platforms with a more intuitive, personalised customer experience (CX) and faster underwriting to change policyholder perceptions through more relevant customised products and digital experiences. For instance, Canadian InsurTech Walnut Insurance introduced holistic digital wellness subscriptions that are simple and quick to obtain – these were specifically designed to engage younger demographics who may benefit from acquiring life insurance earlier but are currently underserved in the market.
SHARING DATA, SHARING VALUES
Additionionally, life insurers are innovating new products and value-added services to meet the needs of price-sensitive millennials and Gen Z seeking holistic CX. Increasingly, this demographic says it is comfortable sharing personal data in exchange for discounts and personalised policies, which opens a big window of opportunity for insurers to deliver customized experiences.
For example, UK InsurTech firm YuLife encourages policyholders to exercise or meditate through YuCoin incentives, redeemable for Amazon and other shopping vouchers. Participants can also compare their wellness progress against friends and co-workers. The firm reported that more than a third of its policyholders use the gamification YuLife app daily, and 87% of users said their well-being has improved.
Many products today include savings components. Carriers are developing focused solutions to engage younger demographics and make life insurance more accessible. In the United States, Progressive Insurance and Fidelity Life partnered to launch a one-year term-life product for first-time life insurance buyers and those seeking protection without a long-term commitment. The solution offers young customers flexibility and purchase convenience.
Besides making purchases more straightforward, life insurers are simplifying the process by closing the communication gap between customers and agents. How? Life insurers empower agents with advanced digital capabilities and tools to help quickly and efficiently handle millennials and Gen Z requirements.
EMBEDDED OFFERS
To reach millennials, carriers must find simplified ways to get in front of them. These could be digital or embedded ways. Embedding coverage at the time of a major purchase for example and burying the cost within or partnering with banks through their mobile apps and personalizing offers based on data.
Moreover, COVID-19 changed the way people perceive life insurance. A LIMRA survey found that 45% of millennials are more likely to buy life insurance due to the pandemic.
I’m convinced that by continuing to educate younger segments about the uses and benefits of life insurance, insurers will create positive awareness. And social tools and digital media are great ways to promote products that stimulate interest even further. Unsurprisingly, many future-focused life insurers collaborate with ecosystem players to take education further by fostering awareness of financial well-being among younger populations.
Financial insecurity transcends generations but was highest among millennials (44%) and Gen Z (42%) in 2022, according to a LIMRA study. However, young and childless individuals are skeptical of whether life insurance makes sense. To tackle this situation, I recommend that carriers focus on uniquely tailored products and solutions.
I anticipate that 2023 market volatility will catalyze the life insurance industry to prioritise product innovation as firms explore novel business models to capture next-gen policyholders. The most strategic insurers will adapt their business approach to meet strikingly different generational needs, demands, and expectations.
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