Insurance looking to crack tough millennial market
But living your “best” Instagrammable life comes at a cost that usually translates into spending on wants and failing to plan for the short and long term.
Millennials and Generation Z are easily criticised for living in the “now”, and because they perceive time to be on their side, surplus income is spent on upping a lifestyle.
Vigen Naidu, the general manager at Absa idirect, says the first trigger to seek insurance usually happens when one buys a first car or house.
“However, with a sharing economy being so prevalent, millennials - many of whom are in their mid-30s and no longer young - usually delay the purchase of these assets or rent,” says Naidu.
And because people are generally marrying later, the accumulation of insurable assets is often delayed.
“The onus is on insurers to change the way we engage with consumers in order to reach this vital market segment and explain to them why insurance is so important,” Naidu says.
Millennials are more aspirational and focused on the present, but it’s not a generational thing, says Momentum wealth manager Larry Masson.
He says it’s because younger generations had poor financial role models.
“It’s easy to generalise and say the youth are living in a debt-trap lifestyle, but obviously that doesn’t apply to everyone. However, younger generations have learnt their behaviour and their attitudes towards money from their parents.
“This generation was taught badly. They don’t learn the importance of budgeting and especially planning for the future. They’d rather be driving a nice car, borrowing from the banks and living in the moment.”
For insurers, that’s a tough market to crack: younger clients are more likely to take short-term insurance, to take care of their property and protect their assets, but aren’t as concerned about their retirement or death.
What is missed, though, is insuring themselves against injury, dread disease and loss of income.
Edwin Theron, the head of actuarial at Sanlam Indie, says: “The industry typically sells long-term insurance predominantly to the middle-aged segment of the market. Sometimes this is because the need for insurance is more well understood by this segment in order to cover their debt and provide for dependants.”
Theron says the life insurance industry’s offering hasn’t changed drastically to appeal to millennials, but “it’s trying to convey the need for insurance to this market where something like income protection is actually crucial”.
“One of the most important assets that a young person has is his or her potential to earn future income. Imagine having a safe at home with all the income that you will earn in future from which you could draw a salary monthly. Most people would agree that it would be wise to insure this safe and its contents, if that were possible. An income protection policy is similar as it pays you an income should you be unable to perform your occupation due to injury or disease.”
For young people, your ability to earn an income and sustain yourself is a vital asset to protect. Theron says many underestimate the likelihood they will suffer a disability during their career.
Insurance where it matters
Clients tend to insure what they value most, which is why device insurance (for cellphones or tablets) is popular. Theron says, as with long-term insurance, there is scope to improve the delivery of most short-term products (household contents, vehicles and buildings), and the industry is starting to see some exciting innovation.
And it’s often driven by the younger market’s appetite for technology. Naidu says millennials prefer an integrated, seamless customer experience, which is fast, affordable, and digital.
“This means insurers need a different approach. Engagement and excellent customer service on social media platforms including Facebook and Twitter are vital.”
Ernest North, the co-founder of Naked, an AI-driven car insurance provider, says they designed their innovative product with a more tech-savvy, time-pressed client in mind by cutting out the admin and unnecessary call centres to make buying insurance fuss-free, quick and simple - by making the process almost entirely digital and fully customisable.
Naked offers comprehensive car insurance, as well as third-party liability cover, of R5million, and clients can pause a portion of their cover if they’re not driving their vehicles for a period and get a portion of the premium refunded to them instantly. To do so, their chatbot Rose guides applicants through the 90-second quote stage, allowing clients to buy insurance online, without the need for call centre agents.
“It’s a self-service process. We’re offering only car insurance for now, but will be rolling out other short-term products in the next couple of months to include household contents and other assets.”
But Naked isn’t just for the youth: North says they’ve noticed an impressive uptake from digital natives of all ages, who are sold on digital commerce and service providers such as Uber and Airbnb.
While Rose might be lovely and efficient, North says the human touch remains important.
“When our clients are stuck on the side of the road and need to speak to a human, we do have an emergency call centre available to assist. It remains an important element of our offering.”
Masson agrees: “The old principles still apply, but it’s become a more nuanced approach. Some products might be changing, but we, as the industry, need to empower our clients and build trust.”