Capgemini’s Life Insurance Top Trends report highlights the importance of digital evolution in the insurance industry and millennial preferences. By putting customers first and addressing pain points, insurers can see significant positive impacts on their business and retain customers.
The Millennial generation has reached adulthood and must now make adult decisions and should buy life insurance while they are young. Many are still on the fence about the choice when choosing life insurance. Others need to gain an understanding of what makes this investment so important (see Why Female Millennials Are Often Left Out of the Life Insurance?).
According to Capgemini’s research, improved customer experience through automation empowers agents and customers with advanced digital tools.Samantha Chow, VP and Global LA&H Sector Leader at Capgemini
This helps form authentic relationships with beneficiaries as early as possible and guides the next generations of policyholders through upcoming asset transitions (see Insurance for Baby Boomers, Millennials & Gen-X).
The report stated that the first step in enhancing customer experience is empowering agents and customers with advanced digital capabilities.
By embracing the three pillars (automation, beneficiary engagement and asset retention) insurance companies can drive greater efficiency, reduce costs, and ultimately improve their bottom line.
Insurance market trends explored across 3 broad themes
- Customer-first: Insurers will bolster customer centricity by addressing consumer/commercial interests or pain points,welcoming new policyholder segments, and prioritizing risk prevention.
- Intelligent industry: Digital technologies will impact revenue streams across the value chain.
- Enterprise management: Strategic organizational priorities will focus on new and evolving insurance risks, such as sustainability, cyber threats, and metaverse frontiers.
Attracting millennials with choice & value
Two of the biggest challenges facing insurers struggling to earn millennials’ business are that this customer segment does do not want to buy from a limited option set or buy without fully understanding the value of what is being offered.
Millennials generally believe that insurance is not worth the cost. The reason is partially the perennial predilection of young people in every generation to be both unwilling and incapable of connecting risk and consequence.
But there are interesting new factors that the millennial generation is bringing to the table.
Perhaps counterintuitively, millennials are much more responsible with their money than baby boomers and Gen X and Gen Yers. They are saving earlier, saving a larger percentage of their income, and investing in more conservative vehicles than prior generations.
However, when broken down per day, the cost of insurance is much lower than millennials realize and actually does provide real tangible value. Insurers should emphasize the low cost and show the value of modern insurance products and new models of servicing them.
Why millennials must buy insurance?
Millennials lead busy lives with demanding schedules, so it can be challenging to make the time for visits to the insurance broker or lengthy phone conversations. Millennials have an advantage because buying a life policy has never been easier. With online applications and payment processing at your fingertips, getting the policy you need is easier than ever.
Life insurance premiums depend upon your age and your current health conditions. Since Millennials are in their early adult years, this is the time to lock in a life policy at the best possible rates.
Remember that once you purchase the policy, you lock in that premium for the policy’s lifespan. That makes this the best time to buy life insurance for Millennials.
As a parent of minor children, having life coverage helps ensure that you provide for your children’s needs in the event of your death. When one parent dies, it alters the household expenses, including added childcare costs, and raises the challenges of sustaining the household. A life policy helps ease those struggles.
Millennials in the workforce may assume that the policy offered by their employer is sufficient for their needs. It is rarely true. Not only could you lose that policy if you switch jobs, but you often have little control over the death benefit amount, which may only be enough for funeral costs. Make sure you invest in a separate policy for your personal needs.
Major investments, such as home purchases, are significant financial commitments. Millennials are buying homes and need to consider the financial implications. Once you purchase a home, consider investing in life coverage to help offset that mortgage balance and protect your family home in the event of your death.
How do millennials buy insurance?
36% of millennials reported buying insurance online, and 30% bought homeowners insurance online. Meanwhile, 52% of millennials purchased insurance, and 58% bought home insurance, through an exclusive or independent agent.
But let’s face it, many millennials—born from 1977 to 1995—now own homes and have families of their own. This might explain an uptick in millennials purchasing life insurance (up 4.5%) but there are other factors at play. Here’s why more millennials are getting coverage—and what you should know before you buy.
What percentage of millennials have insurance?
44% of millennials are not financially ready to deal with the unexpected death of the family breadwinner. Half of the millennials overestimate the cost of coverage. 52% of millennials own life insurance, even though 80% recognize they need it.
Global inflation rose dramatically
A volatile global economy, falling disposable income, and hockey-stick inflation will undoubtedly affect life insurance premiums.
The International Monetary Fund lowered its global growth forecast for 2022 and 2023 to 3.2% and 2.9%, respectively, down from greater than 6% in 2021. Therefore, insurance growth – which correlates to gross domestic product.
Global inflation rose dramatically, to around 8%, putting considerable pressure on insurance claims and rates in the coming quarters.
High demand for global life insurance and increased worldwide risk awareness sparked by the pandemic have encouraged carriers to personalize solutions and focus on bettering customer lives through financial wellness. Uncertain environment and rising interest rates are stoking demand for guaranteed savings products to help life insurers boost profitability.
The agent-customer relationship has already evolved to be digital. Widespread technology adoption by customers of all ages has raised the bar for policyholder expectations and demand for a seamless experience.
If it’s overly complicated to access and update one’s policy, data goes unchecked and the experience worsens for both the carrier and the beneficiary when it’s time to access the policy.
According to Global Insurance Market Report, life insurance reinvention will continue in 2023-2024 as the industry aims to ensure ongoing relevancy. Pushed by current geopolitical and financial challenges, life insurers remain hyper-focused on system modernization, digital transformation insurance, and innovation to boost customer centricity.
Life insurance & millennial business
Capgemini’s analysts also noted that the opportunity to earn Millennial business, as over half (55%) of Millennials do not have or need more life insurance coverage, was also a priority.
The report went on to detail ways to transform the insurance claims process, saying that insurers can focus on the pillars
- Improved customer experience through automation – this involves empowering agents and customers with advanced digital capabilities to meet policyholder expectations and demand for a seamless experience.
- Beneficiary engagement – insurers can provide options for beneficiaries to opt into one-on-one engagement with the carrier to validate information and update it when changes occur. Third-party monitoring can also be deployed for data maintenance.
- Asset retention – as we head into a high-payout period where asset retention is key, the relationships built with beneficiaries can be a way to close the insurance ownership and retirement gap. Carriers can guide beneficiaries through the claims process and offer phased payout options to retain customers.
Insurance industry will continue and even accelerate its digitalization journey to create deeper customer-centric propositions, built on personalized engagement enabled by cutting-edge technologies.Anirban Bose, Financial Services Strategic Business Unit CEO & Group Executive Board Member, Capgemini
Therefore, expect firms to invest in intelligent automation, distribution, and cloud solutions.
Insurance Top Trends offers practical tools to navigate the complex scenarios ahead and help prepare your organization for the future of insurance.
How Insurers can appeal to millennials?
Millennials want to select and buy insurance the way they purchase other products and services. Insurers need to redesign their offerings and business model to support this shift. Insurers are using new insurance technologies to give millennials what they want.
At the forefront is the move to cloud-based insurance microservices platforms which can support the myriad ways that millennials want to select and buy insurance.
Insurance policy administration systems have dramatically evolved in recent years to incorporate more dynamic and flexible solutions. Modern technologies have revolutionized the user experience, as well as provided reduced efforts to onboard and maintain new and innovative insurance product offerings in carrier platforms. These improvements have changed the way insurance is bought and sold – especially to millennials.
Insurers are beginning to understand the psychology of choice and the role it plays in the millennial purchasing process. Insurers are moving toward a microservices architecture for the process of purchasing and servicing insurance products, which enables custom-built applications that fit millennials’ needs.
Microservices allow for unlimited creativity with user interface (UI) and the delivery of insurance products on any device.
Ease of use and digital appeal will improve adoption rates for new, customized insurance products.
Improved adoption is critical as millennials make up the largest percentage of the workforce and have been deterred to purchase insurance due to its complexity and lack of technical accessibility. A simplified, easy-to-use mobile insurance platform could be the solution that engages the newest group of adults.
Successful insurers will create an ecosystem that seamlessly integrates with partners. Some firms have already created an ecosystem manager role.
By offering customers incentives such as rewards and policy discounts for healthy financial behavior, life insurers will earn trust— leading to better and deeper customer relationships.
Life insurers will continue modernizing core operational systems while speeding up digital transformation initiatives to navigate the macroeconomic environment of 2023 and beyond.
Their aim will be to satisfy evolving customer needs while capitalizing on demand driven by heightened risk awareness because of COVID-19 and interest rates that make guaranteed products more attractive.
Edited by Oleg Parashchak