Get Insured? Generation Y Asks “Why?”
Issue: June 2015 | Life | Download PDF | English By Marianne Kutzner, Head of Gen Re Business School, Cologne
“A number of industries are losing contact with the young generation.” P. Riederle1
Generation Y is currently receiving a lot of attention in the media and people are discussing the characteristics of this 19 to 34 age group.2 At the same time, members of “Gen Y” are providing information about their generation’s goals and desires.3,4 When we say “Y” we hear the word “why”. Asking the question “Why?” embodies one of the dominant traits of a generation that systematically challenges traditional norms and values. Members of this generation are also described as “digital natives” because they are the first generation to have grown up with Internet and mobile phones and are at home in virtual worlds and on social media.
Gen Y members started entering the workplace some time ago, so the discussion is now centred on the world of work. For these young people, work and pleasure are inseparable.5 Their main career expectations are freedom for self-realisation and to do work that is in harmony with personal needs. This is the generation of apprentices, of people beginning work and starting families. Life assurance, disability insurance, and long term care insurance are entering their fields of vision for the first time, along the pension issue. Gen Y is an attractive market for insurers keen to provide products and forge long-term relationships.
Gen Y and life insurance
“But we’re not a target group, we’re an audience.” P. Riederle6
“Uncertain and overwhelmed, but willing to buy” is the verdict of a recent target group analysis of 8000 people aged between 20 and 29.7
Gen Y is one of the biggest target groups for the insurance market. Members of this generation hold few insurance policies (3.7 on average) and therefore offer considerable potential as a market for insurance products.
According to the study findings, Gen Y presents specific challenges to the insurance industry – many young people feel overwhelmed when it comes to taking out insurance and require targeted advice and support. In the survey they demonstrate low levels of competence in this area and, in some cases, reveal an aversion to dealing with insurance. The fact that young people are poorly informed about insurance is due in part to a certain level of indifference towards personal cover. Providing a wealth of information can trigger greater scepticism and does not result in people buying insurance. The study recommends targeting this age group through young insurance brokers using simple, clear language accessible to young customers.
Although Gen Y is very at home with the Internet in other areas, when it comes to insurance cover, the most popular route for taking out policies is to visit the offices of an insurance broker or insurance company (83%). Second choice is a home visit by an insurance representative (70%). Online insurance purchases come third (43%).
Researchers have investigated the financial behaviour and appetite of Gen Y for insurance and banking products.8 As expected, the proportion of people taking out private pension or endowment insurance is much higher among those who have started work (48%) than among apprentices and students. The target group is characterised by a pursuit of home ownership and safe investments.
Otherwise, Gen Y is not a homogeneous group – the research identifies three types. The “carefree, inactive” type (40% of those surveyed) comes closest to the widespread perception of Gen Y and holds a lower-than-average number of insurance products. The “competent, concerned” type (40% of those surveyed) is very interested in pension and insurance cover, seeks professional advice and has an above-average number of insurance products. The “worried, overwhelmed” type (20%) is unsure and less competent in insurance matters. These people are concerned about being unable to work and their financial security in old age. However, they have only a moderate desire for advice. The number of insurance products held by this group is average.
The main sources of information for Gen Y include the Internet and personal advice. Members of this generation are conservative when it comes to taking out insurance cover. Policies tend to be signed in the offices of insurance companies or brokers. Gen Y members do not seek advice via Skype or social networks, and only consider buying very simple products online or via a smartphone App.
The researchers recommend offering appropriate options to this technology-savvy generation. In the insurance sector in particular, there should be a facility for digital communication and options for managing policies through online portals. A dedicated contact person and the ability to access banks and insurance companies through modern media channels are highly valued services and a requirement for attracting young customers. By contrast, this target group has a neutral-to-sceptical view of financial service providers that maintain a presence on Facebook or Twitter for purely image-related and advertising purposes. Inappropriate, over-familiar approaches, according to the study, damage links to the target group.
Gen Y and disability insurance
A survey asked around 1500 German citizens aged 16 to 60 for their views on occupational disability insurance.9 It found the risk of being unable to work is something young people are increasingly concerned about. Interest in an insurance solution is high. However, this interest does not translate into large numbers of Gen Y buying occupational disability insurance. The main reasons are that young people have not yet considered the issue sufficiently, that they cannot afford it and that they find the information about it too complicated (see Table 1).
Gen Y is not sufficiently well informed about the fact that occupational disability insurance is an important form of security and is generally cheap and easy to take out when one is young. 54% of those aged under 30 have thought about insuring themselves against being unable to work. Interest is therefore high, but only one in three has actually taken out occupational disability insurance. People aged 30 to 44 are more likely to buy than those under 30. As expected, more people take out occupational disability insurance once their monthly income reaches EUR3000 or more while an above-average proportion (40%) of low-income earners do not hold this type of insurance.
The survey reveals people take out other kinds of policies to insure against the inability to work. Only a third of those surveyed had opted for occupational disability insurance. Just under a third have no insurance against losing their ability to work – 35% of these people said they could not afford insurance while 30% said they did not know about it. The survey shows that people frequently take out accident insurance instead. However, accident insurance, chosen by 57% of people, does not cover the main causes of inability to work: mental illness (31% of cases), followed by musculoskeletal problems (28%). Accidents prevent people from doing their job in 14% of cases. Another study shows similar results (see Table 2).
“If the product is right from start to finish, customers will come by themselves. We’ll see to that, because we won’t be customers any longer. We’ll be your fans.” P. Riederle
The target group analyses provide guidance when it comes to designing products. The cost of an insurance or pension product is very important. Some of the respondents said they could not afford insurance. We can expect to see low-cost, entry-level insurance and pension products that are affordable for apprentices, students and those just starting work. Customised offers for young people could include discounted products adapted to the target group, special conditions for first-time customers, staggered premium payment models and other, similar product variants.
From the target group analyses, we can see that Gen Y – despite a high level of interest in some cases – is not very well informed about the world of insurance, is not in a position to adequately assess the purpose of products, and tends to avoid complex, dense information about insurance products. The challenge to design transparent, understandable, convincing products is evidently one that the insurance industry could make more efforts to address. The conclusion of one study’s author is that “So far, however, no insurance company or bank is firmly established in the hearts and minds of the target group as a specialist provider for young adults. This gap needs to be closed through target-focused product offers and marketing activities.”13
Sales and marketing
“A one-size-fits-all approach won’t reach us.” P. Riederle14
The target group analyses provide clues as to how Gen Y can be reached through sales and marketing. Personal support and advice is pivotal – particularly for occupational disability insurance and retirement provision. The share of new business sales in Germany by distribution channel (see Table 3) varies with the online option chosen for mainly for car insurance.
Life assurance and occupational disability insurance in Germany are dominated by in-person sales. Germany has a high density of insurance brokers compared with other European countries. Gen Y is no different from other generations in its desire for personal support. The trust relationship that people look for when taking out a life assurance or occupational disability insurance policy, is often mentioned. Gen Y has high demand for individual information from the insurance brokers concerning insurance protection. The target group analysis recommends using young insurance brokers for Gen Y.16 Young brokers can communicate authentically with this generation. They can find the same language register and identify more easily with the special characteristics of this generation. A glance at the age distribution of German insurance brokers shows that 4.6% are aged 29 or younger, and 15.8% are in the 30–39 age group (see Table 4). In view of this demographic situation, the industry needs to focus on recruiting more young insurance brokers.17
The “digital natives” of Gen Y appreciate personal advice, support and online information channels and services. The research gives some indications of which approaches Gen Y desires and will accept and which ones are more likely to block access to the target group. According to the latest target group analyses, Gen Y can be reached by insurance companies through a combination of personal advice and an appropriate online presence. These findings can provide a starting point for companies designing their own sales channels.
For more articles in this publication, view the Table of Contents.