Aged between 16 and 33, Generation Y makes up a quarter of the US population and represents a huge opportunity for life insurers. Joan Cleveland of Prudential Individual Life Insurance discusses with Charles Davis the findings of study highlighting the needs and demands of this major market segment.
Most American consumers born between 1977 and 1994 – members of the so-called Generation Y – know little about the intricacies of life insurance. But they know they need it, want it to be far easier to purchase, are wary of industry gimmicks and, most importantly, have a desire to be educated about the process of purchasing life insurance.
“You think you know, but you have no idea,” is how one member of Generation Y summed up life insurance, according to Reaching Gen Y – easier than you think, a study by Prudential Individual Life Insurance.
“I was shocked by the overall level of interest in insurance, and the fact that life event triggers are the same for Gen Y as they are for the rest of us,” said Joan Cleveland, senior vice-president, business development, with Prudential Individual Life Insurance.
“What is interesting is that they really know nothing about insurance beyond payouts, really. Pure protection is what they know.”
Prudential recently conducted one of the largest studies of Generation Y ever undertaken, featuring four external consumer focus groups, three internal focus groups from the insurer’s individual life insurance associates, and more than 1,500 internet-based survey responses.
The study’s findings have much to say about the way life products will be marketed and delivered in the future.
New sales approach needed
In order to reach Generation Y, the report says, the industry will be required to stop selling life insurance – or at least selling it in old-fashioned, aggressive ways. Generation Y wants to be empowered to buy.
In other words, they want education about life insurance, to better understand how life insurance fits into their lives, and to be provided with an easy way to purchase the product.
The single most significant, and heartening, insight that emerged from the research was that Generation Y will buy life insurance. Taken across all survey participants, 18% said they intended to buy or add life insurance coverage life insurance within one year, while 30% said they intended to do so within three years.
Generation Y participants in the internet-based survey were even more enthusiastic. Forty eight 48% stated they had intentions to buy, or add, life insurance coverage within the next three years, and nearly 20% plan to buy life insurance within one year.
That is impressive when compared to a study by industry research and consulting organisation LIMRA in 2005 that found 27% of consumers from all ages intended to purchase life insurance within one year. It is also worth noting that Generation Y’s intent to purchase comes at a time when many of them are encountering trigger events. One in three people who moved, got married, or changed jobs were members of Generation Y.
According to the US Census Bureau the total number of people forming Generation Y is 83.5m (25% of the US population) of which 76.4m were aged 15 to 32 in 2009. In that year, Generation Y’s collective annual income was $1.89trn. Generation Y’s total earnings are projected to increase by 85% during the next decade to $3.5trn, exceeding Baby Boomers’ earnings by $500bn. One thing is certain: Generation Y is a very viable market for life insurance.
In its study, Prudential found one of the challenges for the industry is to augment traditional distribution channels and begin to think more broadly about different consumer access points. This is particularly true for Generation Y, because this group does not want to be pressured or automatically enrolled into life insurance plans they do not understand. They also want more education about life insurance products and ultimately an easier way to buy.
While 53% of Generation Y’s surveyed would consider purchasing life insurance online, they still want to talk to an agent at some point during the process.
The study also revealed that Generation Y understands life insurance as a concept, but the complexities of pricing, product types and the underwriting process are still lost on this group, resulting in many misconceptions.
For example, many Generation Ys think life insurance is only necessary for those with high-risk jobs or for people who are sick, old, or both. Some even described it as a luxury item only for the wealthy.
However, when given prices of typical simplified issue term policies, 60% immediately became more interested in life insurance. They were shocked to find out how inexpensive coverage can be for the average person in his or her 20s. They even suggested that the price be accentuated in advertising to better reach Generation Y’s.
“In the focus groups, time and time again, the perception was that even term life was four or five times more expensive than it actually is,” Cleveland said.
“Participants were amazed when they found out how affordable the product really is.”
Once they knew the price, it spawned a myriad of other questions. It seemed that their initial objection to life insurance was its perceived cost. After it was made clear that life insurance was often very affordable, then a door opened to the rest of the information Generation Ys wanted to understand.
“Today, so much of our time is spent online so it’s no surprise that the internet is their first stop when they’re looking for information about life insurance,” said Cleveland.
“When people put Gen Y and the internet in the same sentence, they automatically think social networking. But that is only one part of the equation, so we’ll leave it up to them to drive the process and tell us where else we need to go.”
Despite these perceptions, Generation Y is a market that should not be overlooked by the insurance industry.
“To align with the lifestyles and preferences of Gen Yers, we will do a better job of demystifying the life insurance process,” Cleveland added.
“And, we will look to relinquish some of the control and allow them to teach us about themselves so we can create relevant products and processes.”