Generation Y has been described as tech-savvy, entitled and achievement-oriented. For agents seeking to enter this market with health and life insurance products, it’s important to understand not only their buying habits, but also their beliefs about insurance.
Gen Y, also called millennials, were born between 1978 and 1994, and is the largest generation since the Baby Boomers, with a population of 70 million people. They have a collective annual income of $1.89 million, according to a 2010 Prudential Individual Life Insurance study. The study also found that they are a very viable market for life insurance, but they have a lot of questions and 44 percent don’t know where to turn for answers. That opens the door for astute agents to become a trusted resource for eager and underserved Gen Yers.
When it comes to purchasing life and health insurance, Gen Y tend to be risk takers, but they also want to feel empowered in their buying decisions.
“What I have found with selling life and health insurance to Gen Y customers is that they look more at the cost/benefit analysis of life and health insurance more than older generations,” says Ryan M. Hanley, an agent at The Murray Group Insurance Services, Inc. in Albany, N.Y. “Gen Y is more apt to take a high-deductible plan to save money today and have the insurance more for worst-case scenarios. The older generations tend to be married to HMOs and co-pays and become very uncomfortable moving away from HMO-style plans.”
A 2010 eHealthInsurance survey of college students and recent graduates found that the majority would prefer to shop for their own health insurance to carry with them from job to job, versus participating in an employee-sponsored health plan. In fact, according to the survey 54 percent of college graduates prefer health insurance portability (the ability to find it and keep it) while 46 percent prefer to change health coverage with every job change.
“Generation X and Baby Boomers see health insurance with more of a fear-based motivation,” says Palo Alto, Calif.-based Aaron Ginn, himself a member of Gen Y and the outreach coordinator at Simplee, an online personal finance tool that manages healthcare expenses. “They say, ‘I shouldn’t leave my job because I’ll lose my health insurance, and then I’ll have to pay all of these expensive bills;’ while millennials don’t really think like that.”
While older generations are still attached to HMOs, Gen Yers like high deductible health plans to cover worst-case scenarios such as accidents.
“They’re younger. They’re healthier. And it’s easier to get them to buy into the concept that if you take care of yourself and you do the right things health-wise, you can save money on a plan with a high deductible,” Hanley said. “It’s swinging back to a larger burden of the risk on the insured. If you maintain your health and take on a little more risk, we’re going to allow you to save on premiums.”
Hanley said that the preference for HDHPs may be because Gen Yers don’t have as much experience with HMOs as older generations and they haven’t been entrenched in corporate society where these HMOs have been the legacy products for the past 20 or 30 years. Hanley also says that the current economy has influenced the preference for cash flow today in the form of lower premiums for a little more risk in taking on high deductible plans.
Bill Suneson, co-founder and president at Next Generation Insurance Group in Boston, agrees. “They want enough coverage so that they are not going to be put into a situation where they can be damaged financially,” he said. “They also want maternity coverage and mental health coverage.”
True to their tech-savvy natures, Hanley said that Gen Yers like a high level of automation with their health plan. “Once we are set up, we will probably keep on paying. Web 2.0 has made Gen Y lazy on the ‘administration’ parts of our lives.”
A key conclusion of the Prudential study that should be particularly interesting to agents is that Generation Y is definitely interested in buying life insurance. In fact, 48 percent of Internet survey respondents stated that they have intentions to buy life insurance within the next three years, and 20 percent said within the next year.
While there is tremendous opportunity in those statistics, agents do face some challenges in the life insurance arena with Gen Yers since many don’t fully understand the ins and outs of life insurance policies, and want to be educated on the terms and benefits.
“The number one reason why people don’t buy life insurance is because they think it costs too much,” notes Butch Britton, CEO of ING U.S. Insurance in Minneapolis. “They don’t understand what they’re buying and they don’t know how much they need. And they’re not really sure why they need life insurance. ‘I’m only 35 years old. I’m healthy. Why do I need life insurance?’ They forget about the accident factor. You first educate them about the product offering, and then they’re much more likely to buy, and understand why they need to buy.” ING has developed a website tool called ING for Life, to meet the market demand for education.
Your Gen Y clients who are getting married and a starting family may find a low-cost term life policy a good fit, Britton says. “In this life stage, many people are looking to protect their families in case of lost income,” he said. “The conversion privilege protects their underwriting class for the future, so as their needs change, they can convert to a cash value product without any underwriting impact.”
Making a connection
So how do you connect with Gen Y? Agents like Hanley, with a successful track record of selling to Gen Y, understand the importance and opportunities available through social media. He has successfully utilized Facebook to connect with potential Gen Y clients before shifting to offline communication.
He also gets involved in his local young professionals groups. “I’m on the board of a local young professionals networking organization here in Albany,” he said. “I do some small sponsorships and get on some committees for different charities, just to get engaged for one and to get to meet a lot of like-minded people.”
And while traditional advertising may have gone the way of the Yellow Pages with Gen Y, Hanley still finds that one old method works. “Cold-calling is the fastest way to get business,” he said. “For as much as I love social media, and this new technology, picking up the phone, calling someone, and introducing yourself to them is still the fastest way to get the most business.”