The Baby Boomers are rapidly passing out of the stage of life when it makes sense to sell them conventional individual disability insurance, or to go out of one’s way to enroll them in a group disability plan.
Insurers have, certainly, brought millions of Generation X and Millennial Generation workers into individual, group and multi-life disability insurance arrangements.
Someone, somewhere, has probably gotten rich off of selling disability insurance to the GenXers and Millennials who (miracle of miracles) have jobs, just as someone has probably gotten rich insuring fish against fungus and overly imaginative customers against alien attacks.
But does retooling a disability insurance company or a disability insurance distribution outfit to go after GenXers and Millennials make serious business sense, or would the insurers and the producers be better off reengineering existing products and creating new products, such as funky pre-need burial arrangements, or nursing home CD collection integrity coverage, until all of the boomers are dead and buried (or stored in Pop Art urns)?
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Drew King, a senior vice president for group and specialty reinsurance at Gen Re, Stamford, Conn., scoffs at the proposition that pursuing GenX and Millennial disability business might be a waste of time.
“We see no basis in fact to say that Gen X and Gen Y workers will never have good jobs or extra money,” King said. “Many of them will, and all of them will need some kind of income protection.”
Steve Brady, a second vice president in individual disability insurance sales and marketing at Standard, Portland, Ore. (NYSE:SFG), said insurers and producers have no choice but to go after workers ages 47 and younger.
Conventional disability insurance policies cut off benefits around age 65. Traditionally, sales of individual disability products to sixtysomething clients were rare.
The U.S. baby boomers – Americans born from 1946, when the troops came home, to 1964, when the spread of the birth control pool started to reduce the annual U.S. birth counts – are now ages 48 to 66.
The average age of a disability insurance buyer has increased to over 40, up from 32 in 1980, Brady said.
Disability insurers must sign GenXers and Millennials, because “you’re going to need the younger, healthy premiums to support the product,” Brady said.
The Life and Health Insurance Foundation for Education (LIFE), Arlington, Va., and the Council for Disability Awareness, Portland, Maine, are organizing Disability Insurance Awareness Month activities to lure GenXers, Millennials and others this month with a radio publicity campaign, a print publicity campaign, and more.
But Hartford Life, Simsbury, Conn. (NYSE:HIG), splashed sobering cold water on the disability insurance industry’s face last fall, by suggesting survey data that the ownership rates for group disability coverage fell both for GenXers and Millennials between 2010 and 2011.
Analysts at the Pew Research Center, Washington, raised more questions about whether the Millennial market is a market – or a deadly mirage – in November 2011, when they showed that the median net worth for U.S. adults ages 18 to 34 had fallen to $3,662 in 2009, down 68% from the inflation-adjusted 1984 total.
The median net worth for GenXers ages 35 to 44 fell “only” 44% over the same period, to $39,601.
The definitions and terminology used to describe the generations that came after the boomers are still in flux.
Marketers originally set the start of a “baby bust” generation around 1965, when the spread of the birth control pill gave women easy control over child bearing. The number of U.S. babies born that year fell to 3.8 million, down five percent from 4 million in 1964, according to the National Center for Health Statistics. William Strauss and Neil Howe later wrote a popular book dubbing the generation “Generation X” and suggesting that the generation may have started as early as 1961.
Marketers have suggested that the next generation – sometimes called “Generation Y” and sometimes called the “Millennial Generation” – may have started sometime between the late 1970s and the mid-1980s. One cut-off could be 1985, which is 20 years past 1965 and a year when the number of U.S. births climbed close to 3.8 million for the first time since 1965.
The cut-offs insurers and others use in their work vary, but the typical cut-offs could be 47 to 27 for the GenXers and from 18 to 26 for the adult Millennials.
Measuring just how broke those GenXers and Millennials area – and whether they actuall are broke – is tricky.
Even though Pew, for example, reported low and rapidly falling median net worth figures for Americans ages 35 and under, the detailed tables show that those individuals increased their asset totals in some important areas, such as the value of business equity and the value of rental real estate owned.
Analysts at LIMRA, Windsor, Conn., say they believe that recession-scarred young workers value the disability insurance benefits offered in the workplace more than insurers recognize.
In a 2011 benefits survey report, LIMRA said only 20% of the participating employers thought employer-sponsored long-term disability (LTD) insurance benefits were important to workers under age 40. But, when LIMRA conducted a related employee survey, more than 50% of the participating workers under age 40 said LTD benefits are important.
MetLife Inc., New York (NYSE:MET), also has found signs that young workers do value disability insurance.
About 68% of the GenXers surveyed, 65% of the Millennials, and 58% of the younger boomers said they have fears about the possibility of a principal wage earner not being able to work.
Some disability insurance specialists question whether breaking consumers down into generations provides any more insights than simply looking at whether particular consumers are getting settled, rearing kids, or gliding toward retirement. Or, segmenting the consumers in other ways.