Life insurers seeking organic growth amid a perfect storm of persistently low interest rates, a still struggling economy and intense competition for baby boomers should perhaps start casting their nets wider and reach out to the underinsured and often neglected Gen X segment.
Gen X provides a tempting target for carriers and their intermediaries, given the segment’s stated desire to buy life insurance coverage potentially worth $3.6 trillion over a 12-month period — higher than any other demographic segment, according to LIMRA’s calculations. The question is how to effectively reach Gen X prospects.
Currently, acquisition costs are often considered too high to incentivize many agents to spend time selling to Gen X. At first glance, it may seem that the pursuit of this segment necessitates more resources than what’s required to reach other generations, but Gen X’s high brand loyalty is very likely to help defray the initial acquisition investment through additional product sales over time.
However, infiltrating this demographic might require novel approaches and innovative strategies to make such efforts worthwhile for stakeholders.
Gen X largely consists of families with children, breadwinners approaching prime earning years, and those tasked with caring for aged parents, which positions them as the model candidates for life insurance. Moreover, their current levels of insurance indicate their households will not be able to cover future living expenses if the primary wage earner should die prematurely.
The distinct attributes of Gen X evolved from their particular life experiences. They pioneered computers at school, witnessed an information and Internet revolution before they graduated college, and lived through corporate downsizing and merger mania at very early stages of their careers.
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Collectively, Gen X’s characteristics can shed light on their purchasing behaviors. By paying close attention to the expectations and needs of Gen Xers, insurers may develop better customer experience strategies through tailored marketing, distribution and product offerings.
Marketing: Listen, connect and educate
To attract and retain the brand loyalty of Gen X (measured, in general, as the highest among the generations), insurers and their distributors should employ marketing messages that are personally relevant using the various channels — online and offline — that this demographic frequents. Consider:
• Establishing networks: Setting up highly-engaging online social media communities, as well as an interactive and easy-to-navigate multimedia website that can give insurers a cost-effective platform to engage with tech-savvy Gen Xers and gain deeper consumer insights.
Insurers and their distribution partners can also network through word-of-mouth with an existing client base, especially parents of this generation, as this segment places great value on the opinions of their social and family circle for purchase decisions.
• Leveraging customer-analytics: Deloitte’s “Voice of the Life Insurance Consumer” survey found that significant life events — such as getting married, having children or changing jobs — are potential triggers for life insurance purchase decisions.
As Gen X is in the life stage for each of these catalysts, insurers can build intelligent analytics capable of targeting prospects with a higher conviction and better understanding of the type of products a Gen X customer is more likely to buy at a particular stage in their life.
• Reconsidering product offerings: For Gen X, cost is not only about the price, but also value. Therefore, life insurers should market their products not just for their death benefits, but as a flexible and tax-sheltered savings and investment vehicle that could finance a variety of goals, such as retirement or a child’s college education. Bundling income protection coverage with investment/savings products can also cultivate client ‘stickiness’ among the Gen X segment.
Distribution channel strategy: Integrate, don’t separate
By engaging Gen X through the various channels they are comfortable using, insurers can more effectively listen to potential clients and take specific action. For example, insurers can:
• Go direct: A website with easy-to-navigate features and immediate assistance at each step of the purchase process — such as video chat or guided selling — would likely appeal to the Gen X desire for simpler, more convenient ways to navigate their lives. Customer and business-facing applications, and services on smartphones and touchscreen tablets could provide higher convenience and enable cost-effective, real-time communication with the segment.
• Redefine the role of intermediaries: To overcome Gen X skepticism of insurer ‘push’ sales strategies, agent roles should shift to educator of life insurance benefits. This would likely alleviate consumer reservations and pinpoint appropriate products and purchasing methods.
Moreover, insurers should consider building a younger, more ethnically diverse agency force, which closely mirrors Gen X, and might better relate to their behavior and preferences.
• Turn simple transactions into relationships: The convenience of Simplified Issue (allowing prospects to get started with an individual life insurance policy without having to take a physical or provide body fluid samples) would likely appeal to Gen X, but the product’s high lapse rates diminish the potential benefits from the long-term relationships Gen X embodies. By augmenting the Simplified Issue process with a few probing questions to enrich the future client experience, low-cost distribution could derive further profitability through cultivation of longer-term relationships.
• Worksite marketing: Gen X is known for changing jobs more often than previous generations (they average 5.5 significant lifetime career events). Highlighting convertibility or portability features that could help customers retain life insurance even after leaving a job could potentially trigger interest in larger policy amounts, given certainty of possession with a job change, while potentially prolonging the relationship throughout a Gen Xer’s career.
• Alternative channels: Insurers should explore alliances with retailers that Gen X frequents, providing opportunities to offer life products through physical retail outlets as well as associated websites. Moreover, newly forming private health insurance exchanges offer the potential to cross-sell ancillary products, including life insurance. Life insurers could perhaps facilitate such piggyback-sales by collaborating with health carriers to develop hybrid products and/or revise underwriting and pricing guidelines.
To sum it up, with as much as $3.6 trillion worth of potential life insurance coverage on the table, it is becoming an insurer imperative to revamp strategies and business models to connect with Gen Xers, build strong relationships, and reinforce their client base for years to come.
Much has already been studied and written on the Gen X demographic by other industries and sectors looking to grow market share, and insurance industry players would be shrewd to scrutinize the collective results of such efforts, adapt them whenever possible for an insurance model, and put them to work before competitors seize the opportunity first.
Michelle Canaan is a Manager with the Deloitte Center for Financial Services in New York. She may be reached at firstname.lastname@example.org.
Jaykumar Shah is a Senior Analyst with the Deloitte Center for Financial Services in Mumbai, India. He may be reached at email@example.com.