When it comes to life insurance, younger Americans are underinsured. Millennials represent the largest living generation, yet only 16 percent own individual life insurance, and about a third would be likely to purchase it in the next year.
While millennials believe they should be putting more money into products like life insurance, competing financial priorities such as buying a home, paying off student loans and other significant life events can present a substantial hurdle to their purchase of these products. In fact, one in two consumers say paying off short-term debt is more important than putting money into a policy.
Capturing this market opportunity presents a challenge for life insurance agents and agencies seeking to build mindshare among a generation that lives life to its fullest, a majority of whom would rather maintain their lifestyle today than prioritize something intangible like life insurance funding. Planning for the protection of assets and loved ones in the event of death can be a small afterthought for today’s young saver.
In a market traditionally defined by lengthy underwriting processes and paperwork among an older and wealthy client base, today’s life insurers are finding ways to adapt and evolve, reaching the young and underinsured in new ways through enhanced processes, products and innovations. Progressive agents are hanging up their sport coats, putting on blue jeans and pulling out smart phones to do business with a clientele that values speed, simplicity and value.
See also: Millenials are unprepared for retirement
Non-traditional clients in a traditional space
Agents beware. Research shows 54 percent of today’s millennials liken dealing with financial intuitions to be as much fun as being stuck in a traffic jam. Breaking through to this audience can be an uphill battle, as expectations are high and the margin of products purchased can be quite low. millennials do business differently, and expect the companies they do business with to address their needs and on their terms.
Data shows that younger generations tend to rely on friends, coworkers, and family for information on retirement planning and insurance, while older generations rely more on their financial advisor. As with other experiences and products this generation latches onto, a positive experience can lead to referrals. A whopping 77 percent of millennials are likely to recommend owning life insurance to their sphere of influence, if their experience is favorable.
Consumers understand that life insurance delivers future benefits along with peace of mind, but it’s not always perceived favorably from a financial standpoint. Lincoln’s research shows 56 percent of millennials feel it is a necessity, and less than a half believe it is a good value and affordable. Striking the balance in this space is critical as millennials are willing to sacrifice price for an overall positive experience and something they feel is of value.
According to LIMRA’s 2015 Life Insurance Barometer, living expenses such as Internet, cable and cell phone bills ranked as a high financial priority and one of the reasons millennials have not purchased life insurance. The study shows 54 percent of millennials make these “screen” expenses a high priority. Yet compared to electronic expenses that can creep up into the hundreds each month, new offerings in the marketplace have made the cost of purchasing a life insurance policy less expensive.
Innovations in underwriting
Industry pacesetters are transforming the life insurance business, working to enhance the overall customer experience, and provide products and processes that meet the needs and expectations of clients of all ages and stages. Today’s life insurance policies are more streamlined, varied and flexible, offering choice to a generation that values technology, simplicity and speed. Innovations in automation, delivery, underwriting and technology are altering this space, helping younger applicants obtain a policy in a fraction of the time, and through an experience more consistent with their expectations.
The intersections between advances in medicine, technology and data have paved the way for new products and processes. Term offerings with lower face amounts are now providing younger applicants with an entry point to the space, and more attainable coverage at a time where their share of wallet is split between paying off student loans, buying a first car or home, and starting a family.
Insurers are embracing options that provide the ultimate client experience and help to make their business fully-electronic from end to end. New streamlined processes include tele-applications and lab-free underwriting opportunities to provide clients with a faster and less intrusive underwriting experience. E-delivery of policy materials are cutting down on time and paperwork, allowing clients to experience a faster policy delivery and eliminating the need for face to face meetings.
Your toolbox for success: 3 tools
(1) Embrace the new marketplace
Based on Cerulli research, less than 10 percent of today’s advisor client base is age 40 and under. Yet this research tells us younger clients provide advisors with higher levels of growth over the long term. Today’s agents should not resist the current. Finding ways to work with this younger and growing subset of clients on their terms can lead to long-term success.
Progressives in the marketplace are building their business one smart phone at a time, using social media channels to provide education and to generate sales opportunities. Agencies are also segmenting their businesses to reach millennials and the mass market with new policies, investing in technology, infrastructure and resources to build their own proprietary platforms.
Life phase considerations are dominating conversations, and agents are networking with real estate firms, banks and other Millennial points of contact to reach younger applicants in a meaningful way, in their own environment, and on their own terms.
(2) Talk life, not death
For younger clients, death is a far-off concern. The industry is moving away from “death” terminology when talking about life insurance, replacing this conversation with talk about life, value and living benefits. Providing millennials with information on the living benefits of life insurance products can help potential policy owners understand why buying a policy now is a good idea.
Cash value life insurance can provide tax advantages and income flexibility for policy owners while they’re alive. And life insurance policies generally allow savings to be distributed income-tax free through policy loans and withdrawals.
Since many of today’s Americans hope to retire before the age of 65, providing education on how life insurance can offer an interim cash stream until other benefits may be accessed is important and a key point to convey. Some products also hedge against longevity, allowing policy holders to transfer their income tax free to their heirs in the event the income is not needed.
(3) Paint the big picture
A life insurance policy is just one product in a saver’s well-rounded retirement portfolio. Helping policy holders understand how life insurance can fit into a holistic financial picture is important and can help savers identify the type of coverage that may be needed based on life stage and benefit preferences.
Discussions that move away from pure product education and towards how a life product meets an overall financial need will help today’s clients understand its value in protecting one’s assets over time.
Today’s financial and insurance professionals have a tremendous opportunity to reach an underserved market with a product that can help protect them, their assets, and loved ones. As the marketplace shifts, advisors and agents stand to gain by building their business one client at a time, helping millennials and younger generations explore life insurance options that fit their unique needs and expectations.
See also: What millennials want from work and life