The Generation Gap

By the time young insurance shoppers find Sean Graham’s online brokerage, they’ve already logged many digital hours in their search for insurance. Even after crowd-sourcing Facebook or Twitter and clicking through quoting tools, they’re still looking for the perfect fit when they land on his site.

They’re often recent university graduates, easing into new jobs and their first solo apartments. “They’re off on their own, wandering the Internet, trying to find the best price and the best experience to cover their needs,” says Graham, principal broker at KTX Insurance Brokers in Toronto.

That’s not all they’re looking for. Millennials—those born between 1982 and 1993—pose a unique challenge to both insurers and brokers when it comes to market-specific needs and expectations. With its online presence and youthful team (the average age is 23 years old), a brokerage like KTX is well positioned to address millennials’ insurance needs. But is the broader industry? Until products and service match younger clients’ experiences and expectations, a younger shopper’s search could take longer than expected.

New profile, new needs

Millennials may not be an obvious target market for insurers. This generation is making the transition to adulthood with a markedly different financial profile than the GenXers and Boomers before them, according to Brett Myers, an analyst at State Farm Insurance and manager of the insurer’s NextDoor financial education centre. The Canadian Federation of Students reports that they’re saddled with high levels of student and credit card debt, with the average student loan around $27,000. And the higher cost of housing in urban areas has pushed typical milestones like a home or even car ownership out of reach for most.

 “There’s a gap in terms of connecting insurers to those millennials for first-time tenants or condo insurance. There’s a big opportunity, but it’s not yet been realized.”

Factor in the generation’s relative mobility (which makes it easier to chase job or personal opportunities), and they don’t look like an easy fit for traditional coverage. “Imagine you’re an insurance company saying, ‘How can I help you?’” says Myers. “[They think],‘Your needs don’t match our products yet.’”

But they will. “This generation is highly educated and has the potential for affluence,” says Daniel Shum, partner and national insurance leader at Deloitte in Toronto. “Over time, they’ll require all the things that other people have.”

Some already do, giving the group a bit of a split personality. Zac Sutherland, a millennial himself, sees a lot of young professionals purchasing cars and younger married couples buying homes in Guelph, Ontario. Like their single, urban counterparts, “it’s their first point of entry [into insurance],” says Sutherland, a broker at Sutherland Insurance. “They’re finding their own way.”

The Amazon experience

They might not all be in the same place, but millennials share the same insurance wish list: a 2013 J.D. Power & Associates survey found that they’re price sensitive, but Daniel Shum insists they’re concerned about more than that. Used to white-glove treatment from online retailers, they want the right product, competitive prices, good service and seamless delivery, all served up digitally. “They want an Amazon experience for insurance.”

Read: The Forces That Shaped Millennials Will Also Change Insurance

Are they getting it? Well, yes and no. Sean Graham argues that many traditional products already meet millennial needs and points to tenant and condo policies (often required by landlords in Toronto or Vancouver) as a good fit for millennial clients. “I’ve seen insurers try to segment that market, especially in Toronto; they want more of that business,” says Graham. But, he notes that local Google searches turn up very little for insurance shoppers. “There’s a gap in terms of connecting insurers to those millennials for first-time tenants or condo insurance. There’s a big opportunity, but it’s not yet been realized.”

Auto insurance poses a different kind of opportunity. Young drivers face some of the highest rates in Canada, and Zac Sutherland says a shift to individualized ratings in recent years has only compounded the problem, especially for those under 24. Usage-based insurance (UBI) products are taking a step toward these drivers. When one of Graham’s young clients faced a $4,000 annual insurance bill, he says UBI products offered a good fit. Recent entries into this market, such as Industrial Alliance’s Mobiliz product, the Independent Broker Resources Inc.’s Ingenie product (offered through Insurance Brokers Association of Ontario members) and Desjardins’ Ajusto, all target younger drivers between 18 and 24 years old, offering discounts in exchange for safe driving habits.

“If you think of the 50-plus group, there are plenty of companies going after them with targeted marketing efforts; not so much for the millennials today,” says Graham. “But there is plenty of opportunity for usage-based insurance to play a part there.”

Catherine Kargas, vice-president at Montreal-based market research firm MARCON, agrees. “They’re meeting a certain need.” But she acknowledges that UBI only addresses one aspect of the segment’s needs.

21st-century coverage

What about the rest? Millennial choices offer a whole new world in coverage possibilities. In 2008, a Deloitte report singled out pet or cyber insurance as good bets for the market, but Brett Myers says that today, products that respond to emerging habits like ride or car-sharing services offer even more potential. Many millennials, he suggests, might think, “I don’t own a car, what kind of protection do I need? That’s where the opportunity comes in.”

Kargas points to the need for “mobility” insurance geared toward usage, rather than ownership. “These are individuals who will rent vehicles, share vehicles, or borrow their friend’s vehicle.” She says such a product would give either renters, car-share or ride-sharers added protection. If they have an accident, “[they’ll know] ‘I’m covered. I don’t have to worry about the fine print of the coverage of the driver or service.’”

Read: Tips for Your Condo-Owner Clients at Risk of Water Damage

Both Kargas and Shum agree that better product bundling can fulfill millennial preferences. Kargas envisions bundles that combine tenant insurance with usage/ mobility insurance, while Shum predicts that home-based bundles that tie in cyber or pet insurance with tenant or home coverage will be a good fit.

There’s also room for what Shum calls “creative insurance”—shorter-term coverage that might span a few months, rather than a full year. Such products could target specific incidents, like an ice storm endorsement. “Hopefully, insurers will offer more options,” says Shum.

Building business

That brings up a new issue. Millennials may welcome more choice, but the question is whether the proposed products are feasible. Glenn Cooper, a spokesman at Aviva Canada, says that overall, the segment’s low-asset, high-risk profile can make it difficult for insurers to address their needs.

And, their behaviour evolves quickly. “I can try something [like ride sharing] and tell 2,000 people with one Tweet,” Myers points out. “It’s hard for companies to keep up.”

Shum considers the product itself another challenge. Millennial customers are drawn to the digital route for theirproduct needs, one that allows customers to do everything online and right now, but insurance products don’t fit easily into that mould. Shum says this poses a hurdle for insurance, a notoriously complex product, especially when it comes to lines like Ontario auto. “How do you regulate the market, work through that and create products that could be sold through a digital channel?”

A surefire way to address products for this age group: think about what they value. They may not be attached to possessions, preferring to stay nimble, but they put high value on their technology and data. If they lose their computer, says Myers, they want an insurance product that will help them replace it tomorrow.

Tapping into their entrepreneurial spirit is another: more than one successful start-up has taken root at Next Door, the coffee shop/education centre State Farm set up in Chicago in 2011. Next Door is a relaxed community space for the “next generation” to get financial and insurance information. It’s also become a bit of a business incubator. “Millennials are entrepreneurial,” says Myers. The difference is, they don’t see themselves as small businesses. “Now, it’s easier to build larger, national businesses.”

Making connections

Insurers are slowly correcting course, building the kinds of tech systems that could turn millennial “must haves” into reality. “It’s an industry under transformation,” says Shum.

Aviva’s Glenn Cooper says that, in the interim, insurers and brokers have other opportunities to simplify the insurance process for millennials using education and outreach. “Insurance is a complicated contract. Anything we can do to make it simpler can help.” He points to targeted messaging for first-time renters or homeowners about water damage as one example.

Read: Liability Issues and Coverage Concerns in the Condo Market

Sutherland notes that many millennials have been on their parents’ policies and need an insurance primer as they move into their own coverage. And at times, they need to understand what it’s worth. “They’ve never had a claim, so they don’t see the value in it.”

These days, insurance education can’t be separated from the overall financial picture. Myers points out that as young adults juggle student or credit card debt with dayto-day expenses, some may not even have $20 a month for rental insurance.

Insurers can also capture their interest with social or environmental causes. Cooper notes that Aviva’s Community Fund makes a marked effort to include the younger market. “With millennials, there’s an expectation of corporate responsibility,” he says. “It’s one way they can connect.”

Kargas suggests that, ultimately, insurers—and brokers—would do well to emulate non-insurance brands like Apple that have intensely loyal, younger shoppers, noting that the tech giant has more than a little in common with the insurance business. “Their offerings are quality products [and] the after-sales service, the hand-holding, is all part of the overall experience.”

According to Graham, all those efforts will help insurers and millennials meet in the middle. He says that in many cases, “the products are there, the customers are there, but the connection isn’t there.”

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Copyright 2014 Rogers Publishing Ltd. This article first appeared in the August 2014 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.