Why the rise of millennials spells change for insurance companies

By Stephan Kaiser, CEO at KoverNow

 

Most of us, regardless of our age, use our phones to inform shopping decisions, make purchases, order deliveries and carry out even complex banking transactions. What most of us are not doing is managing our insurance policies through our mobiles. This seems odd, and for the millennials amongst us, it’s even more unfathomable. Why should so many other functions of our lives be enabled by mobile apps when accessing a simple insurance arrangement is not?

Much of it has to do with the technology underpinning the insurance value chain. Regulatory changes have put continuous pressure on the cost-income-ratio of banks for the last decade.  This has led to many innovations, including our banking apps (the first mobile banking app was only launched in 2011), but the insurance sector has not kept up, or focused in the same way on efficiency gains and consequently has invested significantly less in IT. We calculate that insurance IT spending as a percentage of revenues has been at about 50% that of banking IT spending over the last 10 years (7-8% for banking and 3-4% for insurance). As a result, we have no apps in insurance for today’s consumers who use their phones to shop around, compare prices, and only pay for what is needed.

Millennials, understandably, want to know why they can’t have more choice, why they can’t select cover just for the items they really value and quickly, without any fuss, from an app. Traditionally selective insurance in which individual items are named comes at a premium price, but not everything that any of us, particularly millennials, own needs to be insured in one job lot.

 

The Millennial mind

In an effort to delve into the attitudes that millennials have to their belongings and insurance, we recently ran a survey targeting 500 people aged between 25 and 39. Our cohort live and work in Singapore, but they are all well-travelled and educated.

We discovered that almost 74% of respondents to our survey already owned health insurance and a fraction below 73% also had life insurance. For this group, this type of insurance was essential. We asked them what items would cause them distress if they were lost, stolen or damaged. Unsurprisingly, given their age and circumstances, almost 80% said it would be a smartphone or tablet, while 71% said it would be their laptop. However, only 12% had taken out insurance cover on these precious belongings.

When we asked further questions, we found that our respondents were willing to purchase insurance for their items, and in fact, just under 80% would pay a monthly amount to secure their electrical goods. The same is true for fashion items such as jewellery, luxury watches and luxury handbags. While they would be less distressed to lose them than their smartphones and laptops, they would still be willing to insure these items.

And how do they seek out suitable financial products or services? Around 45% said they used online search engines and word of mouth recommendations, but 40% said that online reviews, articles and/or videos informed their purchasing decisions.

As expected, most of this young cohort is open to using a mobile app to purchase insurance. When we asked them what the top four most common insurance products they would consider buying through an app were, they said: health, mobile device, life and travel insurance.

This attitude to sourcing services through mobile apps is to be expected. Millennials are a generation that have entered a digitalised workplace and they lead digitalised lives. They expect the services they are offered to be personalised and adaptable, and if they own only a few items that they consider to be precious, why should they have to pay a standard amount for a standard policy? To this cohort, the concept of a mobile insurance app is regarded as convenient, easy to use and user-friendly.

 

Keep up, or lose out

These findings throw out a challenge to the insurance industry to change. What is more, the clock is ticking. While millennials have paved the way for digital transformation, it is the Gen Z generation of digital natives snapping at their heels that will reject anything not available as an app or as part of the digital ecosystem.

So what can insurance companies do to compete? Developing apps is not the difficult part; building them to provide a holistic service that meets the lifestyles of young customers is trickier. When asked what the most important attributes were that would impact their experience when they were using a mobile app, price advantages topped the list, then a hassle-free claims process and easy to use interface, and the responsiveness of the support team.

Millennials are looking for speed and efficiency without compromising their security, which is why banking mobile apps have found such favour. They are also receptive to brand influence, and strategic co-operation with well-regarded brands would be a good step for insurers to take if they want to reach this audience.

Agility, however, is what insurers really need to develop. Standardised policies that cannot be researched, selected, purchased and managed through an app will struggle to find favour with young consumers. But if the policy also lacks flexibility, is too expensive or too complex to provide cover for a handful of precious items, they will reject it outright.

To millennials the apps on their smartphones are the doors to all the services they need and want. If insurance policies cannot be accessed through apps, they are unlikely to be found, let alone used. Insurance companies must change to take advantage of this growing sector of the market, and they need to do it now.

 

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