Insurance and Next Gen

When it comes to ‘’the digital generations” (Millennials, Gen X and Z, or “Zoomers” as referred to since March 2020), a lot has been said, written, compiled and glorified. One thing is certain, they are changing the ways businesses have been doing business for centuries. The phrase ‘big ships are slow to navigate’ is true when it comes to financial institutions, and above all, to the insurance industry, where certainty and consistency are considered as holy grails. But even the biggest ships find ways to navigate in stormy skies. 

Next gens are moving from being ‘these kids’ to having a great deal of purchasing power. And while economic structures had been catering for their needs in the past 10 years, it’s just the tip of the iceberg. By 2025, next gens are expected to comprise 75% of the global workforce, which means they will be the most influential market segment for the next few decades. What does that mean for the insurance industry? 

Different times require different approaches 

According to a recent Gallup poll, next gens are the least engaged with insurance compared with older generations, we can think of a few reasons why. 

For example, next gens are less likely to marry young, if at all. Fluid gender identities, polyamoria and “co-parenting”, are emerging as new foundations for the future of  family structures. For older generations, having dependents was one of the key decision mechanisms in buying insurance. The reality in which high percentages of next gens remain single and not married, having only one child, or none, makes the costs of life insurance less appealing than in the past. 

Another potential reason for the lack of engagement with insurers can be related to frustration that comes along with getting insured. Too much paperwork is a common reason behind next gens’ frustration with insurance. This often leads them to give up on getting insurance altogether.

As digital-natives, next-gen-ers are expecting to engage with insurance products in the same way they engage with other products – digitally, simply and quickly. 

And lastly, insurance has long been a ‘one size fits all’ type of business, and here as well next gen-ers are pushing the industry to change. Personalisation is a key element for next gen-ers and such, it’s one of the prominent insurance trends lately. A Capco survey found that 47% of next-gen policyholders are willing to share data from smart home devices with an insurance company to generate personalized products and services, this can help insurers not only to capture their segment but also reduce expenses for unnecessary policies and marketing costs.

Go Embedded or Go Home

Personalization is an important element, but it does not stand alone. Next- gen-ers also expect a holistic and smooth customer experience – where digital offerings are bundled with other products and services. This concept is already known as embedded offerings, meaning  that a certain product contains other relevant  products or services within it. This is different to “add-on” products which customers are offered and can add to their purchase. Embedded Insurance has been part of the insurance ecosystem for some time now, but in the past two years it gained a lot of attention as more and more studies have shown its value and the great market opportunity it holds.

In 2020, Simon Torrence, a well known advisor for business growth published a Linkedin article on embedded insurance, stating that “Embedded Insurance could create over $3 Trillion in market value by 2030”. This market is mostly dominated by Insurtechs that build the technological solutions that allow for insurance to be embedded within other digital products. 

The global insurtech market size is expected to reach USD 152.43 billion by 2030, registering a CAGR of 51.7% from 2022 to 2030, according to a new report by Grand View Research, Inc. The rising awareness about the benefits of insurtech solutions in simplifying the claim process, improving communication, and implementing automation is expected to drive market growth. 

Examples of Embedded Insurance range in insurance lines (such as P&C, life, dental health, etc.). One example could be car insurance based on collected data on how well and how much you drive – Pay as you Drive/Pay how you Drive. Health or life insurance based on data regarding your lifestyle collected from smart watches or health apps is also one of the rising insurance trends. 

Embedded insurance presents a great value for next-gen-ers, as they are highly price-sensitive and savvy consumers – comparing prices, identifying discounts, and reading reviews in trying to find the perfect, most personalized, and convenient solution for their needs.

Embedded Insurance presents a great value and opportunity for next-gen-ers

To sum it all up

Next-gen-ers present challenges to all traditional industries, forcing corporations and complete sectors to adapt or die. The insurance industry is not different to others, and it too is rapidly changing to answer the evolving customer expectations. While next-gen-ers are highly price-sensitive, this is balanced by their increased comfort with sharing personal data in exchange for discounts and personalized policies. This opens up a massive window of opportunity for insurers to deliver personalized experiences to this demographic by using an Embedded Insurance distribution model. Insurers and Insurtechs that provide on-demand, flexible coverage with simple self-service options and real-time quoting will succeed in serving this underserved market.