As millennials quickly come of age and become one of insurance’s key markets, insurance companies need to take notice of the fundamental differences between this generation and the previous one. How can they adapt to such a generational shift?
Following the latest population estimates from the U.S Census Bureau, millennials have officially overtaken boomers as the largest generation in America. Worldwide, millennials made up 23% of the global population in 2020. How can insurance adapt to such a generational shift? The answer lies within InsurTech. According to a 2021 report, almost half of all 3,475 InsurTech companies globally emerged only in the last 5 years, showing that insurance is indeed rising to the challenge. Furthemore, VC funding for InsurTech companies in the past 10 years grew an average of 89% every year, showing that InsurTech is a booming industry not to be taken lightly.
As millennials increasingly come of age and begin to enter the insurance market, they are fundamentally changing the way the industry operates as companies adapt to a new demographic that has vastly different expectations from the previous generation. As the first ‘digitally native’ generation, millennials are comfortable with and almost expect to have high-tech solutions geared towards their lifestyles.
Demand for technological solutions
With the growing influx of millennials into the insurance sector, technological solutions are quickly being adopted and invented. InsurTech is often praised for being able to lower costs, keep insurance affordable and make it more accessible to the masses. Technological trends that will disrupt traditional insurance such as applied AI.
A patented Privé solution for unit-linked life insurance providers
AI services and algorithms can rewrite the way life insurance is approached both from a provider and a client point of view. AI offerings such as robo-advisors, which are able to generate the most optimal portfolios in mere seconds and take a customer-centric approach by customizing portfolios to a client’s specific wants and needs. Such robo-advisors already exist and are currently in use by companies and financial institutions worldwide, such as Prive’s patented AI-based Genetic Optimizer (AI GO) solution. With over 5% of all InsurTech companies operating within the finance and banking industry, some robo-advisors, like AI GO, are centered around unit-linked life insurance, a product that offers both insurance and investment payout. Robo-advisors that focus solely on insurance use algorithms to offer more suitable plans to clients via quizzes and questionnaires, as well as process claims and answer questions through machine learning.
Adapting existing policies
It also means that insurance policies have to adapt and change to the new needs of a new generation. Home ownership has been on a steady decline across both the U.S and the EU, as millennials are frozen out of the housing market by declining relative wages, barriers to borrowing and a drop in marriage rates. However, this simply means that other forms of insurance are on the rise: between 2004 and 2014, the National Association of Insurance Commissioners in the UK found that the number of renters’ insurance policies had doubled, from 6.6 million to 13.2 million. Predicting such insurance policy trends is very important for companies to stay ahead of the game, and can be possible with the help of big data and predictive algorithms.
To summarize, it is clear that the generational shift to millennials is forcing industries to drastically change the way they conduct business, be it in marketing, product development, and consumer engagement. The insurance sector will also have to adapt as millennials come of age, and InsurTech is one method which can be capitalized on to make such changes.