For the insurance industry, this represents both an opportunity and a challenge.
On the plus side, these two demographic groups represent the greatest potential for growth in the general insurance sector, according to Roy Morgan research from 2018.
However, millennials are the least engaged insurance customers compared with preceding generations, a 2015 Gallup survey found.
It is clear that more needs to be done to respond to the insurance needs of this group and to harness the business opportunities it represents.
INSIDE THE MINDS OF MILLENNIAL CUSTOMERSWhile definitions vary, it is generally agreed that millennials are those born between 1980 and 1994, while gen Zs were born between 1995 and 2015.
These two groups are distinctly different from older generations in their consumer behaviour and have notable differences from one another.
First and foremost, they are digital natives, with increased global connectivity amidst a rise in online retail, says Claire Madden, a Sydney-based social researcher and commentator on generational change.
Gen Zs are especially tech savvy, she says, and would consider certain forms of corporate communications, such as phone calls, as outmoded. Paper forms would be considered an anathema.
‘As customers, they are global consumers who buy from global brands,’ says Madden. ‘They also see themselves as global citizens. They are tech and price savvy. They know they’ve got options.’
David Chan, the general director and head of distribution at Liberty Insurance in Vietnam, says millennials are more likely to scour online reviews than older consumers, but still value the input of a trusted adviser for more complex purchases.
They are more likely to purchase their insurance online and seek best-value, comprehensive cover.
Millennials and gen Zs will also seek out insurers that align with their values, according to a Vero spokesperson in Auckland.
‘Corporate social responsibility and belonging matter to this generational cohort, whereas older generations ... look for options that reduce effort.’
UNITED BY GLOBAL TRENDSDigital connectivity has created a global youth culture, meaning that gen Zs in particular are likely to be using the same social media apps, watching the same YouTube videos and following the same celebrities.
‘While research shows that there are some cultural differences among millennials and gen Zs in different parts of the world, at the same time, these generations have more in common than any previous generation,’ says Madden.
Robin Scarborough, a partner in Deloitte Digital’s customer strategy and experience design practice in Australia, agrees. He advises insurers to pay attention to certain global trends outside of insurance.
‘On-demand services such as Netflix and Spotify are globally successful companies who have responded well to the needs of these customer groups,’ he says. ‘Millennials and gen Zs will expect similar experiences from their insurers.’
These needs and purchasing preferences are prompting a fundamental rethink among many insurers, adds Scarborough.
‘The needs of millennials and gen Zs are different from previous generations. One of the biggest differences is that they value access over ownership.
'The insurance industry is using an old model based on ownership and these groups have less of a want for that.’
For example, millennials and gen Zs are more likely to want insurance cover only for the period they are renting an Airbnb home or using a shared vehicle.
And if they don’t use their own car for a few weeks, they may question why they must pay insurance on it.
The popularity of monthly subscription services, such as Spotify and Netflix, means that traditional insurance policies that come up for renewal every 12 months are unlikely to appeal.
Scarborough predicts that insurance is likely to become more usage-based. This will be aided by connected devices and wearable technology, with data provided to insurers.
‘The millennial and gen Z customer bases are more comfortable providing their personal data [than older people] — provided it leads to a more personalised, convenient or value-added experience,’ he says.
FLEXIBILITY KEY TO ENGAGING YOUNGER CUSTOMERSMathew Skinner, 30, a senior claims consultant at CHU Underwriting Agencies in South Australia, believes that flexible insurance products will eventually replace broad form policies.
‘Younger people don’t see the need to insure items like clothing and common household items, especially in share-house situations.’ But what are important, he quips, are their mobile phones: ‘Take away a gen Z’s bed and they’ll sleep on the floor. Take away a gen Z’s phone and their world is over!’
This shift in priorities also reflects changing patterns of wealth.
‘Millennials may be the first generation in living history who will be materially less well off than their parents.
'They validate themselves through quality of life, rather than quantity of stuff that will impact their insurance,’ says Rick Shaw, a partner of consulting and senior member of Deloitte Australia’s actuaries practice.
As owning a home slips further out of reach for many, share housing may become the norm, and full contents cover will not be necessary.
‘This is where the flexible pieces of insurance become even more important,’ Skinner says.
Madden points to research that shows both generations still have a strong desire for home ownership, but their journey getting there is different from previous generations.
‘A new national survey by Lendlease of Australians aged 18 to 40 found that over a third have a specific savings account, and 24 per cent have some kind of side hustle to be able to save for their home,’ she says.
Scarborough predicts that the economic crisis resulting from the COVID-19 pandemic could further reduce demand for insurance from millennials and gen Zs. ‘They may be forced to live at home with parents for longer and reduce ownership of assets like homes and cars,’ he explains.
Another flow-on effect is that these two groups may become even more price sensitive and that the likes of on-demand insurance will gain traction more quickly.
Scarborough says that while on-demand insurance has taken off overseas, it is yet to build a strong presence in Australia.
One standout example is Suncorp’s partnership with Good Shepherd Microfinance, which saw Australia’s first accessible insurance cover for people on low incomes.
Essentials by AAI, as it is known, was launched in 2015 and provides car and home contents insurance to anyone with a healthcare card, receiving Centrelink payments or with a household income of under A$48,000.
It allows for fortnightly or monthly payments and policyholders can select exactly what they wish to have covered.
MetLife Australia is also responding to the demand for more flexible products, says Chesne Stafford, its chief customer and marketing officer.
‘Our MetLife Protect product is a modular product sold through financial advisers and allows people to only pay for the cover they need. We’re also seeing this trend play out in the group insurance market,’ she says.
Stafford adds that the main appeal for millennials lies in the product’s design, which allows advisers to work with their millennial clients to build on the four standard cover types — life, trauma, total and permanent disability and income — with a range of optional extras cover.
‘Put simply, it’s like building blocks that allows millennials to piece together different options that match their specific goals and objectives,’ she says. ‘
And as their needs change over time, they don’t have to replace their insurance — instead, they can add or remove the different optional extras to best suit their changing circumstances.’
Furthermore, MetLife only requires clients to work a minimum of 15 hours per week for income cover, while most insurers require a minimum 20 to 30 hours per week.
ALL IN THE DELIVERYWhen it comes to engagement, arguably nothing is more important than communicating the right messaging via appropriate channels.
‘Our research tells us that younger audiences are more open to digital communications compared with older generations. This group is used to being able to run their lives at the touch of a button,’ says Stafford.
Skinner believes that traditional advertising channels, such as free-to-air television, newspapers and radio, are unlikely to penetrate younger audiences.
‘Instead, engaging with customers through online platforms such as Instagram, Twitter and Facebook, as well as podcasts and YouTube, is the best way to reach younger generations.’
Amy Yerro, 31, an insurance broker at Abbott in Auckland, believes that insurers need to ‘up their game’ when it comes to their social media presence.
‘When millennials consider buying insurance, they like to see a big online presence,’ she says.
However, venturing into the world of social media is risky unless the strategy is well-informed, cautions Madden.
‘There’s a host of unwritten rules about the subtleties of using social media platforms like Snapchat and Instagram,’ she says.
‘When a company just tries to sell something on these platforms, it really jars with this generation. A brand must come across as authentic and trustworthy, otherwise it’s awkward and doesn’t gain any traction.’
Chan agrees, noting that communications from insurance companies should not be solely transaction-focused. ‘Communicate more often than just at purchase or renewal time,’ he suggests.
That said, he adds that millennials value the opportunity for online self-service wherever possible, including for claims notifications, renewals or updating particulars. This is considered time efficient.
Using insurance jargon is a big mistake, says Yerro. It’s important to remember that for many in these age groups, it will be their first purchase.
‘Simple is best, and preferably via their smartphone and a well-designed claims management app,’ she says.
Madden adds: ‘Don’t be afraid to have a more relaxed communication style, even when it comes to talking about something like insurance.’
Stafford emphasises that the application journey must be quick and easy to navigate.
‘We’ve digitised our applications process and streamlined questions, so that we only ask questions that are relevant for the individual customer. This can’t be done with paper-based applications.’
Against the backdrop of innovative ways of doing business is the need to overcome a general scepticism among younger people towards large organisations, including insurers.
Scarborough believes that the COVID-19 pandemic may offer an opportunity for insurers to demonstrate a higher purpose and social impact that re-engages these younger customer groups.
When done properly, it will build trust and loyalty, and this will go a long way in developing an engaged consumer group throughout the years ahead.
CASE STUDY: KEEPING THINGS SIMPLE IN A COMPLEX CATEGORYPart of the Medibank group, specialist provider ahm health insurance offers a no-frills, affordable private health insurance option with wide appeal among younger consumers.
‘At this stage of life, health insurance is probably not the most important priority in young people’s lives, or even on their radar,’ says Amanda Romeo, ahm’s head of marketing.
‘Combined with the affordability pressures of today, insurance is often considered a bit of a luxury purchase. We know that younger consumers are looking for value without the frills.’
Research by ahm showed that younger consumers wanted one less thing to worry about in an often overwhelming world, which is why ahm highlights the simplicity of its products and services.
‘Just like our audience, we are digital first,’ says Romeo. ‘The majority of claims can be done online using self-service. That makes us easy to deal with.’
Affordability is another key selling point, which ahm conveys through its logo — a pair of scissors cutting a coupon.
However, Romeo is keen to point out that it’s not just about being the cheapest, but offering great value.
It offers a discount on hospital insurance to members who are aged between 18 and 29 and the principal member or partner on the cover (this is part of government reforms, but it is not mandatory for insurers to offer it).
It also provides member perks, such as two-for-one ‘date night’ movie tickets and discounts on selected gym memberships.
Romeo says this, along with its loyalty rewards program, is an important part of providing value that goes beyond health insurance.
When it comes to marketing and communications, ahm strives to appeal to the millennial mindset. It also communicates on streaming platforms such as YouTube.
‘Our personality is quite strong in terms of our humour, playfulness and no-nonsense approach,’ says Romeo. ‘We also use simple black and white cartoons to demonstrate our simplicity in a complex category.’
MAKING HEALTH AND WELLBEING A VALUE-ADDGeorgie Drury is the Sydney-based founder and CEO of wellbeing provider Springday, whose white-labelled, cloud-based platform is deployed by 26 Australian blue chip clients, including Accenture, Australia Post and PwC.
Springday launched in 2009 and is currently in talks with insurers that are interested in the value creation of moving into the health and wellbeing space, something that millennials in particular value, according to Sanford Health research.
‘It’s an effective way of attracting millennials and gen Zs, because it’s a value-add as well as a retention tool,’ says Drury.
‘You’re effectively joining a loyalty program, and you don’t want to lose it. The problem with insurance is that once you have your policy, there’s often no communication until someone phones up and says they want to leave.
'Springday would enable insurers to have a relationship with the end user. Some of our app users check in every day, which is a strong value proposition.’
The platform features engagement strategies, monthly campaigns and gamified activity challenges that are integrated with wearable tech.
All are aimed at improving wellbeing. It can be used as a diagnostic tool and provides suggestions for services to improve wellbeing, which were validated with the University of New South Wales.
‘Springday can also provide insurers with significant amounts of data, which would help them understand who is engaged and disengaged and how to tailor marketing accordingly,’ says Drury.
While Springday has similarities with AIA’s Vitality program, Drury emphasises they have taken a more localised approach.
‘We’re not trying to take something that’s worked overseas and thereby put a square peg into a round hole. It’s been created based on Australians’ preferences and norms.’