Millennials disrupting the insurance industry

“The make-up of our customers is rapidly changing. Where once the majority of them were baby boomers, we are now experiencing the rise of a new generation,” Soul Abraham, says head of personal lines at Mutual & Federal.

According to a recent Goldman Sachs report, millennials will make up the largest generation in history and is about to move into its prime spending years. “Millennials are poised to reshape the economy. Their unique experiences will change the ways we buy and sell, forcing companies to examine how they do business for decades to come,” the report says.

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Who are the millennials?

The term, millennials, refers to consumers born from roughly 1980 and 2000 and a bit later. In other words, those who range in age from 37 to 18 and younger. According to Stats SA’s mid-year population report last year, millennials make up 26.5 % of the South African population – and are estimated to grow at twice the rate of the overall population as they start working and contributing to society and the economy.

Abraham points out that being heavily dependent on technology; this generation turns to the internet first for everything from insurance to news. They are accustomed to having easily accessible information. If something is not available in a desired format, access to these formats are questioned, solutions are sought.

How insurers need to adapt

To tap into this generation, insurers need to stay abreast of technology trends and to demonstrate a capacity for innovation. “Over the next 10 years, our industry, both locally and abroad, is set to change as companies deal with disruption. Ideally, more established insurers need to be able to anticipate disruption and innovate within their own company to meet the demands of this up-and-coming generation,” he says.

This could translate into training and hiring more graduates who fall within the millennial generation and who can identify with their peers to more effectively anticipate and meet the ever-changing needs of these customers. An example of disruption in the global insurance space is Dectar, based in India, which offers users in the United States a tow truck driving service via Uber.

Quick, speedy advice

While millennials want to hear all the options available to them, they also want quick service. This means that the current broker model is likely to change as intermediaries will have to embrace technology to compete with a speedy direct insurance market. Millennials are quite comfortable dealing with someone over the phone or internet as opposed to the baby boomer generation, which is more likely to require a personal meeting and relationship-building experience.

In South Africa in particular, with the growing black middle class, there is an entire first and second generation of individuals entering the insurance market with limited or no experience of these products. Consumer education is therefore required on various platforms including social media. Furthermore, as insurance penetration increases, brokers will be needed in more remote areas.

Changing asset priorities

The types of assets insured are also changing. For example, there is talk in the product development world of upcoming products such as cyber-crime insurance and more recently, social media liability insurance, where consumers take out insurance on the off chance that they might be sued for something they post or comment on publicly. While the typical insurance for assets, such as a home and car will never fall away, the type of asset that needs to be insured is slowly moving away from the traditional physical asset to assets that live in the cyber world.