To hear many baby boomers and Gen Xers tell it, Millennials are lazy, entitled workers whose parents heaped them with so much praise they are unmanageable workers. In fact, Millennials are different than their parents and big brothers and sisters. Consider the hard-knock lesson many learned from hitting the job market during the Great Recession and you will understand why they have put off marriage, buying a home and buying insurance.
But there is a positive lesson they have learned from coming of age in a time of uncertainty: Many have realized they have to take responsibility for their own futures. A Harris Poll conducted for the Transamerica Center for Retirement Studies found that 71 percent of Millennial workers are saving for retirement at a median age of 24, younger than Gen X’s starting age of 30. Moreover, 39 percent of Millennials would be considered “super savers” who are saving more than 10 percent of their salary each year.
That means there is growing opportunity for appealing to this group who currently make up 46 percent of the U.S. workforce, who are technologically proficient, curious and receptive to new concepts. And who, above all, are accustomed to getting information and making purchases online.
One of the surest ways to connect with Millennials is by using the method of communication and commerce they are most comfortable with—technology. Technology-driven insurance transactions, or InsurTech, has been rising in prominence in the insurance industry over the last decade. Technology driven innovations in the insurance industry are primarily focused on improving transactional efficiencies and customer experience. However, InsurTech is now being watched closely with an expectation that it will move from promise to impact. Investments that have been made over the prior years need to start delivering meaningful bottom line results for carriers, distribution and for the consumer.
As part of this transition, InsurTech will keep moving away from being disruptive technology to collaborative. The technology innovators are coming to realize that they will not be replacing insurance distribution or manufacturing. Carriers and web-based platforms have long sought to knock distribution out of the transaction. However, as InsurTech comes to appreciate the challenges of distribution and the value that today’s independent brokerage model plays, they will look to collaborate with carriers and distribution instead of replace. To gain traction in the industry and with consumers, InsurTech must empower the smooth interaction between insurance manufacturing and distribution to get an efficient, well-priced product into the hands of the consumer. As of today, commercial lines have been quicker to embrace InsurTech, but life, health and annuities are starting to catch up.
Engaging the Millennial
Millennials are more comfortable engaging in commerce online than they are in person. They have grown accustomed to providing personal and financial information through a web-based interaction, and that creates a new door for distribution to reach them for insurance information and sales. As they have proven with e-commerce and social media, Millennials are desensitized to providing very intimate and detailed information that can be used in insurance for underwriting. If you have ever seen a “which celebrity is your twin” survey on Facebook, or if you have ever used a genetic testing service like 23 and Me or Ancestry.com, you can appreciate just how willing Millennials are to trade personal information and even DNA samples for value back to them.
This means that insurance products can be mass-customized to create a new type of consumer experience. Distribution can gain incredible insight into the Millennial and target the individual’s profile for product design, pricing and ongoing customer interaction. One of the biggest emerging opportunities for distribution is using InsurTech innovations to create more touch-points with their customers during the lifecycle of an insurance policy.
Today, the lifecycle of an insurance transaction exists on three planes:
- Claims (or termination)
InsurTech can add a fourth plane to the transaction. The ability to personalize the experience with so much available information allows distribution to de-commoditize the insurance transaction. An abundance of information and a willingness to share by Millennials can help build a stronger bond between agents and consumers. By opening up new opportunities and tools for communication and engagement with the consumer, agents can deliver ongoing ancillary value to their clients. This will strengthen the relationship for distribution creating better client retention and possibly new business opportunities. In addition, for the carrier, this is an opportunity to build brand loyalty and work together with distribution to create more sales.
Underwriting can create value and opportunity
The intrusive nature and long cycle-time of underwriting will be reduced by InsurTech innovations. This can enable quicker collection of underwriting requirements, pull from more data sources and allow for cross-referencing information. It will also open up tech enabled point-of-sale underwriting from the field with agents, and from the consumer via self-reporting and new methods to collect samples. The goal is to reduce consumer friction by increasing accuracy and speed-to-decision from weeks to days and, whenever possible, instant decisions. Simultaneously, InsurTech is leading the way to combat fraud, reduce inaccurate assessments, improve pricing accuracy, and expand product choice and design.
One emerging area of underwriting, which is not yet quite understood, is genetic-based testing. In a number of ways the insurance industry has had genetic-based underwriting almost from the start. Questions about family history ae the most rudimentary form of genetic testing available. For the consumer, they have grown accustomed to providing family history and genetic samples to learn about their roots from services like Ancestry.com. Today there are significant advancements happening in the field of epigenetic underwriting that can not only improve the risk management dynamic, but also create new opportunities for distribution.
Epigenetic underwriting value-chain
Genetic-based underwriting seeks to identify and assign a measure of value to DNA markers that make up the genetic code we inherit from our parents and ancestors. This information can tell a lot about our biology and health, and can give clues toward an individual’s predispositions to diseases and malignant conditions. However, there is more than just DNA to analyze and understand how a person’s gene expression could influence their longevity. As the prefix epi, which means “on, above or upon,” indicates, epigenetics is the mechanism that regulates gene expression. As a science, epigenetics measures biomarkers that attach to your DNA and how they change as you modify your lifestyle and environment. As such, it can be used as an element of the underwriting process.
Your epigenetic age can be quite different from your chronological age. Based on the habits a person has in a number of key areas, that epigenetic age can move upward or downward. Key areas to make a positive, measurable impact on your genetic health are: Diet, exercise, supplemental nutrition, rest, stress and environmental factors such as pollutants. Epigenetic testing can deliver not only far more accurate underwriting information in a quicker timeframe than anything currently available, but consumers can receive incredibly important insight into their own molecular health, make modifications, and then continue to monitor for improvements with additional testing.
- Greater accuracy and quicker turnaround time for underwriting is of significant value to carriers and distribution.
- Insight into one’s own biological age and health, with a roadmap to making measurable improvements, is of significant value to consumers.
- Opportunity for ongoing interaction between distribution and the consumer to test for underwriting improvements, which could possibly result in improved pricing and product features, is of significant value to everyone in the value-chain.
If you want to catch fish, then go fishing where the fish are. If you want to catch the attention of Millennials, then you need to go where they are swimming and use the right bait. Millennials respond well to new information, customized products and solutions, and technology. They are more comfortable shopping online than in person, and are very willing to share information and even DNA samples if they perceive sufficient value for the exchange. The question for the insurance industry is, with their tendency to delay moving forward into the norms of adulthood, how do we get them to pay attention to us?
Well, InsurTech is on the verge of transforming the insurance industry with collaborative technologies that bring the carrier, distribution and the consumer together with more value and efficiency in the insurance transaction. Underwriting is poised to benefit greatly from technological advances and genetic-based testing that will speed up the process and bring more value to consumers. The nexus of InsurTech and habits of the 71 million Millennials is a ripe opportunity for distribution to access this emerging generation on the rise as a driving economic force in today’s America.