Millennials, who as a group tend to be ‘cash rich’ and ‘asset poor’ are about to surpass the baby boomer generation as arguably the most influential generation in history. This seismic generational shift will be complete when wealth is finally transferred to them from the baby boomers. But despite this obvious market opportunity the insurance industry has hitherto been slow to create products that cater to the insurance needs of tech-savvy millennials, who typically shun the spending priorities of their parents.
The millennial generation with their appetite for technology tend to prioritise device insurance for their cellphones and tablets and travel insurance, rather than life insurance. Indeed, New York Life recently discovered that only 10% of millennials have adequate life insurance cover. The reasons why the life insurance industry’s offering has failed to appeal to millennials are varied. But it is clear that flexibility is the key. Millennials are often engaged in part-time or freelance work, part of the so-called ‘gig economy’. As such they are reluctant to take out traditional annual policies as future work is uncertain.
Insurtech innovators are stepping into the breach by offering flexible on-demand cover to millennials for their valued possessions and trips abroad. So-called ‘usage-based’ or micro-insurance insurance is important because it reflects a major attitudinal difference between millennials and their predecessors. Millennials tend to be spontaneous and are the most likely to take a short-term trip on a whim. But they are also the demographic that is least likely to have coverage through their work/profession.
Micro-insurance, which essentially breaks down traditional insurance products to smaller individual items, can therefore be the preferred option. The big enabler here is smartphone technology that gives insurers the opportunity to offer micro-insurance via an app. Smaller increments means less financial risk for the policyholder. They also open up a net-new market for the insurance companies of users who would have otherwise not have signed up for insurance with them.