The Pulse

Millennials & Modern Insurance

How the ‘convenience generation’ is influencing the way your industry relates to them

We are please to present excerpts from a new study from Cake & Arrow, a customer experience design and innovation company, which identifies new understanding of how the insurance industry approaches and relates to emerging generations. Reprinted here with permission. Access the full study here

In recent years, there’s been no shortage of labeling, discussing, and research when it comes to Millennials. WebMD discovered that Millennials are more likely than Gen Xers and Baby Boomers to prefer speed and convenience from their healthcare professionals over comprehensive interactions (WebMD Health Services, 2016). The Washington Post has discussed how Millennials reversed a longtime trend of steady growth among warehouse clubs and supercenters, choosing the convenience of Boxed and Amazon Prime over the prices of Costco and Sam’s Club (Bhattarai, 2018). And when it comes to labeling, there’s been a few: lazy, entitled, self-centered, disloyal and spoiled.

While not all Millennials are alike, there is one term defining their generation most might agree upon– the convenience generation. From on-demand taxi services, to on-demand food delivery and on-demand entertainment, Millennials have opted for new levels of convenience unlike any other generation before them. This consensus set the path for insurance companies big and small, old and new, to embark on a journey towards convenience. Terms like “digital transformation,” “personalization,” and “on-demand,” are the chosen jargon of the industry, used in industry events, panels, webinars, and reports across the world in an attempt to set clear objectives and guidelines for companies that want to stay relevant. What’s more, these terms have been portrayed by others as promising opportunities for those willing to embrace the journey. We’re here to challenge that.

Empowered by the internet and digital technology, Millennials have opted for unprecedented levels of convenience. But as the insurance industry journeys toward convenience, is it headed in the right direction?

Deeper Than Digital

Just as technology companies copy one another’s best idea, so do insurers. While “digital” is trending in general, one formula in particular is recurring more frequently:

From “instant everything” to “actually simple” and “hassle-free,” different brands use different terms – all in the name of convenience – as they look to differentiate their offering from legacy players, e.g. paper-based, agent-dependent models.

According to a 2015 study, price has the greatest influence on Millennials’ purchase decisions above all other factors, including quality, brand, store, and availability (Blackhawk Engagement Solutions, 2015). This translates to a long list of new entrants that are looking to gain market share on the concept of fair insurance (read: fair price); from pay-per-second, to pay-less-per-sweat (Vitality), to the several pay-per/pay-how/paywith-peers. Root considers itself “the first insurance company founded on the principle of fundamental fairness” (Root Insurance, 2019) Lemonade says insurance can be fair and charitable (Lemonade, 2006). Trov offers insurance exactly when you want it (Trov, 2019), which translates to consumption-based pricing. In reality, not all players can offer “killer prices” like Lemonade, but all savvy players understand they can’t ignore how much of an influence price has on distribution.

Companies such as Traverse by Travelers and Toggle by Farmers are dropping annual contracts in exchange for subscription-based pricing. Often times, you’ll find that fair and flexible simply go hand-in-hand, as evident by the value proposition of Hugo Insurance, a new entrant from Santa Monica established in 2016, offering “No downpayments. No annual contract. Just affordable liability insurance, you control,” (Hugo Insurance, 2019).

While elements of fairness and flexibility typically translate to better pricing, modern players are also looking to add value by adding benefits and perks beyond the conventional coverage offering. Toggle allows policyholders to build credit while paying rent due to its partnership with RentRack (S. Ben-Hutta, 2019). Haven Life goes beyond traditional life insurance coverage to offer a digital solution for creating legal wills (A. Ben-Hutta, 2018)  (after all, 78 percent of Millennials do not have a will) (DiUlio, 2017), powered by Trust & Will–a secure online safe deposit box to manage important documents (itself powered by LifeSite, a discount for an at-home genetic health test)–and a 15 percent discount voucher for family health services at MinuteClinic. Outside of the U.S., São Paulo-based digital broker Kakau offers home and renters insurance with up to 35 services to allow policyholders to clean their apartment, replace a lost key, bring in a plumber, or enjoy access to a pet feeding service (S. Ben-Hutta, 2018).

Social Responsibility
In 2017, Americans donated a record amount of money to charitable causes (more than $400 billion) (Giving USA, 2018). Empowered by online and social giving and emboldened by their own convictions, Millennials are behind this uptick in charitable giving. “Not only did the Millennial generation wholeheartedly embrace online giving, they have pushed other generations to participate with charities and causes that are now readily accessible with technology,” wrote Clay Braswell in a 2018 article. (Braswell, 2018). As a result, the insurance industry found ways to incorporate the Millennial sense of social responsibility into their products and marketing. Modern insurers are realizing that one effective way to incorporate a charity scheme is to allow customers to take part in how donations are allocated. Lemonade, the NYC-based Certified B Corp. insurer for renters and home insurance has incorporated a Giveback component into its scheme (Lemonade, 2019), in which any unclaimed money in Lemonade’s piggy bank is donated to a charity selected by the policyholders. Cherrisk, the Hungarian D2C brand of UNIQA Group, offers a chatbot named Emma and allows users to collect “cherries” if they take part in risk-reduction games that can later be used to reduce the insurance premium or to support a charity or a community of choice (Cherrisk, 2019). ONE, the Vaduz, Liechtenstein-based digital insurer by wefox, operates a bonus system: anyone who has not caused damage or refers a friend, gets a bonus point that later can be converted into charitable donations, premium reduction, or cash (ONE, 2019).

Americans Consume Convenience

In 2017, Americans donated a record amount of money to charitable causes - more than $400 billion. Empowered by online and social giving and emboldened by their own convictions, Millennials are behind this uptick...

Perhaps the best way to illustrate how much Americans value convenience is in the context of food. When it comes to food convenience is a powerful force–so powerful that Americans are willing to pay extra for it. According to recent research, new food business models capture a five to 25 percent premium for added convenience; on a global level, online grocery commanded a 15 percent premium over in-store purchases, while meal kits were priced 11 percent higher than online grocery, prepared meals cost five percent more than meal kits, and restaurant take-outs were priced 25 percent higher than prepared meals.

Most choices we make involve several factors–meal kits like Blue Apron cost more than preparing your own food, but for some, the time saved on grocery shopping and the quick preparation are worth paying extra (Stice and Melnick, 2016). With an estimated revenue of ~$68 billion in 2018, the U.S. is the largest convenience food market in the world. China and India–countries with a population that’s about four times that of the U.S.– take the second and third place with an estimated 2018 revenue of ~$22 billion and ~$20 billion respectively (Statista, 2018).

According to Laurie Demeritt, CEO of the market research firm The Hartman Group, “Convenience currently is the No. 1 need articulated by consumers across all eating occasions. American families today spend more hours working, commuting and taking care of children. Even younger generations grapple with stress and anxiety. As a result, consumers are skipping meals, seeking shortcuts and snacking more than ever” (Watrous, 2018). The story of TV dinners offers a great lesson on how convenience brands reached their peak, eventually loosing to brands that added quality to the mix. When Swanson & Sons introduced TV dinners in 1953, they sold 5,000 meals in the first year and an impressive 10 million meals the year after that (Watrous, 2018). But after 60 years of sustained growth, in 2008 TV dinners began declining in sales. One important reason for this decline is that consumers under 45 are more interested in “freshness.” Interestingly, this trend correlates with the rise of new brands like Blue Apron, showing how convenience and quality are stronger together.

Insurance Is Going Behind The Scenes

In a perfect world where all insurance companies are convenient, most consumers will choose a company based on price. But we don’t live in a perfect world. We live in a world where digital brands are going beyond their core offerings. We live in a world where adding new features and services mostly requires writing new lines of code.

We have discussed how convenience drives innovation and is the foundation of today’s most dominant brands. We highlighted how Americans love convenience, especially Millennials, and how its value is most apparent when dealing with products and services of frequent use. But when it comes to convenience, there’s more: there are also different levels of convenience to consider.

In 1994, Blockbuster was acquired by Viacom for $8.4 billion and at one point had more than 9,000 stores; twenty-five years later there exists just one last store in Bend, Oregon (Brito, 2019). An estimated 7,795 U.S. retail store closures were announced in 2017, surpassing the previous all-time high of 6,163 store closures in 2008 (Kelley, 2018), the year of the financial crisis. And yet, despite these store closures, we continue to watch movies and shop, as the internet, and more specifically Netflix and Amazon, have presented us with more convenient options.

In the digital race for convenience, insurance companies are lagging far behind. At its core, the insurance product is not a product of frequent use–it was designed to be used in emergency situations only. This means that convenience doesn’t deliver a strong effect for insurance as a standalone product, which creates an opening for outside brands to add insurance products to their existing offerings and provide consumers with a level of convenience insurance companies alone can’t match.

Last year, Expedia Group selected AIG to become its global travel insurance provider. “Our work with AIG will help more people go places with confidence and with the knowledge that we are looking out for travelers,” said Aman Bhutani, President, Brand Expedia Group. “Travel can have disruptions, and together with AIG, we are creating real-time, hassle-free solutions aimed at delighting travelers” (Expedia, 2018).

While buying travel insurance online is a convenient solution, adding it while booking your travel is even more convenient, since you can do it with a click of a button. Literally.

Access the full study: Millennials & Modern Insurance here.