What’s keeping millennials out of the life insurance market? SE2 explores industry future
November 11, 2018 by Morgan Chilson
Millennial families aren’t buying life insurance at the same rates as previous generations, and that shift affects the industry.
SE2, a Topeka-based tech company working in that field, wanted to know why. What it discovered through a survey, said chief information officer Vinod Kachroo, was that in some ways, the industry is tackling that market in the wrong way.
The survey found that millennial families — identified in the survey as people ages 22 to 37 — were interested in life insurance but cited financial challenges as reasons for not purchasing it. Thirty percent pointed to student loan debt as the issue, while 29 percent said they were saving for a home, 19 percent highlighted mortgage payments and 30 percent said they just couldn’t afford it.
But one thing that stood out for Kachroo was that fewer than 10 percent said they weren’t interested in life insurance at all and, beyond financial problems, many said they weren’t educated enough about life insurance.
“There was a myth in the industry that millennials and also mid-market people do not really care about life insurance,” he said. “I think this survey for us helped us basically get some more details around that myth. So millennials very much are interested in both mortality risk as well as their income risk. They very much care about the guarantees and comfort levels they get by buying life insurance and annuities.”
But the industry doesn’t have a strong approach for reaching millennials and the mid-market families about their products, Kachroo said. Products are often sold through distribution channels, which have no motivation to go after the lower mid-market customer, but instead focus on the high mid-market or higher-end customers, he said. Those markets are what Kachroo called “high-touch service models,” meaning one-on-one contact and customer care.
But that isn’t what millennials want, he said.
“They’re looking for more self-service, self-research, and they’re looking for a better engagement model,” he said. “Their benchmarks are Facebooks, Amazon and Googles of the world, and saying that you’re gong to get a paper document in the mail at some point, and saying it is going to take four to six weeks to get a policy turns them completely off the product.”
SE2 has heavily invested in a digital platform for life and annuity insurers, Kachroo said, that allows them to launch new products targeting specifically mid-market and millennial clients.
“Working with one of our large insurance company clients, we were able to launch a new product in less than four months,” he said. “It asks you a bunch of simplified questions and can help you issue a policy, take a payment and be able to print a policy between five and 10 minutes. We have taken the process of four to six weeks to literally 10 minutes.”
Such market adaptations are necessary to meet the needs of the millennial age group, but that doesn’t mean life and annuity insurance is going to go away.
“When you look at life and annuity insurance, it’s not something people are excited about and wake up every morning and say, ‘Hey, I’m going to buy a life policy today,’ ” he said. “It is something which is not bought, but it is sold. That’s not going to necessarily change. The mode in which it is sold is going to change.”
The survey, Kachroo said, confirmed what will need to happen to capture the millennial market.
“It confirms that millennials do care about life insurance, they just don’t know about how to buy it, who to buy it from, and also what is the best way to buy it,” he said. “Our goal is to move from a high-tech, high-priced service model to a low-tech to no-tech service model where the pricing for the model can also be much lower than what it is today.”
Kachroo said SE2 is positioned in the marketplace to help that movement occur as it has based growth on looking forward and anticipating needs.
“We are thinking the next step. We are thinking the next generation. We are helping the industry, which is so much bogged down by their legacy, to help them get into the next generation,” he said. “A lot of these shifts which are happening, whether it is getting into the mid market, enabling millennials to buy these products, are moving from a commission-based model to a fee-based model. SE2 is in the middle of enabling a lot of these journeys.”
Among Kachroo’s takeaways from the survey results was that the industry has been based on paper and face-to-face interactions. As it moves to a technological, low-touch environment, SE2 is positioned to help the industry make that shift.
“We are very focused on leveraging the data in the industry,” he said. “Whether it is artificial intelligence or machine loading algorithm, there is a huge opportunity to leverage the data which is already out there.”