The younger generation is not inclined to shop the same way as its predecessors, forcing insurance companies to rethink their sales strategy
The way younger Canadians research and buy insurance is changing and that’s going to require a major shift from the companies that serve them, a new report says.
Traditional insurance products are not well suited to meeting the needs of Generations X and Y, or middle-class families, according to an outlook report on the Canadian life insurance and annuity business released by consulting firm Ernst & Young LLP on Wednesday.
In 2015, insurers will face the reality that millennials and future generations aren’t inclined to purchase insurance the same way as generations past, said Marc-André Giguère, Canadian financial services insurance leader at EY, noting their heavy online presence and inclination to do their own research.
To appeal to these groups, insurance products need to be simplified, the EY report notes.
Making policies easier to understand for consumers hunting online might mean insurers do a little less underwriting and accept a bit more risk when it comes to mortality, Mr. Giguère said.
Companies can offset that risk with better use of analytics, which means collecting more data and hiring more people to analyze it, Mr. Giguère said. Canada lags the United States, where insurers often buy pharmaceutical information that gives them access to customers’ drug histories, with their consent. This can replace doctors’ statements.
Insurers also need to spend more time looking beyond the much sought-after high-networth market to address the insurance needs of consumers in the mid-market – defined as families with a household income of between $35,000 and $125,000. These consumers are underserved by insurance, too, EY says.
Some insurance companies are already thinking about these changes. The risk of technology disrupting distribution has been simmering for years, but has come to a boil in recent months as Google said it would roll out an online auto insurance shopping system in the U.S.
Manulife Financial Corp., the country’s largest insurer by market capitalization, said one of three top priorities for the coming year to accelerate growth is changing the way it approaches consumers.
“We will transform from an organization traditionally focused on products and distribution to one that is more customer-centric,” said Donald Guloien, chief executive of Manulife. “This will be manifested in a whole variety of ways, from the use of branding and social media, to offering simpler products, more needs-based solutions and more accessible and user friendly portals for support and service.”
That could help with the perception problem insurers are facing. According to the EY study, only 59 per cent of people trust life insurers, while 81 per cent trust their banks. That is lower than in other developed countries, such as the U.S.
“We’re actually seeing that customers think that insurers don’t talk to them, or deal with them, sufficiently,” Mr. Giguère said. “It might seem counterintuitive, but about half of customers said they haven’t heard from their insurers in the last 18 months. Banks have many more contact points.”
Insurers must change or risk losing customers to competitors, the EY report states. “Insurers that stay on the sidelines as others make these investments to serve next-generation markets risk losing existing customers, while … missing out on cost effective opportunities to enhance the overall customer experience.”
Millennials’ heavy online presence and inclination to do their own research means insurance products need to be simplified, making policies easier to understand for consumers hunting on the Web.
FRED LUM/THE GLOBE AND MAIL FEB 26, 2015.