Insurance Industry and its Tryst with Millennials

A few weeks ago Brian Chesky, CEO AirBnB, a perfect example of what Millennials armed with a great Idea and Technology could achieve, was visiting India. In one of the interviews, he mentions that after he graduated, his mother made him promise, that he would get a job that would pay for his Health Insurance.

That is how important Health Insurance is in some of the countries where medical costs are steep. It is not about being able to afford a house or a car, instead a health insurance features as the most critical financial instrument that citizens invest in once they start earning given that a single medical intervention could wipe away one’s savings. This made me deliberate, that the medical inflation in India is at an all-time high and health care treatments are no longer affordable, but is the Indian millennial sensitized? Most importantly, does insurance or any form of financial protection find space in their annual spends or financial planning?

Millennials are unlike the previous generation, where opportunities were limited and hence the focus was on what they had. Baby Boomers spent a majority of their life working in the same company or sector and therefore their learnings would be limited to their core competence. On the other hand, for millennials the opportunities are huge, their exposure towards information, data and newer prospects is much higher. As a result there is a visible change in the behavioral pattern of this generation when it comes to learning, adding value to their life, seeking opportunities to grow or when it comes to maintaining a healthy work life balance. The millennials are also more curious to travel and explore the world when compared to earlier generations.

For them it is important that they are able to constantly innovate and add value to the organization they work for. Many are also focused on how they can make a difference in people’s life. As a result we are seeing a huge influx of innovative start-ups making various aspects of our lives simpler.  A remarkable shift from previous generations, millennials are more creative, innovative, ready to change and are unafraid to embrace newer opportunities. Unlike the previous generations, the millennials have much higher disposable income.

Given this disposable income, many millennials are primarily focussed on spending, especially on experiences such as travel, dining out or acquiring a new gadget. However, Indian millennials especially from Tier 2 and 3 towns are also keen on acquiring and creating new assets such as home, car or the latest gadgets. As a result, EMIs as a percentage of their salary are very high as compared to expenditures towards other financial instruments such as insurance. So in case of an adversity, such as a lay-off, job loss or an unexpected medical emergency they are most likely to be faced with high liabilities without adequate insurance protection. Such scenarios can lead to immense societal and personal turmoil. Therefore, there is a strong need for the insurance industry to build awareness and understanding regarding insurance in the modern millennial’s lifestyle. Currently insurance for their assets and health does not find any space in their financial portfolio.

Millennials find insurance traditional and its products unattractive. The historical ways of selling insurance do not work with them either. Therefore in a highly competitive global environment, it is imperative for insurers to understand what makes, the largest and most technologically savvy generation in history, tick, not just at their workplace but also as their customers. Companies consequently, need to re-engineer their strategies to remain highly relevant to this section. Millennials also exhibit very different spending and investment patterns in comparison to their parents or Gen Y. Their spending habits continue to fascinate and frustrate financial services companies and retailers alike.

Thus to make insurance relevant to them - products need to be simple, easy to comprehend and the purchase should not consume more than 5 minutes. Most importantly, they should see value in the offering. One size fits all strategy does not work with this segment, insurers need to create value propositions that resonate with their lifestyle and it has to be highly customizable.

Annual products with fixed covers are not working with this segment and no longer can interactions be limited to purchase or claim. They need products that will provide protection for a specific period, are highly interactive and covers exactly what they desire. They clearly want more engagement and are also willing to share personal information if it results in rewards and reduction in their outgo towards premium. As a result Usage-Based Insurance (UBI) is highly relevant for millennials and is definitely the way forward for insurers.

For instance, maximum takers of Drive Smart, industry’s very first UBI telematics offering launched by us last year have been the millennials. Soon we will see similar products in the Health and Home space given that connected health has already made inroads into our lifestyle and smart homes are in the making. Give millennials personalised service which is tech friendly along with a stellar customer experience not only are they yours but peer to peer recommendations will mean many shall follow  suit. While investing, the millennials are able to research extensively and are constantly on the lookout for investments which yield high returns and are affordable. So we have to ensure products and solutions are visible online at all times and it is already too late if you do not have a mobile app that facilitates a seamless and hassle free purchase.

Insurance Industry is already taking strides in this direction to cater to their largest customer base. The industry is at a brink of a revolution, today we have customizable covers and solutions, with features such as adventure sports, PA covers only for the period you are on the move and a host of UBI products are in pipeline. Today customers can also settle their own claims and issue their own policies. While the industry is transforming it also needs to educate this growing demographic force on these developments to ensure utilization. If the industry, centre and regulator join hands to not only create newer and simpler solutions but also to distribute and educate masses it could significantly transform the insurance landscape in India. Individual initiatives by each of these stakeholders might not have the desired impact.

Indians do need protection against the vagaries of nature and escalating medical costs. Till the time we reach a stage where insurance becomes a fundamental need for Indians similar to our western counterparts, we may have a long way to traverse, but this road needs to be navigated faster.