Gen Z and the future of life insurance: Adapting to a new generation

By Bob Gaydos

Generation Z represents one of the largest demographics in the U.S. – more than 68 million. This makes them a huge target market for the life insurance industry. However, given that only 37% of Gen Z adults are predicted to have life insurance by 2025, it’s clear that there’s a huge gap in the market.

Therein lies the challenge. Most Gen Z adults are hesitant to purchase life insurance because they see it as either too expensive or too complicated. To rectify this, life insurance carriers must adapt to meet the needs and preferences of America’s youngest generation.

I believe the answer lies in streamlining the life insurance sign-up process and in providing the right sort of flexible policies that can entice Gen Z to buy coverage.

Faster underwriting

As digital natives, Gen Zers are comfortable with technology. They expect businesses to be comfortable with it too. For carriers, this means embracing the latest technologies to provide a more streamlined and user-friendly experience. Although a lot of progress has been made in this area over the past few years, I believe there is room for improvement.

For example, recent advances in artificial intelligence have many potential applications in the insurance industry, including AI-driven underwriting. Although it’s unlikely that underwriting will ever become fully automated, the latest AI algorithms can reduce the workload of human underwriters by automating the approval or rejection of applications that are within certain risk scores. This could significantly reduce the time required to underwrite a policy from weeks to just a few days. For a generation famous for its short attention span, that’s a big selling point.

Another big development is the use of AI-powered chatbots. Although chatbots have been around for decades, the latest ones – powered through language models such as ChatGPT – are on another level in terms of speed and intelligence. That said, I'd advise insurers to remain realistic about what these chatbots can do. They aren’t quite at a human level yet. But they can provide helpful advice for customers stuck on their applications, or unsure about the most suitable policy for their needs.

Tailoring policies to entice Gen Z

One notable characteristic of Gen Zers is that they aren't interested in remaining with the same employer for their entire career. Instead, they prefer to job-hop every two or three years, viewing this as a faster and more interesting way to move up the career ladder. This behavior tends to exasperate many employers, partly because it means that employer-tied benefits, typically the bread and butter of most benefits programs, don’t appeal to Gen Z workers.

The good news is that the benefits industry recognizes this and is adapting. Instead of offering employer-tied benefits, employers are now increasingly providing employees with lifestyle accounts. These accounts give employees more flexibility to choose whichever benefits they wish. Most importantly, the account and the benefits stay with the employee when they switch jobs, offering exactly the sort of flexibility that Gen Z wants.

For life insurers, this shift toward lifestyle benefits accounts is a huge win since it makes an individual life insurance policy appeal more to a Gen Z worker. Carriers should aim to lock new customers in by emphasizing how customizable their policies are, as well as how comprehensive and easy they are to sign up for.

Talking about life insurance with Gen Z

Gen Z is a highly proactive generation that knows how to research. But carriers should not assume that Gen Zers have adequate knowledge about life insurance. Unlike baby boomers, Gen Zers have had little exposure to what life insurance is and how it works. We can thank the disappearance of door-to-door insurance agents for that one.

Life insurers must keep that in mind when reaching out to Gen Z consumers. Many younger consumers aren’t familiar with industry terminology, the different types of policies and that life insurance can be more than just a death benefit. For example, I’d be willing to bet most of them don’t know that a permanent life insurance policy can function as a tax-free savings account through its cash-value mechanic. This sort of thing could be enticing to Gen Zers who are just getting started in their careers and need a secure way to build wealth. However, this must be communicated to them effectively.

Life insurers must focus on technology, flexibility and communication to attract Gen Z consumers. Technology ensures your application process is as hassle-free as possible. Flexibility caters to Gen Z’s need for customizable coverage options. Communication will help clear any roadblocks in the prospect’s mind. With any luck, these areas will allow carriers to bridge the coverage gap among Gen Z.

Bob Gaydos is the founder and CEO of Pendella. He may be contacted at [email protected].