The concept of life insurance sells itself and always has. Few Americans argue against the idea of setting aside a few dollars for protection against the financial consequences of an untimely death. Converting that popular concept into a life insurance sale is where the difficulty comes in. It’s a difficulty many producers are currently having with younger Americans.
New LIMRA research shows nearly half of Gen Z adults and millennials say they plan to buy life insurance this year. How they say they want to purchase suggests the insurance industry will need to pivot to meet the expectations of these consumers.
According to results from the 2023 Insurance Barometer Study, conducted jointly by LIMRA and Life Happens, more younger adults say they would prefer to buy life insurance online rather than work with a financial professional. While interest in online buying has been growing over the past decade, this is the first time the preference to buy online was the top choice, LIMRA said.
That does not mean eliminating the financial professional, however.
“No doubt, younger generations are living online — on average, younger adults report spending at least five hours on their devices every day,” said Alison Salka, senior vice president and head of LIMRA Research. “While they want to research online, they recognize they may not be particularly knowledgeable about life insurance, so they want to talk to an expert when they make the final decision to purchase coverage, because it involves the financial security of their loved ones.”
Gen Zers and millennials have accumulated less wealth than Gen Xers or baby boomers and are more likely to buy now and pay later. They also tend to be less optimistic than other groups about the possibility of owning a home.
They also went through the financial crisis and experienced COVID-19. In addition, Gen Zers and millennials feel more stressed than other groups about their finances, said John Carroll, senior vice president and head of insurance and annuities, U.S. and Canada, LIMRA and LOMA.
In general, Carroll pointed out, baby boomers have done OK and Gen Xers are doing pretty well. But young adults tend to worry more about their finances and about “things” in general and are also concerned about job security. To make things worse, social media, which the older groups did not have, is amplifying the bad news that is out there.
Despite these issues, life insurance sales broke records in 2021 and 2022. In fact, in 2021, life insurance experienced an 18% growth in premium sales. There was only a 1% growth rate last year. While this was a big drop, Carroll said, it was still another good year, and the results from recent months remain strong.
Despite this growth in sales, the gap in the number of young adults who say they need life insurance and those who actually own life insurance has been growing, Salka pointed out.
“We conduct the Insurance Barometer Study each year with Life Happens, and in general, the need gap has been growing, especially among younger groups,” Salka said.
Low buy-in rate
Only 40% of Gen Zers have life insurance. There are many reasons young adults are not buying life insurance or not buying more life insurance, Carroll said.
He cited five common reasons:
1. They think it’s too expensive. “We have a perception problem here,” he said.
2. No one has approached them about buying it.
3. They have other financial priorities.
4. They are not sure how much or what type to buy.
5. They have not gotten around to it.
To address these challenges, agents and advisors need to understand that many young adults are more diverse than other groups, and they are digitally savvy. They expect everything to be done online, Carroll said. So why not insurance?
And they have high expectations, with a need for personalization, speed, ease and access. They have a crowded “financial mindshare,” which can keep the subject of insurance from standing out. Their desire to act is strong, Carroll said, confusion is high, and most of them remain inactive.
Gen Zers and millennials are on all social media platforms, including LinkedIn, X (formerly Twitter), YouTube, Facebook and TikTok. As a result, advisors can’t pick just one platform to communicate with them, Carroll said. Instead, different platforms should be used.
Many advisors are already figuring this out. Although 48% of them are using social media to communicate with their clients and prospects, 63% expect to use social media for communications in just a couple of years.
Many young adults spend four hours a day online, Salka noted. “It is really where they are,” she said. Why such heavy usage? Sixty-six percent said that it is more convenient and it is easier and faster than other types of media.
But reality is different, Salka pointed out. When they are making a purchase, many still prefer the security and knowledge they get when talking to a person.
“People live their lives online but want to talk to human beings when they are ready to buy,” she pointed out.