I have always been conscious of generational differences across the advice industry. More importantly, I believe it’s essential for insurers and advisers to see the business opportunities in those differences in order to remain relevant to their clients.
By Jordan Hawke, executive general manager, adviser distribution, Asteron Life
They must understand and adapt to each generation’s expectations of them – and what this means for their own commercial landscape in the future.
The age of the adviser
Most advisers are Baby Boomers (born between 1946 and 1964). They’ve been in the industry for many years and their clients have aged with them. However, we need to recognise that young advisers now form an enormous segment of the industry’s talent pool. They are technology-savvy and have become focused on using social media to engage potential and existing customers.
Many Boomers could learn from the ways in which Gen Y advisers engage with their clients, using online technologies like Skype, FaceTime and video conferencing to communicate more effectively. The insurance industry, however, is largely focused on the Boomer age group and, as such, many of the products marketed reflect Boomers’ core values.
Bridging the insurance gap with Boomers
Today, many of our life products are marketed as vehicles for “wealth protection”. However, I believe Baby Boomers who get financial advice better understand the financial impact of injury, illness and death on their family than those who are not advised.
What Boomers most want is to engage with someone who understands their needs. In the advice business, Boomers value face-to-face relationships, equating that to trust in an adviser. That’s why a solid relationship with a Boomer is vital to understanding their needs and helping them to choose the right financial strategy and products.
Gen X wants ‘steak not sizzle’
Generation X (born between 1965 and 1980) are informal, like to debate and regularly question the status quo. They demand work-life balance, think independently and like to be challenged. Gen X also approaches life with cautious optimism. Growing up amid the AIDS epidemic, September 11, the birth of globalisation, the dot com bust and the GFC, they’re far more sceptical of authority, large institutions and traditional values and more open to diverse cultures.
In Australia, Gen Xers are better educated and attend university more than any other generation, according to the Australian Bureau of Statistics. Raised by Boomer parents, they’ve learned to research everything for themselves and create their own wealth.
So, when selling insurance to Gen X, sell them substance not hype. When buying insurance, they’ll only follow recommendations that corroborate their own research.
Gen X expects optimal customer service, jargon-free communication and justifications for decisions made on their behalf. In return, they are loyal and will forgive the occasional mistake provided the adviser’s long-term commitment is honoured. Their brand loyalty can be powerful for customer retention and as a promotional tool.
Gen Y: conundrum and opportunity
As consumers, Generation Y (born between 1983 and 2000) experiences product innovation at an unprecedented rate. Gen Y’s lifetime of exposure to new technologies means traditional media channels are less effective in engaging them, while their loyalty to brands is fickle.
Their attention span is also shorter. Gen Ys value peer opinions over advertising. Competition for their attention is tough, so your message will need to engage them quickly with the uniqueness of your value proposition.
Insurers and advisers need to harness the power of social media through LinkedIn, Facebook and Twitter to appeal to the emotions of Gen Y.
Gen Y’s immersion in digital technology and TV has also led to increased junk food consumption and decreased exercise. These habits will likely continue into adulthood, resulting in a greater propensity to Type 2 diabetes and other chronic conditions like obesity and heart disease.
For the insurance industry, this presents both a problem and an opportunity. One example is increased demand for Trauma cover, but the growth in obesity and related illnesses means premiums will be less affordable given present conditions of coverage.
In order to offer affordable Trauma cover, insurers will have to focus on product development not just product management. A significant 24.6 per cent of Australians are considered obese, so we need to underpin insurance with something tangible, other than just the premium, that improves the long-term health of our customers.
As the trend towards Trauma and Income Protection (IP) claims rises over the next generation, will disability products (Trauma, IP and TPD) become simpler or include complicated exclusions and additional conditions? The answer may be both.
The changing life insurance market
Since people’s circumstances change as they get older, so too should our risk products. Today, more than 66 per cent of Australian university students are women. Also, a majority of Australian TAFE students are men. These demographic shifts will significantly impact the insurance industry. For example, the predominance of women in office jobs, along with flexible working conditions and maternity leave, together with the increasing number of trade workers and self-employed skilled ‘blue collar’ workers means the profile of insurance needs, claims trends and suitable product features needs to change.
More men will be seeking flexible work arrangements to share family responsibilities. The decreasing number of permanent roles as opposed to contract positions in the workplace is also likely to indirectly incentivise longer breaks during the year.
What generational differences mean for you
Life insurance industry research concludes that the average advised client has more than three times the amount of insurance cover compared to those who buy through direct channels. So, the move towards buying online will increase people’s need for solid and dependable advice, and the ability to choose the right level of cover. Advisers and life companies need to understand the key drivers of this future market.
Tomorrow’s customers will want easy-to-understand products that serve specific purposes, and are easily purchased and maintained. We need to be agile enough to recognise that while our products are fundamentally sound and provide excellent protection to those who have them, we need to connect better with those who don’t just yet have – and don’t even feel they need – insurance or advice.
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