Extract from. Études et Dossiers No March 2009 Hong Kong

Transcription

1 International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No th CEO Insurance Summit in Asia March 2009 Hong Kong This document is free to download from The Geneva Association website, November 2009 Working Paper Series of The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance The Geneva Association - General Secretariat - 53, route de Malagnou - CH-1208 Geneva Tel.: Fax: secretariat@genevaassociation.org -

2 The Geneva Association Working Paper Series Études et Dossiers appear at irregular intervals about times per year. Distribution is limited. The Études et Dossiers are the working paper series of The Geneva Association. These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association. Where they contain work in progress or summaries of conference presentations, the material must not be cited without the express consent of the author in question. This document is free to download from The Geneva Association website, please visit: Layout & Distribution: Valéria Kozakova The Geneva Association - Association Internationale pour l'etude de l'economie de l'assurance

3 Insuring the Catalyst-Customer Generation Y and the Insurance Industry Terry Mezger Executive Summary The demographic shift known as Gen Y (birth years ) is emerging as a new long-term driver of growth. Largest generation since baby boomers Projected to become the wealthiest generation ever Similar to earlier generations, what Gen Y purchases will be triggered in large part by life events. But how it purchases insurance products will differ. As customers, Gen Yers are: financial freshmen, independently dependent, practically motivated, tech-savvy, entrepreneurially spirited, diverse and socially mindful. Collectively, these characteristics can help inform the group s rising expectations of its desired customer experience, delivered through product offerings, marketing and distribution. Other generations are quickly following Gen Y s lead. Thus, insurers who tune into Gen Y as a catalyst for adopting a truly customer-centric business approach can set the stage for improving customer experience for everyone, as well as improving their own performance and growth

4 Who is Gen Y? Simply put, Gen Yers are teenagers and twenty-somethings; they are the younger siblings of Gen Xers and the children of baby boomers. Their attitudes and beliefs have been shaped by the formative experiences depicted below. Figure 1 Veterans Birth Years ( ) Age as of 2008: Strong family values and traditional family structure Served in the armed forces and had a military training Command and control management style and sharing of information on a need to know basis World War II (WWII), U.S. Great Depression and Patriotism Source: Deloitte Consulting LLP Baby Boomers Birth Years ( ) Age as of 2008: Traditional household with working father and stay-athome mother Educational system that emphasized basic skills Face time at work and limited technological connectivity Management systems that range from paternalism to autocracy Post-WWII prosperity, Civil Rights Movement and Women s Liberation Gen X Birth Years ( ) Age as of 2008: Latchkey kids, with both parents working First generation to use computers at school Corporate downsizing, merger mania and Wall Street frenzy Information explosion and Internet revolution Gen Y Birth Years ( ) Age as of 2008: Non-traditional or singleparent households Diversity in the workspace High level of connectivity through technology Consumerism and a desire to interact with everything they consume Corporate scandals, Iraq War and emerging nations economic boom Some Other Names for Gen Y Baby Busters Boomlets Digital Generation Dotcom Generation Echo Boomers Gaming Generation Generation WHY Generation Next I Generation Millenniums/Millenials Net Generation Netizens Nexers 11-2

5 An Emerging Opportunity Gen Y is projected to become the wealthiest generation ever, based on its size, earnings and expected inheritance. Its rising economic influence may lead to a larger opportunity for auto and earlier opportunity for home insurers compared to previous generations of young adults. More generally, the creation and spending of wealth typically leads to strong demand in the long-run for personal property and casual as well as life insurance. The timing is ripe to reach out to Gen Y, since the need for insurance products is often triggered by life events such as getting married, having a first child, moving or purchasing a first home. A Closer Look at Gen Y: What Insurers Need to Know Figure 2: Gen Y Consumer Profile for Insurers Gen Y Profile Characteristics Implications for Insurers Financial Freshman Are financially aware, but novices in implementation Independently Dependant Seek guidance in purchase decisions Practically Motivated Seek affordable raters and good service Tech Savvy View technology as an extension of themselves Entrepreneurially Spirited Have stated intention to live an entrepreneurial life Diverse Seek to express their individuality Socially Mindful Value altruism and environmentalism Source: Deloitte Research, Deloitte Services LP Lack confidence in their financial decisions Find insurance products too complex May not understand the need for risk protection Are self-directed in research Seek recommendation and validation from personal networks and professional advisors Focus on price value and convenience Expect good service Are prone to switching carriers Are avid web users Are avid mobile technology users Integrate technology into their lives Demonstrate a strong interest in entrepreneurship Describe themselves as serial entrepreneurs Are racially and ethnically diverse Come from diverse household types Have diverse professional experiences Participate in volunteer activity Are environmentally conscious Opportunity to provide education and advice about risk and the need for financial protection Existing customers may serve as influential advertisers and endorsers Opportunity to provide professional advice Requirements to make value, convenience and good service essential to product offerings Need to cultivate Gen Y s loyalty Opportunity to use technology to satisfy Gen Y s desired mode of interaction and customer experience A potential early opportunity to commercial insurers Opportunity to explore Gen Y s expectations of B2B relationships Opportunity to provide a customer experience that caters to Gen Y s diversity and individuality Opportunity to cultivate relationships built on values 11-3

6 Toward a Customer-Centric Approach Collectively, Gen Y s characteristics can help shed light on its purchasing behaviors and rising expectations of insurers. By paying systematic attention to Gen Y s expectations, insurers may develop better customer-experience strategies through suitably tailored product offerings, marketing and distribution. Because Gen Y occupies the leading edge of technology and other marketplace changes, a customer-centric approach stands to raise the quality of the customer experience for all generations, thereby enabling more customer-centric companies to excel. A Customer-Centric Approach: Product Offerings Product Offerings Meet a need in the context of a relationship Use plain English in an educational manner Expose benefits and value up front Leverage existing product base to meet underserved needs Innovate to match Gen Y s values and lifestyle Key Insights Gen Yers often purchase insurance products because of requirements to do so, rather than out of a true understanding of the risks they face. The complexity of insurance products, combined with the fact that many customers are reluctant to think about the circumstances in which insurance becomes critical, makes it difficult to convey benefits in simple terms. A few insurers are pioneering innovative products that match Gen Yers lifestyle, price sensitivities and attitudes, such as: pay-as-youdrive auto insurance, mobile phone insurance coverage or riders for laptop computers, and green home insurance policies. Strategies that link products to values or lifestyle can help insurers differentiate themselves, develop long-term relationships with Gen Y, provide a more enriching experience for the group, and may resonate with older, wealthier generations as well. 11-4

7 A Customer-Centric Approach: Marketing Marketing Delivers personally relevant messaging Leverage traditional and newer forms of word-ofmouth techniques Adopt an educational approach Build and manage the brand Appeal to cultural diversity and individuality Key Insights Traditional word-of-mouth techniques such as through friends, family, parents and physical networks (e.g., associations, colleges) are a key starting point. Worksite marketing provides Gen Yers with validation and convenience, and for insurers, may reduce the spotlight on price. Given changing trends in technology and media consumption across all generations, insurers can benefit from engaging in both traditional Internet and viral marketing. Spread across multiple media, a brand that communicates value and other core benefits up front can help insurers differentiate themselves and potentially reduce customers search costs. With distribution and technology becoming increasingly complex, insurers should carefully manage brand across all customer touch points. Ethnic or foreign-language media, as well as affinity marketing methods, can play an important role in reaching minority groups across all generations. Personalization and customization of the customer experience, especially on the Web, may appeal strongly to Gen Y s individuality. A Customer-Centric Approach: Distribution Distribution Enables flexibility throughout the customer life cycle Use technology to strengthen and leverage Web channels Manage the potential for channel conflict Promote cooperation and integration across channels Explore and integrate newer channels Key Insights Insurers should focus on improving core Web site functionality, e.g., search capabilities, font size and space usage, easy-to-locate customer service numbers, online chat with a representative, etc. Insurers should also consider developing more enjoyable, educational and personable experiences on their Web sites. Gen Yers will increasingly seek self-service activities along side face-to-face or telephone support, requiring insurers to develop an effective cross-channel strategy across the customer life cycle (see figures 3 and 4). Direct channels are not a substitute for agents and brokers: for most consumers across generations, purchasing behaviors vary with the relative cost, complexity and importance of the purchasing decision. The Web plays an important role in integrating channels and providing flexible options for interacting and purchasing products. It can also reduce costs associated with acquiring and servicing clients, reduce the amount of time agents spend on administrative tasks, and help promote other channels. Newer channels such as worksites should also be integrated and promoted. 11-5

8 Customer Life Cycle Figure 3: Customer Life Cycle in Life Insurance The concentric circles represent facets by which the customer experience can be customized throughout the customer life cycle. Source: Deloitte Development LLC Point-in-Time Examples of a Cross-Channel Strategy Figure 4: Examples of Customer Experiences along the Customer Life Cycle Source: Deloitte Development LLC 11-6

9 A Customer-Centric Approach Figure 5: A Customer-Centric Approach for Targeting Gen Y (Based on Gen Y Consumer Profile for Insurers) Product Offerings Meet a need in the context of a relationship Use plain English in an educational manner Expose benefits and value up front Leverage existing product base to meet underserved needs Innovate to match Gen Y s values and lifestyle Marketing Delivers personally relevant messaging Leverage traditional and newer forms of word-ofmouth techniques Adopt an educational approach Build and manage the brand Appeal to cultural diversity and individuality Distribution Enables flexibility throughout the customer life cycle Use technology to strengthen and leverage Web channels Manage the potential for channel conflict Promote cooperation and integration across channels Explore and integrate newer channels The Road Ahead Gen Y s current product needs are limited, but those insurers and distribution partners that move early and stay the course with this group could reap large rewards in the long run. More immediately, Gen Y serves as a leading indicator or lens through which insurers can view the rising expectations of all consumers. As Gen Y seeks increasingly flexible and customized customer experiences, older generations are following in its footsteps. The immediate value of Gen Y lies in its role as a catalyst for capitalizing on an opportunity to improve insurer performance and growth, and for setting the stage for improving the quality of the customer experience for everyone. 11-7