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The psychology of unpacking life insurance for millennials vs. Gen Z – all you need to know

20 June 2024 Hollard Life Solutions

In today’s dynamic and ever-changing insurance environment, understanding the distinct preferences and behaviours of different generations and audience segments is crucial.

As South Africa's insurance market evolves, a notable disparity continues to emerge in the buying habits and preferences of millennials, born between 1980 and 1995, and Gen Z, born between 1996 and 2010. Unlike their predecessors, these younger generations are reshaping the insurance market with distinct buying patterns and attitudes; and understanding these two generations is crucial for insurers and advisors alike.

Unlike previous generations, millennials and Gen Z in South Africa are delaying major life milestones such as marriage, parenthood, and property ownership. These delays have, in turn, translated into a later uptake of life insurance, and these generations are typically not taking up life insurance until they reach their late 30s.

Steve Piper, Head of Underwritten Intermediary Sales at Hollard Life Solutions says, “We have observed that the younger generation, Gen Z, tends to prioritise immediate needs like lifestyle and travel experiences over long-term financial priorities.”

According to findings from the Asisa 2022 Gap Study, individuals aged between 30 to 39 years often find themselves underinsured by an average of R1.4 million.

Piper highlights a distinct contrast in how Millennials and Generation Z navigate unexpected expenses within the current economic landscape. “On the one hand, millennials, currently in their early 40s, are assuming greater responsibility, they are increasingly acknowledging the significance of life insurance, while on the other hand, Gen Zs often tend to seek guidance from others due to their limited financial planning knowledge relying on family support for unforeseen costs and occasionally resorting to microloans for unexpected expenses.”

At the core, both millennials and Gen Z prioritise affordability and value in their life insurance decisions. They seek coverage that not only fits their budget but also delivers additional perks, such as loyalty rewards and cash back benefits. Insurers should take heed of key factors such as price, value, peer recommendations, innovation, and digital engagement to effectively cater to the needs of this demographic.

“Financial planning for unforeseen circumstances is a lower priority for Gen Z, until they reach certain life stages. However, concerns about health issues like cancer and mental illness, as they increasingly impact younger lives, are gradually shaping their attitudes towards insurance preparedness,” shares Piper.

While millennials are prioritising financial obligations as they approach midlife, Gen Z continues to face affordability challenges. As millennials approach midlife, they are beginning to actively prepare to shoulder the accompanying financial obligations. Meanwhile, Gen Z continues to grapple with affordability challenges, often resorting to shared property ownership with friends as an example, to attain a desired lifestyle.

Piper adds, “What is also common for both millennials and Gen Z is their desire to prioritise value-driven products, price competitiveness, and digital accessibility of products and services.

“Both these demographics are receptive to innovative offerings tailored to their needs. Instead of prioritising the traditional narrative of insurance such as life insurance and property, for example, they are prioritising income protection, often driven by self-employment, and they seek policies with long-term value such as savings-oriented plans.”

Furthermore, industry-wide data indicates that both millennials and Gen Z prefer digital interactions over traditional advisor relationships. They are heavily influenced by peer recommendations, often seeking insurance products endorsed by their social circles. Platforms like TikTok and Instagram have more recently emerged as influential channels for product exposure.

“With this demographic, there is an opportunity for advisors here to leverage price competitiveness, peer referrals, and digital engagement to capture these market segments,” Piper says. “A notable observation is that misconceptions about the value of insurance and distrust of insurance companies present significant barriers for entry with both millennials and Gen Z. Advisors have a crucial role to play in educating and creating awareness through real-life stories and communicating transparently about the claims processes, as this would help in bridging some of these existing gaps and in building trust, especially among the younger GEN Z consumers.”

A study conducted by Ernst and Young found that better consumer knowledge leads to more personalised service and enhanced client experiences.

“Communication and marketing preferences tend to differ between the two generations. While Gen Z tends to gravitate towards digital interaction, Millennials seem to favour human engagement through advisors, for example. However, both demographics want to delegate their responsibilities to individuals they trust.

“As millennials and Gen Z grow older, insurers and brokers alike need to adapt their strategies to meet the evolving needs of these market segments. This includes the integration of digital solutions, diversification of product offerings, and the recruitment of younger advisors to better connect with these demographics,” says Piper.

The latest insights from the 2023 Consumer Pulse Study show that both millennials and Gen Z are gearing up to increase their contributions to retirement funds and investments. Interestingly, this commitment to saving for the future is prompting them to potentially scale back on major purchases. Projections suggest a decline of 35% and 44% in such expenditure among Gen Z and Millennials, respectively. This shift in mindset reflects a growing focus on establishing long-term financial security in the face of ongoing economic challenges.

According to Piper, adapting to these evolving trends is imperative for insurance companies.

“Eventually, insurance will become a commodity distinguished mainly by price among comparable product options. Understanding their distinct preferences, and the attitudes and behaviours among millennials and Gen Z are crucial for the insurance industry and advisors, to ensure that we align products and engagement strategies with the priorities of each generation to expand the reach of insurance solutions and foster long-term customer relationships,” concludes Piper.

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