INSURANCE: Generation Z drives the shift toward flexibility, individuality, and ethics

Generation Z - more flexibility, individuality and ethics

_Futurization

Author: Andreas Fensterer, Insurance Expert at WAVESTONE

The upcoming generation is becoming the most powerful group of consumers. For them, almost everything is a click away. Today, “Gen Z” is applying its digital habits to future insurance products and sales channels, bringing new demands the industry will have to embrace.

Their names are Anna, Lukas, Mia and Leonie – and they live in Dortmund, Passau, Berlin and Dresden.  Generation Z, represented by people currently between the ages of 15 and 25, represents the first generation shaped by smartphones and apps from birth.  With currently approximately 12 million people, Gen Z already represents one of the largest consumer groups in Germany.  Much of what they buy, love, learn or know has been googled, streamed, swiped, or ordered online.

The future of the insurance industry must undergo radical change to accommodate the growth of this new, digitally defined consumer base.  Not only is Gen Z accustomed to seamless digital experiences, but trend researchers define them as “hypercognitive”.  They are adept at filtering and comparing a multitude of digital sources to both form and reform their purchasing preferences which applies to their insurance purchases as well.

Generation Z - customer opinion: insurers must respond more to needs

“[The ideal insurance] must be personalised and responsive to individual needs, life is unpredictable.”

A 19-year-old from Munich

Generation Z - Customer Opinion: Insurers must mitigate burdens

“I want insurances to make life easier rather than creating more burdens for me. A basic protection package that allows me to live without fear.”

An 18-year-old from Cologne

Weighing the pros and cons of standing out– insurers must respond

The digital age has created a new mindset that is characteristic to Gen Z. Young adults make decisions only after careful analysis and weighing their pros and cons, especially given the number of options at their disposal. These alternatives, with the potential to shape their lives, have become central requirements for both insurance products and their sales channels. “Overall, Gen Z expects insurance companies to develop in a direction that is favourable to them, aiding them in supporting the challenges of life – both individual and global,” are the conclusions of market researcher Rheingold Institut, after a study on how Gen Z members view insurance .

Gen Z prefers to see many of their ethical beliefs reflected in their purchases, not just planetary challenges like climate change or maintaining quality of life. This also applies to the establishments where Anna, Lukas, and the others prefer to shop since they demand product/brand transparency. Maintaining relevance with this critical consumer group requires insurance companies to deliver comprehensive added value within their policies. Radically adapting business models is a necessity if their desire for digital individuality, flexibility and sustainability is to be met, particularly during a time where younger people tend to lose interest in insurance.

What Gen Z expects from insurance companies

Shared common values and societal objectives

Flexible and transparent policies that support their needs throughout their lives

Efficient and unbureaucratic communication

How insurers can inspire Gen Z to safeguard their everyday lives

1 Push online first strategies
Insurance broker office hours have long ceased to be a reference point for Gen Z. The ever-closer merging of online and offline has, in many aspects, lead them to expect insurance products to be readily available online. For example, if a new camera is purchased online, the new generation of consumers expects to be able to simultaneously purchase a policy against theft. With this in mind, entering into sales alliances with large online retailers, and being their recommended insurance company is beneficial for maintaining market relevance in the future.

“Insurance has to keep up with me. When I buy furniture, I can add home contents insurance online.”

A 24-year-old from Hamburg

2 Maximum insurance product transparency
Insurance companies must recognise that customers are becoming increasingly informed and knowledgeable. Before a member of Gen Z determines which insurance policy suits their needs, they research comparables, gather opinions from trusted sources, such as financial influencers, and review information about returns, exclusion clauses and premium payments. Due their tendency to gather all available information, a sales representative may struggle to relay new information to them, making sales processes difficult. With the younger generation, it is no longer viable to merely present information about risks and why people purchase insurance policies. Both advantages and disadvantages must be transparently presented, providing the Gen Z customer with the appropriate information they require when making their decision.

See you later!
Well-informed customers are more likely to switch providers or policies. Gen Z is no different. In future, insurers should link contracts with 24/7 cancellation periods, i.e. for liability and household policies.

3 Emphasising individuality
A defining trait of Gen Z is their goal for individuality, something insurers must learn to cater to in order to be successful. As an example, a generic equipment policy should have an option to add additional household items, increasing the potential for individuality. Market research has shown customers are willing to pay higher premiums for more customisable solutions; if you can insure a cellphone, you can insure your e-bike or handcrafted furniture. Insurers who offer such policies attract a younger consumer base.

4 Depicting relevant experiences
Sporting goods companies are building digital experiences around their products while automotive manufacturers are entering into the ride sharing market. Insurance companies should also enter markets beyond their traditional scope to gain market share and expand their offerings. As an example, it would be mutually beneficial for health insurance providers to partner with third party health experts who offer nutrition tips or doctors wanting to use online appointment bookings or the sale of fitness accessories online. Through these partnerships and platforms, insurers can create value for the lifestyles of their younger customer base. However, to accomplish such a feat requires a radical change to their value creation models. These models should be built around the life events and activities of Gen Z within the scope of health, fitness, travel, home, garden, or wealth policies. Product sales would evolve and expand into new service channels, forging a direct relationship with the customer.

Added value through external partners
An example of an external partnership, that creates added value is that of a car insurance company and a telematics service provider. Policies can be individually tailored based on the data that is provided by the onboard boxes.

5 Sustainable living
As evidenced by surveys, Gen Z is characterised by their search for truth, which defines their consumer behavior. Stemming from this, these individuals expect their insurers to take a stand on social issues, particularly sustainability. The company’s marketing must align with their sustainability goals and the corresponding actions taken to achieve them. For example, if a company promotes diversity but fails to hire diverse staff, their contradictory nature will be noticed, and most likely called on their failure to act on their claims. Therefore, insurance companies must clearly identify the issues they support, act on them accordingly, and ensure all employees demonstrate acceptance.

Generation Z poses new challenges for the insurance industry

Generation Z forces insurers to rethink

Gen Z" has new expectations of its environment. This is changing marketing and consumer behavior and is also forcing the insurance industry to rethink.

Constant adaptation to digital lifestyles is the “new normal” for insurers

Transitioning towards a predominantly Gen Z marketplace requires radical change for insurance companies in their efforts to adapt to new, digitally driven consumer demands to maintain relevancy. Gen Z highly values individuality, flexibility, ethics, and transparency when acquiring insurance advice or purchasing insurance.  This trend is forcing the industry as a whole to adopt new business approaches and sales processes that are characterised by transparency, genuine added value and sustainability issues.