Digital insurance and the millennial-Gen Z consumer
Updated: Jul 4, 2022
Millennial and Gen Z consumers are well on track to becoming the key market segments of the next few decades. Millennials in India number more than 440 million (Source: Times of India), and the country’s Gen Z population is over 472 million (Source: ResearchGate). In the coming decades, these digital natives will form the majority of the workforce and drive consumption trends. They will need insurance too, though the old ways of selling policies may not cut it.
When the time comes for these digitally-savvy consumers to buy insurance, they are likely to explore new modes of distribution. Embedded insurance could be one such option. Here, policies are conveniently embedded into offerings from sellers and service providers who do not normally deal in insurance. That means users can shop for insurance while shopping for other items. Insurance purchase begins to feel natural and seamless—just the kind of thing that millennial and Gen Z consumers love.
Millennials and Gen Z need insurance
Insurance is a valuable means of financial risk mitigation. But millennial and Gen Z consumers may feel they are young enough to delay insurance purchases. Are they really?
Senior millennials are already 40 or getting there. Many of them have children to put through school and elderly parents with health issues. They may hope to buy some property or a car. Plus, there are lifestyle costs, such as home repairs, travel expenses, vehicle maintenance, and so on. They absolutely do need insurance every step of the way.
Gen Z will get there soon enough. As of now, older members of the Gen Z cohort are entering the workforce. With no real financial obligations, they may not be thinking about coverage just yet. However, given their young age and general good health, the premiums for life and medical insurance will be relatively low.
On the bright side, both groups have many income-earning years ahead of them. Insurance-cum-investment plans could support them to create long-term savings.
Here is a quick look at the types of insurance plans that millennials and Gen Z could buy:
Life insurance plans ensure a pay-out to beneficiaries when the policyholder dies.
Health insurance plans cover the costs of hospitalization and medical care.
Car insurance plans provide for third-party liabilities and car repairs after an accident.
Home insurance plans cover losses to homes and belongings due to theft, fire, storm, or explosion.
Unfortunately, insurance remains an afterthought for most digital natives. Insurance purchase is seen as a hassle because shortlisting policies can be hard. Even price comparison websites are not easy to use.
Besides, the insurer–customer interaction normally happens once a year: at the time of policy renewal. The other interaction is when a policyholder submits a claim. Since both touchpoints have negative associations for the customer, it is understandable why people avoid thinking about insurance if they can help it.
Embedding insurance for digital natives
Travel sites have been embedding insurance into flight ticket purchases for years now. And now embedded insurance is spreading its wings. Thanks to application programming interfaces (API), insurance plans can be integrated at the point of sale for many non-insurance products and services today.
Users can even renew and buy life insurance while transacting on digital payment apps. That works well for digital natives who pay little heed to the insurance company providing the policy, except when it comes to health insurance (Source: IBM).
Although millennials and Gen Z users have no preferred insurers, they do favour certain digital brands over others. For instance, they are often loyal to specific travel sites, digital retailers, and even fitness apps. Should these trusted businesses insert policies into their customer journey, users may be more than willing to purchase insurance from them.
Making the transaction even more seamless is the use of artificial intelligence (AI) and data science. Embedded insurance APIs go through the customer data available with the partner business to create products that are relevant to the user.
What embedded insurance looks like
Digital shoppers today can buy damage protection even on small-ticket items. Say, a user is shopping for a backpack or even a pair of headphones online. Just as the user confirms the order, the sales channel displays an offer for add-on insurance. If the user accepts the offer, the premium is added to the bill. The shopper can pay for the policy and other items that he is buying through a single transaction at checkout.
Some players are making the journey even more seamless by integrating insurance into the item being purchased. For example, Tesla provides insurance connected to the car itself. Tesla owners in select markets even receive premium quotes based on their driving behaviour. Software built into the vehicle provides the data to Tesla and the policy is underwritten accordingly (Source: Fintech Futures).
However, embedded insurance does not have to be related so directly. Adjacent products and services could also provide bundling opportunities: A yoga studio might offer health insurance to all new members. Home cleaning or pest control services could bundle home insurance into their annual package. Auto servicing centres may provide car insurance offers on online bookings.
Embedded plans take the thought out of insurance purchases. The mere act of creating add-on offers persuades users to buy insurance. Plus, the machine learning (ML) capabilities of the backend software ensure that insurance forms come partly auto-filled. This reduces paperwork for the digital customer and adds to the overall convenience.
Scope for embedded insurance growth
Over the next couple of decades, more than 40% of insurance will be embedded (Source: IBM). With insurance thus becoming more accessible, millennial and Gen Z users may be encouraged to upgrade their coverage. This bodes well for not only policyholders but also businesses in the insurance ecosystem.
According to one estimate, the market value of the embedded insurance business could swell to USD 3 trillion by 2030 (Source: Simon Torrance). So, digital-forward businesses that embrace embedded insurance have the potential to make big gains.
Besides greater accessibility, customers may see policies becoming more flexible. For example, concertgoers today may struggle to find event insurance coverage. But as embedded products get fine-tuned, bundled event insurance may become available on the same platforms that sell concert tickets.
Embedded plans support consumers and businesses
The sheer accessibility of embedded insurance is great for millennial and Gen Z consumers. They get to buy insurance on channels where they already shop. More importantly, they can get insurance coverage and begin to understand its value from a young age.
The AI capabilities of embedded insurance technology help to underwrite policies based on user data. This results in context-specific offers that the user can choose to add or ignore. However, these embedded policies are often affordable and hard to pass up. Plus, the purchase experience is smooth and stress-free.
There are also benefits for third-party businesses that enter the embedded space. If yours is an insurance-adjacent business, including bundled insurance in your digital sales channels could add to your profit margins. Any transaction history, device data, and other customer information could be harnessed by the insurance API to create context-specific offers. Embedded insurance adds value for customers and builds on their loyalty to your brand.
Reach digital natives with Turtlefin
Millennials and Gen Z are the target markets of the future. Why not connect with them right away by adding embedded insurance to your digital platforms?
Turtlefin can help you here. We have a deep understanding of the insurance space and the technology to make your business a part of this growing ecosystem. Our insurtech experts supply the necessary tools and infrastructure when you partner with us. And the whole process is quicker than you think.
Turtlefin OneAPI is all you need to begin your journey as an embedded insurance partner. These 10 lines of code are easily adapted to your digital sales channels. Our technology experts oversee the integration process so that you can focus on your core business. When the set-up is complete, you can test the platforms. And once everything is running smoothly, the API goes live.
Now, your customers can view quotes and buy policies from your website, app, or any other digital sales channel. The backend software uses your customer data to create hyper-relevant offers for your customers. The user journey is frictionless and designed to drive both customer satisfaction and policy commissions. That’s a win-win scenario for your business!
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Millennials and Gen Z will soon be the dominant consumers of insurance, but insurers have to revamp their business models. Given the customer habits and expectations of digital natives, embedded insurance may well have a bright future ahead. And so might the third-party businesses that join the insurance ecosystem early on.