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Life Insurers Should Make Bold Moves to Capture Millennials

Posted by | Fuld & Company

Life Insurance for Millennials

Why John Hancock’s recent Vitality Program points to a call for creativity and digitization in a historically staid industry.

An attention-grabbing, yet misleading message was included in John Hancock’s September press release when the company boasted “John Hancock leaves traditional life insurance model behind…”.  Hancock, one of the oldest and largest U.S. life insurers, implied that it was abandoning traditional underwriting processes in favor of incentive-based policies that track fitness and health data through wearable devices and smartphones.

Taking a closer look, however, we concluded the press release’s headline is a bit overstated.

Certainly, John Hancock—like many life insurance companies– would prefer to augment traditional underwriting by taking advantage of new technology designed to cull detailed data on customers’ health and fitness habits. In a recent interview with the New York Times,  Books Tingle, president and chief executive of John Hancock, made no secret of the company’s mission when he said, “The longer people live, the more money we make. If we can collectively help our customers live a bit longer, it’s quite advantageous for us as a company.”

But without mandating that insureds share their data, Hancock will still be reliant on the traditional process of gathering information from customers to assess risk—Do they smoke? Do they have high blood pressure? Are they obese? Any history of cancer, heart disease, etc.?

Instead of making participation mandatory, John Hancock is making its existing Vitality Go program “automatically available” to all policyholders. Its more innovative, rewards-based Vitality Plus program is also available to all but is only included free of charge with individual whole life policies—all others must opt in and agree to pay a rider equal to 3% of premiums.  In other words, only customers who really want to participate–presumably because they are young and healthy–will be granting access to detailed data regarding their physical activity and food purchases.

Creative Marketing is the Real Value of John Hancock’s Moves

While we believe the headline was slightly overstated, we still think John Hancock’s marketing move is interesting because the rewards-based Vitality Plus program was clearly designed to appeal to a massive, yet underserved, Millennial generation.

Research from the Life Insurance and Market Research Association (LIMRA) shows Millennials have little concern about safeguarding their financial futures by purchasing life insurance, even though they are concerned about their finances overall.  While members of this generation are at the precipice of embracing major life changes and should be considering their life insurance options, they are the most likely to be uncertain about product types, coverage amounts, qualifying for coverage, and the cost (according to LIMRA’s 2018 Life Happens Barometer).

Still, this younger cohort is a critical segment for life insurers to penetrate and serve. The Millennial segment is on its way to becoming the nation’s largest living adult generation by 2019 and, along with Gen Z, Millennials will account for 70% of the global population in just a decade—up from 60% today.

Those insurers who fail to capture up and coming customers will see their books of business shrink and their profits decline. Setting aside uncertainty about how successful John Hancock will be in attracting new customers through its Vitality program, we would argue it has instituted a creative approach to get life insurance back into Millennials’ financial considerations.

The Marriage of Personal Data and Commerce is Gaining Popularity

In making this move to more aggressively promote its Vitality program, John Hancock is wisely taking a cue from its brethren in other insurance segments who are marrying data and analytics in order to keep a closer eye on risk, while sharing some of the gains with customers themselves.

  • In the property and casualty arena, Progressive Insurance has been using telematics technology to monitor the driving habits of auto policy holders who opt in to its Snapshot discount program for nearly a decade, and others quickly followed;
  • United Healthcare and Fitbit launched their Motion program, which rewards enrollees with up to $4 per day (or $1,500 per year) in healthcare credits if insureds wear a tracking device and meet daily FIT (frequency, intensity, and tenacity) goals;
  • Travelers Insurance, one of the country’s largest insurance companies, launched an Amazon storefront where customers can buy discounted home security equipment and receive discounts on their homeowners’ policies

Even as these programs proliferate (and consumers become more blasé about sharing personal data), concerns about the ‘Big Brother’ effect still loom. Many customers feel that personal health data shouldn’t be coagulated with big business— and the quandary of tackling how insurance companies use health and wellness data curated by wearables has been present in the marketplace for a few years.  However, Hancock is wise for directly targeting a data-savvy generation that values transparency and is less concerned than older generations about privacy .

The Benefits Fit the Audience

In targeting younger potential customers, John Hancock should benefit from its alignment with companies that are insanely popular with Millennials—Amazon and REI, for example. Amazon continues to be a choice Millennial retailer with no immediate indicators of losing popularity–Amazon brings together ease, reliability and social media in a user-friendly format that Millennials are accustomed to.  And REI, with its products and services geared toward a healthy and active demographic, is also a very good drawing card.  As John Hancock is demonstrating, incentives are effective when they appeal to the needs of target audiences.

How Should Other Companies Respond?

The one thing life insurance companies should not do is ignore the fact that Millennials and up-and-coming Gen Zers are switched off to life insurance. If they want new customers to buy their products (and enough of them), simply updating their websites and marketing materials will not suffice—more dramatic action is needed.  Does this mean they should simply follow John Hancock’s lead and develop copycat rewards programs based on monitoring activity through wearables?  Probably not.  However, it does mean they should do something profoundly different because it’s clear the old approach has not worked.

Another example of a firm that has taken bold steps to capture Millennials in a non-traditional way is MassMutual. Its Society of Grownups initiative, now re-worked and relaunched as In Good Company, is a highly experiential, hands-on financial literacy program squarely aimed at Millennials who value its practical advice delivered in a social setting.

As the Millennial generation ages, leading them in directions where life insurance becomes more essential, there is an emerging opportunity for John Hancock’s competitors to think strategically and prepare for the next iteration of demands from these consumers (who are different than the customers they’ve historically served).

Those primed to keep Millennials engaged—and entice Gen Z—might have a significant opportunity to reinvent new interest in a storied life insurance archetype. We recommend that life insurers take time to figure out what makes these potential new customers tick and get creative about new ways to deliver on those needs. Most importantly, while there are good examples in the marketplace, it’s essential that players look outside the insurance realm for inspiration and develop their own playbooks.

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