Only 10 percent of millennials have enough life coverage for all of their needs, which can include mortgages, retirement, or a child’s college education. This fact has presented a challenge to life insurance companies to persuade the younger generation to buy their products. However, the opportunity exists in problems. Many insurance firms step up the game with AI development in life insurance to create a whole new purchasing experience for millennials.
1. Millennials Were Quite Distant with Life Insurance
According to LIMRA, millennials are buying life insurance; the amount they purchase and own, whether on an individual or group basis, is insufficient and declining, leaving them today’s most underinsured generation. The 2018 New York Life Insurance Company’s Life Insurance Gap survey found the life insurance coverage gap for U.S. millennials, at 78 percent, is far higher than that of Generation X and baby boomers.
The reasons for such a worrying trend vary but are condensed to three main points: They have other financial priorities; They are not qualified for coverage; Insurance is costly.
#1 Millennials do not see life insurance as the top priority as their parents did. The millennial generation likes to go with the flow and are not big-time planners. Yet, the benefits of a term insurance policy start reflecting only in the long run, which explains why their financial journey is also equally sporadic. According to Life Happens, 80 percent of millennials are not into buying life insurance because of other obligations, like rent or mortgage, student loan debt, food, and gas. Right now, the oldest millennials are in their 30s, and the youngest are in their early 20s. They’re graduating college, beginning their careers, settling down, and starting a family. In fact, Millennial Marketing states that 53 percent of millennial households have children. Because of this, millennials may not think they have enough extra money to afford life insurance right now.
#2 43 percent of millennials thought they wouldn’t qualify for life insurance coverage. And they did not call out any specific reasons for this thought. This could be coming from their inadequate financial management skills. Millennials are reported to be the generation with the fastest-growing debt load, which isn’t surprising when you consider this cohort increasingly has children, buying homes, and continuing to pay off their student loans. According to the Experian 2020 State of Credit report, the average millennial consumer has about $27,251 in non-mortgage debt, and millennial homeowners have an average mortgage balance of $232,372.
#3 Millennials’ misconceptions about insurance cost. By age group, millennials expressed the most interest in purchasing life insurance (45%) according to Forbes. Yet they vastly overestimate the cost, the survey indicates. Forty-four percent of millennials estimated the cost of a 20-year term life insurance policy for a healthy 30-year-old would exceed $1,000 a year, yet it’s actually about $165 a year.
2. AI Helps to Close the Gap
AI development in life insurance seems like the most promising solution for insurance life companies to acquire millennial customers since the generation is tech-savvy and the most digitally observed.
#1 Produce quick & interactive communication. Rather than using the old traditional way to introduce and explain services, insurance companies are now adopting chatbots to interact with their customer. A chatbot helps in building communication without having to spend any money on employees. The insurance industry has been actively making use of such chatbots to educated, improve the connections between the company and clients and save costs spent on operations, resulting in lower premium prices. Machine learning is also an ideal option for insurance companies that only work with their clients online as it can help those counter frauds and promise their customers a characterized experience.
#2 Personalized Product Education. Insurance companies enhance their customer profiling capabilities by automating and applying advanced technologies in the data collection processes. By having the power to consolidate data (from both internal and external sources), insurers can build a more comprehensive picture of their customers related to their insurance needs, interests, and life stages – which help in more effective targeting. Depending on these attributes, companies can segment their audience and use deep learning to predict the conversion rate of these segments. AI development in life insurance in turn can help insurers to give valuable and relevant product recommendations for each customer segment. Insurance companies are enhancing customer profiling with AI-enabled voice and facial recognition. This helps create biological customer profiles for fast and accurate verification, as well as the tracking of behaviors and attributes.
#3 Immediate Cost Estimation. Price remains central in consumer decision-making, but carriers innovate to diminish competition purely on price. Sophisticated proprietary platforms connect customers and insurers and offer customers differentiated experiences, features, and value. In some segments, price competition intensifies, and razor-thin margins are the norm, while in other segments, unique insurance offerings enable margin expansion and differentiation. In jurisdictions where change is embraced, the pace of pricing innovation is rapid. Pricing is available in real-time based on usage and a dynamic, data-rich assessment of risk, empowering consumers to make decisions about how their actions influence coverage, insurability, and pricing.
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