While much has been written on attracting, retaining and managing Gen Y employees, less frequently discussed is the sizable and potentially lucrative opportunities within the income protection market. Gen Y is typically characterized as a tough consumer segment for marketers to attract due to the strong influence of friends and family when making purchase decisions, the ease with which they are able to research information and their perceived immunity from the effects of traditional advertising. The need for this age group (roughly defined as those born between 1977-1994) to purchase disability and life insurance is growing however, and their sheer size (about 25% of the U.S. population according to a 2009 Metlife MMI report) is reason for ancillary carriers to take notice.
Gen Y is in serious need of income protection as they face challenges with debt, income and job security. A recent Wall Street Journal blog states that 2011 graduates are the most indebted ever, to the tune of nearly $18,000 (parents average an additional $5K), with average starting salaries down 23% against 2009 ($37,800 to $46,500). To further complicate matters, average credit card debt of college graduates has grown to more than $3,000 and an alarming number of Gen Y’ers are moving back home with their parents. According to Metlife’s 2011 Employee Benefit’s Study, 43% of Gen Y live paycheck to paycheck, 49% worry about having enough money to make ends meet and 52% are very concerned about job security.
With what could only be classified as alarming financial obligations (and stress) so early in life, one might assume this generation would protect their income the most, however, that has not proven to be the case. While a 2010 Unum survey showed an uptick in their perceived insurance knowledge between 2008 and 2010, this doesn’t necessarily translate into actual sales. According to a recent LIMRA survey, fifty-percent of Gen Y households do not have life insurance, and a recent Guardian survey found that only 28% believe disability insurance is extremely important.
As ancillary benefits continue to move towards Voluntary, shifting more costs onto employees, Gen Y is going to need to find a balance between paying bills, paying down debt, funding retirement and deciding which insurance products are the most essential. Furthermore, the insurance industry needs to do a better job educating consumers and positioning the concept of why life and disability insurance have a place among the priorities mentioned above. According to a recent Prudential study, many Gen Y members believe life insurance is only a necessity for people who have high risk occupations or are ill or elderly and fail to understand the complexities of underwriting, pricing and product types.
The good news is, Gen Y appears to recognize the role voluntary benefits play and their importance. According to Metlife’s 2011 Study of Benefit Trends, 57% and 58% of Gen Y employees believe it’s important to have disability and life insurance respectively offered in the workplace, even if they have to pay 100% of the cost. Generationally, they placed second in the study in each product line, behind only Gen X, perhaps indicating a realization by younger employees that they are likely to face increasing financial responsibility for their own coverage.
If carriers can improve education and price products reasonably, the potential market opportunity is impressive, especially as the economy stabilizes and employers become more open to making Voluntary products available to their employees.
