The Millennial generation, or those that cameof age in the 2000s, presents a unique challenge to today's employers, especially those in theinsurance industry—namely, how to adapt traditional productstrategies aimed at homeowners to the needs of a populationfollowing a non-traditional path into the housing market.

The average member of this growing segment—one that typicallydrove the growth in the homeowners' insurance market in yearspast—is now graduating from college carrying a much heavier debtload than his or her parents ever did, in the form of an average of$23,000 in student loan debt. Today's higher costs of financing acollege education will not likely abate any time soon.

According to Bloomberg, U.S. debt fromcollege loans has reached $1 trillion, surpassing consumer creditcard debt for the first time while sparking heated debate onCapitol Hill. Consequently, home ownership for this generation willbe significantly delayed. So exactly what does this mean forselling homeowners' insurance bundles?

Even graduates who are landing good paying jobs are finding itdifficult to buy their first home. Rather than being able to savethe $20 to $30,000 for a down payment on a house, Millennialsbetween the ages of 23 to 35 are still paying down substantialcollege debt. Assuming they're also apt to carry significant creditcard debt, one can begin to envision a new reality that must beaddressed by the insurance industry.

Expansive Personal Property

While this generation may not be in a position to jump into thehousing market for years to come, they have managed to accumulate alarge amount of personal wealth in the form of household contents.Items such as large flat screen HDTVs, gaming consoles, multiplecomputers, carbon fiber sports equipment, designer apparel, jewelryand luxury items—while not equating to the value of a new home—alladd to significant investment in personal ­property.

Based on processing $2 billion in property claims data annually,our internal data set indicates Millennials have, on average,accumulated approximately $65,000 worth of consumer items within 10years of graduating. A typical renter's insurance policy doesn'tmeet the needs of this demographic. This evolving market segment,while challenging, also provides carriers with an opportunity todevise innovative products that support these new ownership trends,while building customer loyalty.

A Slow Ride from Auto to Home

It is a well-understood process: Carriers sell entry-levelindemnity products such as auto insurance, then migrate thecustomer into a renter's policy. As these young consumers matureand build assets, carriers look to transition these customers tohomeowners' insurance. In this way, insurers develop a persistent,profitable, long-term relationship for products addressing allaspects of the consumer lifecycle.

The difference from how this business plan progressed in thepast, though, is in the length of time it now takes for thisoverall process to unfold.

Since the majority of Millennials will most likely not be ableto afford buying a house until well into their 30s, insurers arelooking at a much different earnings curve than has historicallybeen the case. At the same time, carriers don't have the incomethey traditionally relied on during the boom stock market years. Inturn, this creates a need for new products, not to mention enhancedvisibility into opportunities.

Product Adaptability Is Key

The old $250 per year renter's policy is a starting point;however, Millennials are willing to pay for (and coincidentallyneed) more coverage. Successful insurers are creating ways tobridge the current product gap and understand that although manyMillennials may be in debt, they are definitely considerably“richer” in contents than ever before.

It should be noted that Millennials are not the only ones whoare being impacted by current economic realities. In fact, hundredsof thousands of long-time homeowners have abruptly become rentersover the past five years as a result of the mortgage crisis. Theforeclosure trend is affecting insurers along with an ongoing waveof underwater mortgages and short sales. Many families have beenforced to downsize from substantially larger homes to condos andapartments. Their contents are more reflective of their formerlifestyle than the demographic of a $250-per-year renter's policy.Therefore, P&C insurers must recalibrate how they pricerenters' policies for this new segment as well.

Enhancing Underwriting Practices

Knowing how to accurately create such products requires pricingtools that tell insurers at what rate a person is accumulatingassets, and what their valuation is. Insurers need to determine theright-sized coverage so that they can begin to offer theappropriate amount at the outset and continue to provideappropriate products at different milestones in the insured'slife.

That's a tough task without a real estate value on which to basethe contents estimate. Analytical products are emerging that offeruseful estimates about the necessary contents coverage for aspecific insured household and the property. Predictive analyticsand other big data applications can determine these customer assessments bycombing through years of claims data to gain insight on consumerprofiles based on marital status, age, zip codes and other datapoints.

Clearly establishing the right limits and pricing is criticalfor carriers to increase profitability on personal propertycoverage. New insights about how to price this risk correctlyrepresent a significant innovation in the underwriting process.Informed pricing assures faster, more accurate settlements whenclaims arise but are critical in setting expectations and buildingcustomer satisfaction.

Though too often neglected, homeowners' policies are still a keyto generating industry revenue, but getting customers to theseproducts calls for more adaptive creativity than in the past. AsForrester analyst Ellen Carney notes in her recent Trends 2013report, 'after decades of segmentation based on attitudes andaverages, insurers are now equipped with the business intelligenceneeded to look at just how customers behave.'

Designing offerings that reflect these changes and buildcustomer loyalty that lasts until the insured is ready for his orher first homeowners' policy is vital. P&C carriers that fullygrasp this will be able to capture revenue from a rapidly growingsegment in property insurance.