The Millennial generation, or those that came of age in the2000s, presents a unique challenge to today's employers, especiallythose in the insurance industry—namely, how to adapttraditional product strategies aimed at homeowners to the needs ofa population following a non-traditional path into the housingmarket.

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 anaverage of $23,000 in student loan debt. Today's higher costsof financing a college education will not likely abate any timesoon.

According to Bloomberg, U.S. debt fromcollege loans has reached $1 trillion, surpassing consumercredit card debt for the first time while sparking heateddebate on Capitol Hill. Consequently, home ownership for thisgeneration will be significantly delayed. So exactly what does thismean for selling 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 carrysignificant credit card debt, one can begin to envision anew reality that must be addressed 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 itemswithin 10 years of graduating. A typical renter's insurance policydoesn't meet the needs of this demographic. This evolving marketsegment, while challenging, also provides carriers with anopportunity to devise innovative products that support these newownership 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 marketyears. In turn, this creates a need for new products, notto mention enhanced visibility 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 althoughmany Millennials may be in debt, they aredefinitely considerably “richer” in contents thanever before.

It should be noted that Millennials are not the only oneswho are being impacted by current economic realities. Infact, hundreds of thousands of long-time homeowners have abruptlybecome renters over the past five years as a result of themortgage crisis. The foreclosure trend is affecting insurers alongwith an ongoing wave of underwater mortgages and short sales. Manyfamilies have been forced to downsize from substantially largerhomes to condos and apartments. Their contents are more reflectiveof their former lifestyle than the demographic of a $250-per-yearrenter's policy. Therefore, P&C insurers must recalibrate howthey price renters' 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 emergingthat offer useful estimates about the necessary contentscoverage for a specific insured household and the property.Predictive analytics and 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 iscritical for carriers in order to increase profitability onpersonal property coverage. New insights about how toprice this risk correctly represent a significant innovation in theunderwriting process. Informed pricing assures faster,more accurate settlements when claims arise but are critical insetting expectations and building customer 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 Trends2013 report, 'after decades of segmentation based on attitudesand averages, insurers are now equipped with the businessintelligence needed to look at just how customers behave.'

Designing products that reflect these changes and build customerretention that lasts until the insured is ready for hisor her first homeowners' policy is vital. P&C carriersthat fully grasp this will be able to capture revenue from arapidly growing segment in property insurance.

Jon McNeill is CEO of Enservio, a provider of software andservices to property insurers since2004.