It appears we have a real generation gap when it comes to buying auto and homeowner's insurance. Indeed, a key lesson suggested by the results of recent surveys by Deloitte Research could be summed up with the following advice to personal-lines insurers: Get consumers while they're young!
Surveys of 1,080 auto insurance consumers and an equal number of homeowners found that the two youngest segments (ages 18-25 and 26-34) were the least inclined to renew their current coverage–and were the ones who shopped their personal-lines business most frequently.
In addition, "The Voice of the Personal Lines Insurance Consumer" surveys found a higher percentage of younger respondents bought direct from carriers (even though they had the most serious trust issues in dealing with the industry), while younger consumers who had bought through agents expressed less loyalty to their intermediaries.
Younger respondents were also more tech-dependent, putting a greater emphasis on the value of online services and mobile applications than did older consumers responding to the survey. Meanwhile, younger buyers are far more influenced by their family and friends than by professional sales people when it comes to buying personal-lines insurance.
Business among the younger crowd is definitely more in play, the surveys revealed. Around 20 percent among those in the 18-25 and 26-34 age segments had changed auto carriers in the prior 12 months, compared to only 10 percent of those over 50. About 15 percent in the two younger age groups had signed with a new auto insurer more than 12 months but less than 24 months before, compared to 9 percent of those over 50.
Among homeowners queried, about 12 percent of the two youngest groups had changed insurers in the previous year, compared to just 5 percent of those over 50, while 15 percent of the younger segments had bought from a new carrier in the prior 12-24 months, compared to 6 percent of the oldest segment.
That means 35 percent of auto consumers surveyed who are under 35 reported changing carriers over the previous two years, compared to just 19 percent of those over 50. The gap was even more striking in the survey of homeowners, with about 27 percent of the two younger age sets having switched carriers over a two-year period, compared to just 11 percent of the oldest buyer segments.
Looking ahead, 47 percent of the youngest auto consumer respondents (18-25) and 56 percent of the next youngest (26-34) said they are very likely to renew their policy—far below the nearly 70 percent likely renewal rate recorded among those over 50. This generation gap was echoed among homeowners, with only about 45 percent of respondents under 35 saying they are very likely to remain with their current insurer, against 62 percent of those over 50.
There wasn't much difference among the various age segments on auto insurance when it came to price satisfaction, with about 40 percent of respondents reporting they are very satisfied with what they are paying. When it comes to service, however, only about 40 percent of the youngest segment (18-25) said they are very satisfied, compared with 53 percent of those over 50. A similar comparison emerged among homeowner respondents.
Meanwhile, younger respondents were much more likely to buy direct from an insurer rather than through an agent. On auto, about 58 percent of respondents younger than 35 bought direct, compared with 45 percent of those over 50. The gap was even wider on homeowner's insurance, with 65 percent of respondents between 18 and 25 and 55 percent of those 26-34 buying direct, compared with 42 percent between 35 and 50 years old and only 37 percent of those over 50.
Younger buyers surveyed were also far less loyal to their agents, if they used one. Indeed, while 34 percent of auto respondents and 29 percent of homeowners over 50 said they would not buy insurance without an agent, those numbers dropped for both coverages to about 18 percent among those between 35 and 50, and 11 percent for those 26-34. For those below 26, only 15 percent indicated they would never buy auto insurance without an agent, along with just 5 percent for the youngest homeowner respondents.
One factor might be that younger respondents have not worked with their current agents for nearly as long as have older buyers surveyed. The percentage of respondents working with the same agent for a decade or more climbs in each age segment, topping out at around 57 percent for auto and homeowners over 50, while only a handful of respondents in the youngest age segments have been with the same agent for even as long as five years.
Trust was a big factor for a significant number of respondents, with 40 percent of auto and homeowners surveyed indicating they use an agent because they don't trust insurers to deal with them fairly, althought younger respondents were less trustful toward carriers. Among the youngest age segment (18-25), 54 percent of auto respondents with agents cited a lack of trust when dealing with insurers, but that sentiment fell with age to 40 percent for those 26-34 and around 36 percent for those 35 and older. The feeling of distrust for carriers was even stronger among the youngest homeowners (69 percent of those under 26, along with 50 percent of those 26-34), dropping to 38 percent for those 35-50 and 34 percent for those over 50.
From this set of responses, it appears those carriers that can most effectively bridge the generation gap might have a better shot at organic growth in personal lines.
In my next blog, I'll explore how open-minded these survey respondents were in terms of switching channels. The surveys found that many of those currently buying directly from carriers, without an intermediary, expressed an interest in using an agent when it comes time to renew.
(We welcome your feedback and questions throughout this series of reports. You may download the full report on "The Voice of the Personal Lines Insurance Consumer" from Deloitte Research at http://www.deloitte.com/view/en_US/us/Industries/Insurance-Financial-Services/a0f93dffd16f5310VgnVCM2000001b56f00aRCRD.htm.)
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