Millennials and Auto Insurance

Part
01
of eight
Part
01

Millennials and Auto Insurance, Part 1

Both Farmers Insurance and Geico have advertising targeting millennials. Both use humor in videos and information on home ownership for that market.

Farmers Insurance

  • Farmers targets millennial with their Hall of Claims videos and TV ads meant to communicate that Farmers cover any accident, no matter how unusual.
  • Because research has shown that many millennials are first-time home-owners, Farmers also targets millennials with homeowner insurance information.
  • Farmers' messaging is multi-channel, including YouTube and TV, Social media, and OOH.

Geico

  • Geico breaks all the traditional rules in branding and messaging.
  • They currently have a seemingly disjointed and eclectic lineup of ads which include the Gecko, the Caveman, Kash, and rhetorical questions.
  • Recent ads with these brands target both auto insurance and new home ownership for millennials.


Part
02
of eight
Part
02

Millennials and Auto Insurance, Part 2

Liberty Mutual and State Farm both have marketing campaigns geared toward millennial auto insurance customers that aim to promote the insurance brands as accessible, effective, and appropriate for all stages of millennials' diverse lifestyles. The majority of campaigns were established across social media channels, though a variety of channels were utilized, and focused primarily on either entertaining videos or useful advice, such as in Liberty Mutual's Master This series and State Farm's Meme-o-nomics videos. Additional insights regarding the marketing efforts these two insurance providers have employed to attract millennial auto insurance buyers may be found as part of the attached spreadsheet.

Liberty Mutual

  • Liberty Mutual has a strong focus on direct-to-consumer (D2C) marketing, which they point to as being particularly effective among millennials. Their messaging for marketing auto insurance to millennials tends to focus most on their ability to customize insurance options for millennials at all stages of life and presenting the Liberty Mutual brand as simple and effective.
  • In 2019, "LiMu Emu and Doug" campaigns were launched across TV, radio, and social media platforms to engage millennial insurance buyers with humor, which "drives memorability". Commercials featured an emu and its mustachioed detective partner in buddy-cop style scenarios in which they help Liberty Mutual customers get the most out of their insurance policies.
  • Also in 2019, Liberty Mutual teamed up with the How Stuff Works podcast brand to develop Master This, a web-based series of instructional guides called Master Kits intended to add value to millennial customers' lives by helping them worry less.
  • As a result of its Master This campaign, Liberty Mutual reported an 800% increase in time spent on its site among millennials, which was four times the company's goal. The campaign also cut Liberty's website "bounce rates" by 50%, reached 90% of customers, and resulted in 75% of visitors indicating their willingness to recommend Liberty Mutual to a friend.
  • Liberty Mutual has no savings programs or insurance policies specifically targeted at millennials or young adults.

State Farm

  • State Farm makes an effort to acknowledge the non-linear lifestyles and diversity prevalent among millennials in its marketing efforts aimed at the generation. Messaging tends toward promoting State Farm as relevant regardless of age or demographics, and wants to communicate to millennials that its solutions are "for your life, not just your stuff".
  • In 2017, State Farm launched a "Meme-o-nomics" campaign, a series of 45- to 60-second meme-inspired videos with tutorials and how-tos intended to appeal to millennials. The videos were intended to demonstrate State Farm's value as a brand to young consumers seeking life solutions.
  • Also in 2017, State Farm produced a mini web-based, Spanish-language sitcom called Los Asegurados, or The Insured. The show follows a newlywed Hispanic couple and is geared toward Hispanic millennials on social media sites like Twitter and Facebook.
  • In 2018, State Farm introduced a Neighborhood of Good marketing campaign geared toward millennials and their desire for socially-conscious behavior. The nationwide campaign was intended to encourage philanthropy and volunteerism among the millennial community while promoting State Farm as a socially-responsible brand."
  • State Farm reports that its Los Asegurados campaign generated favorable responses and positive comments on social media.
  • The company's Neighborhood of Good campaign resulted in more than 17,000 volunteer hours and 156,000 "acts of good" among millennial volunteers. The company's marketing team also noted increased brand awareness and an "influx of leads" following the successful completion of the campaign.
  • State Farm has no specific savings programs or insurance policies specifically targeted at millennials, but does offer a 25% "good grades" discount for college students, which expires after policyholders graduate or reach 25 years of age.
Part
03
of eight
Part
03

Millennials and Auto Insurance, Part 3

Information on how Progressive and Allstate target millennials with their advertising for auto insurance products can be found in columns G-H and rows 3-8 of the attached spreadsheet. Millennials are reported to prefer digital media over traditional media and Progressive has over 48000 followers on Twitter and over 42000 followers on Instagram. Allstate runs the Good Hands Rescue program where the company offers about $2 roadside rescues for stranded motorists and millennials are the major beneficiaries of the program.

Progressive

Messaging

  • According to Coverager, Progressive creates cost-saving messages to reach out to millennials. Coverager reports that cost saving is a major factor in millennials' purchasing habits.
  • MediaPost shows how Progressive creates messages discouraging millennials from relying on their parents to make insurance decisions and encouraging them to make personal insurance decisions.

Marketing Channels

Sample Adverts

Programs

  • Progressive has a Life Lane channel on its website that has articles created to help people, including millennials to understand various life issues.

Metrics of Success

Allstate

Messaging

  • Coverager provides a summary of the messaging used by most insurance firms, including Allstate to target millennials.
  • The messaging used by insurance firms, including Allstate to target millennials, covers convenience, flexibility, fairness, and social responsibility.
  • New York Daily News reports that millennials are attention-seekers and Allstate creates messaging that makes millennials feel recognized.

Marketing Channels

  • Consultancy UK reports that millennials prefer digital media over traditional media and Allstate uses diverse digital channels to target millennials.
  • The digital channels used by Allstate include Facebook, Instagram, Pinterest, Twitter, YouTube, and LinkedIn to target millennials.

Sample Adverts

Programs

Metrics of Success



Part
04
of eight
Part
04

Millennial Auto Insurance: Customer Journey

Millennials expect their customer journey to be fast and straightforward. They are looking for comprehensive and affordable coverage, and are open to new companies. Digital channels and recommendations from family and friends are their sources of information, and they place more value on online reviews than their older counterparts. They are not as confident as boomers on their ability to choose the right policy and are open to external help.

Key Factors & Priorities

  • Millennials are more prone to worry about future risks than their older counterparts, with 38% describing they continuously worry about “what-if” scenarios, as reported by a survey conducted by Liberty Mutual and Safeco. Although they value price when examining insurance options, coverage is essential.
  • The survey discovered that finding "comprehensive coverage for a reasonable price" is the number one priority for this cohort (52%). Other key factors they consider when purchasing insurance include an easy-to-understand policy (50%), reputation (49%), price comparison (40%), easy purchase process (36%), and lowest price, even if it means a basic policy (31%).
  • As for the service, they expect “rapid access to information and clarity around the value proposition.”
  • For those that choose to work with an agent, online reviews carry the most weight (43%), followed by representing a well-known company (41%), convenient location (34%), social media engagement (28%), modern website (24%), availability of online chat (19%), and a nice-looking storefront (15%). Chat is the preferred method of communication.
  • It is worth noting that when choosing an agent, millennials have a different set of priorities than older generations. For example, boomers consider representing a well-known company as the most important aspect (59%), followed by location (50%). It is also interesting to see that the tech-savvy generation is more likely to give importance to a nice-looking storefront than Gen X (7%) and boomers (3%).
  • When it comes to what they expect from an agent, 50% said they want an agent that inspire trust; 49% want a seasoned insurance professional; 29% said an agent that makes it a point to get to know them; 21% desire someone that is a “go-getter”; 19% think it is important to be tech-savvy; 15% say they want someone involved in the local community; and only 9% are looking for someone close to their age.
  • According to Bain & Co., millennials worldwide are more open to non-traditional sources of insurance, such as big tech companies, and are looking for carriers that are a “part of an ecosystem of providers—made up of both insurers and noninsurers—that help them lead safe and healthy lives.”

Awareness & Discovery

  • Whether it is gathering recommendations on social media, using search engines, or reading online reviews, the first step millennials take when considering insurance options is online, often on their smartphones.
  • Millennials want easy access and convenient experiences; however, they value expert advice and recommendations from those they trust. The Liberty Mutual survey revealed that the cohort is twice as likely as boomers to report they "don't mind if others make a decision for them if that person seems better informed." The survey's findings are similar to other studies:
  • According to research conducted by Facebook and Accenture, 43% of millennials discover auto insurance options online, which shows that online presence is a contributing factor; however, not as important as word-of-mouth. They also seek recommendations from family members and peers before choosing an agent.
  • Ninety-two percent of millennials in the United States say they are influenced by peers and family when choosing auto insurance. Thirty-eight percent reported they learned about new insurance brands and products through them, and 36% evaluate the brand according to conversations they have with friends and family. These conversations usually take place online, via social media.
  • Millennials are aware they do not have the same experience with insurance than older generations. Only 34% of those surveyed by Liberty describe themselves as insurance-savvy, as opposed to 52% of boomers. The lack of confidence creates a desire to learn and more attention to details. They want to be well-informed consumers.
  • This self-awareness may also be one of the reasons why this cohort is open to agents, despite preferring digital experiences. Only 16% said they would not be open to the idea of working with an agent. They also spend more time researching insurance options online than other generations.
  • When it comes to the information they are seeking, 58% wants to understand the coverage and how it works, 50% said they want to know what to expect if they have a claim, 40% cited the unique features of their policy, 33% want to know how to manage their policy online, 31% want information about additional products and relevant services, and 29% asked for safety and loss prevention tips and tricks.

Channels

  • Millennials are more likely than their older counterparts to purchase auto insurance online. However, it is not as prevalent as some would expect from these consumers. While 36% of millennials reported buying auto insurance online, 52% still chose to buy it from an exclusive (29%) or independent agent (23%). It is worth noting that these consumers are more willing to purchase auto insurance online than home insurance (36% versus 30%).
  • Members of this cohort consider online channels particularly important during their journey, especially for auto insurance (44% versus 33% for home insurance). Auto insurance consumers are 3,5x more likely to say that mobile features have an important role when acquiring a product.
  • This generation is 2,7x more likely to be interested in social media ads for insurance products and brands. Like the Liberty Mutual survey, the Facebook study stated that online reviews are extremely important for the cohort. Furthermore, Facebook noted that the group prefers personalized options. They are 2,8x more likely to acquire monthly policies than boomers.
  • The Liberty Mutual study concludes that this cohort wants easy access and time-saving, and “while they want engagement and advice during the insurance buying process, they are less concerned about service after they buy. This points to a need to offer streamlined digital service and use carriers who can deliver online account management for routine tasks.”

Pain Points

  • Trust is a big pain point for millennials. Thirty-eight percent rated the honesty and ethical standards of an insurance agent as very low or low. It may come from the fact that, according to Mintel, millennials are the generation most likely to say insurance companies are all the same.
  • Millennials are not alone. Overall, the financial industry is the least trusted industry among consumers, and only 59% of consumers trust the insurance industry, as reported by the 2019 Edelman Trust Barometer. For reference, Americans are more inclined to trust financial advisors, banks, and credit card companies than the insurance industry.
  • Before launching Spire, a platform designed to attract millennials, Nationwide reach out to millennials to discover their pain points. According to the company, the most frequent ones are a lack of transparency and the feeling the process is too long.
  • These younger consumers are looking for “24/7 access and frictionless customer service.” However, traditional insurance companies still offer products surrounded by complexity, which creates a barrier between the industry and millennials.
  • Again, millennials are not alone. The journey to acquire insurance is so draining that 20% of insurance consumers surveyed stated that they would rather “slam their hand in a car door than shop for car insurance.” Millennials expressed their confusion, stating they would need to ask three or more people for help to understand their insurance coverage.
  • One of the reasons why millennials find the process draining may relate to their mindset. They are just not comparing insurance companies; they are comparing them to their “experience with online retailers and service providers.” They expect the experience to be fast and intuitive, similar to the experience they have with a company like Netflix.

Research Strategy

There is limited information about Millennial’s auto insurance consumer journey, as most studies focus on overall insurance, and generally present few insights regarding auto insurance. Therefore, we included data from the overall industry to complement the analysis. The typical customer journey map was adapted to reflect the publicly available information.
Part
05
of eight
Part
05

Auto Insurance Trends

Like all industries, COVID-19 has significantly affected the insurance industry, which saw a global market capitalization loss of $760 billion. The COVID-19 crisis has resulted in certain trends that could bring about structural changes in the auto insurance industry. These trends include a decrease in the frequency of claims and a decrease in the top-line revenue for insurance companies.

A decrease in the frequency of claims

  • The ongoing COVID-19 crisis has resulted in significant social distancing measures, especially in states with shelter-in-place directives, and thus people are driving lesser than before.
  • Data from previous calamities like the recessions indicate that the reduced frequency corresponds to less driving. This trend was observed in Europe as the increasing number of COVID-19 cases in March 2020 resulted in a drop in driving numbers by 50% and 80% in Germany and Iberia, respectively.
  • The US reported a 40% drop in driving numbers for the period of 2 March to 21 March as COVID-19 spread across the US. This drop may intensify further as the COVID-19 cases continue to rise in the US.
  • As the driving numbers drop, there is an obvious decrease in the frequency of auto accidents, and thus the frequency of auto insurance claims is also predicted to decrease.
  • In this scenario, the insurers are expected to develop robust fraud detection capabilities, anticipating a drop in the driving numbers.
  • As the desire for mobility reduces in the country due to the spread of COVID-19, insurance companies may also consider different ways to support their customers, which may include checking on their customers to see how they are dealing with the COVID-19 pandemic.

A decrease in the top-line revenue for insurance companies

  • The COVID-19 crisis has led to a significant rise in unemployment numbers, and missed premium payments and lapses on the policy are also expected to rise.
  • A major impact could be in the form of insurers reducing or even returning premiums owing to reduced usage.
  • This will result in significant top-line pressure for insurance companies who are also expected to experience reduced auto insurance sales owing to a drop in new-car sales.
  • An industry expert states that auto premiums will be lower for the next 1 year and 6 months and as a result, the agent's revenue will also decrease.
  • The Consumer Federation of America have contacted insurance commissioners in the US and asked them to offer customer credits, refund, or to lower auto rates.
  • For the next couple of months, agents are advised to use this time to update and accommodate clients especially those who they have a strong relationship with to provide a superior customer service. They can negotiate and discuss better pricing, updates, and other agency management systems.
  • In the wake of the reducing new-business volume, the insurance companies, on the other hand, can think of cutting their expenses on internet leads, direct mail, or TV ads. This may seem to be a contradicting policy to address the drop in new business volume, but it is a rather sensible move during a period of depressed shopping activities.
  • During a downturn, customer retention becomes crucial as retaining customers has a greater ROI as compared to spending on attracting new customers.

Research Strategy:

To identify the trends that could impact the auto insurance industry, especially the insurance agents, we checked through industry reports and news articles. We initially found a recent research published by McKinsey and Company, which details how the current situation in the United States would have a transformational impact, even for the next couple of years, in the auto insurance industry. From this information, we sought for other supporting articles that discuss these trends, as well as advice from industry experts on how auto insurance agents can prepare for the future to lessen these impacts or help improve the state of the industry.


Part
06
of eight
Part
06

COVID-19 Impact on the Auto Insurance Industry

The US auto industry has been affected in many ways by the COVID-19 pandemic, with impacts seen now and to be seen in the future. Changes in auto policy premium rates, bases for calculating risk, technology for information collection, and driver behavior have occurred and will occur.

How the US Auto Insurance Industry Has Been Affected by COVID-19

Fewer Miles Driven by Fewer Drivers
  • Drivers who commute to work are largely staying home due to state government COVID-19 response rules.
  • The rules have led to drivers using their personal cars less than before COVID-19, including millennial drivers.
  • One study showed that mileage and trips declined by 40 percent.
  • Auto insurers do not know whether drivers will continue to work from home, will return to commuting by personal car, or will use public transportation when the pandemic rules are lifted. The data on these outcomes will drive future auto insurance rates.
More Personal Cars Being Used for Business
  • Although auto insurance policy holders are driving less for personal reasons, "that isn’t always the case for commercial vehicles. Amazon, GrubHub, delivery services and more are supplying people stuck at home with their essentials, like groceries. This means the increased use of personal cars for work."
  • During the first three months of the pandemic (March, April, May) restaurants remained closed by state government rules. Some of these restaurants turned "to home delivery services since they cannot allow patrons to enter their facilities."
  • If drivers are using their personal cars for business purposes like delivering for Amazon, restaurants, or other businesses, then the drivers need to purchase commercial insurance. If a driver gets into an accident, those drivers "would want that covered under commercial lines coverage because it typically isn’t covered under personal lines coverage."
  • Auto insurers don't know whether Amazon, GrubHub, and restaurants will continue to offer home delivery by personal cars once the pandemic ends. The decisions made by these businesses will affect the sale of commercial insurance coverage to drivers using their personal cars for business.
Fewer Claims Reported
  • The reduction in miles driven "has resulted in fewer claims and higher profits for auto insurers."
  • There are fewer auto accident claims from all drivers, including millennial drivers.
  • However, many states are seeing increases in driver speeding behavior, violating speed limits on highways even more than before because traffic has decreased and roads are less crowded. The increase in speeding behavior may be captured by new insurance technologies (see below).
Discounts, Refunds, and Credits for Policyholders
  • The Insurance Information Institute reported that auto insurers will return $10.5 billion in premiums and benefits to policyholders in 2020. "Policyholders will receive the paybacks in various forms — such as premium percentage discounts, credits, and added coverages — depending on their insurer." Millennials will receive the discounts, credits, and added coverages along with other policyholders.
  • Insurance companies participating in the auto insurance premium paybacks include Liberty Mutual (refunds of 15 percent to personal auto insurance customers on two months of auto premiums), State Farm (giving $2 billion in rebates to auto insurance policyholders with the company between March 20 to May 31), Progressive Insurance (giving a 20 percent credit for customers' April and May premiums), along with Allstate, Geico, and Nationwide. The rebates, discounts, and refunds apply to all policyholders.
  • USAA announced premium refunds also. “Every member with an auto insurance policy in effect as of March 31, 2020, will receive a 20 percent credit on two months of premiums in the coming weeks.”
  • Liberty Mutual and Farmers Insurance companies are also giving refunds, rebates, and/or discounts.
  • Insurance companies do not know whether driver behavior will change when the pandemic ends, and have not set new rates for auto insurance.
Future Auto Insurance Rate Changes Based on COVID-19
  • Future auto insurance rates will be calculated based on experiences during the COVID-19 pandemic period, including several factors: annual mileage driven, claims experience, policyholder hardship, and distracted driving rates.
  • A study by New Initiatives reported that during the pandemic, the number of trips and distances driven decreased by 40 percent, the total distance of short trips increased, public transportation for commuting fell to 0 percent, fewer people drove together which led to decreased carpooling, and fewer people attended social events. These changes in behavior will result in rate changes going forward.
Fewer Americans Shopping for Auto Insurance
  • Fewer people have been shopping for auto insurance during the COVID-19 pandemic. According to the Lexis-Nexis Insurance Demand Meter, "new business volume growth ... decreased at unprecedented rates, shrinking -10 percent in March and -14 percent in April."
  • People buy auto insurance through three insurance shopping channels: direct, exclusive agent and independent agent. During the first few months of the pandemic, "the direct and independent agent channels took the biggest hits ... at -26 percent and -24 percent respectively. By contrast, exclusive agent carriers saw a far more modest decline of -9 percent."
  • "The pandemic has had the biggest impact [on Millennial] shoppers ages 35 and younger." Sales growth decreased by more than -20 percent among this demographic group. "Shoppers ages 55 and older kept on pace and their shopping even surged by 32 percent around the time of stimulus checks. Since then shopping has leveled off to the pre-COVID growth rate, according to the LexisNexis data."
  • Auto insurers don't know how to predict consumer shopping behavior going forward after COVID-19. They have to wait and see what drivers do about renewing their current auto policies or looking for new ones.

Future Changes in Auto Insurance

Possible Change to Usage-Based Insurance (UBI) Premiums
  • The Covid-19 pandemic has emphasized an existing discussion among insurance professionals about the need for Usage-Based Insurance (UBI), rather than insurance based on guessing about customers' annual mileage, types of trips, and other risk factors.
  • Fairness of insurance rates is being discussed.
  • "...Not everyone is driving the same miles, and not everyone is a careful driver. How can insurers reflect that risk level into their customers’ premiums?" This is one of the questions being debated.
  • UBI would determine a different insurance package for each customer based on "how much the customer is driving his/her car (Pay As You Drive--PAYD) and the customer’s driving behavior (Pay How You Drive--PHYD)."
Creation of a Different Algorithm for Insurance Rates
  • Fewer cars on the road has not meant fewer risks. The principle that fewer cars meant fewer claims has not proved to be true during COVID-19. Insurers may have to alter the way they calculate risk.
  • A report by Digital Insurance showed that (1) in "New York City, traffic volume decreased between 78 percent and 92 percent compared to January, but there was a 57 percent increase in speeding violations in the ten days following the Governor’s stay at home orders; (2) in Minnesota, traffic fatalities increased by about 50 percent when traffic was down 50 percent; and (3) in California, during the lockdown, collisions increased following a rain event and were blamed on people driving at higher speeds.
  • Auto insurers have not decided how to use this information to calculate future insurance rates.
Changes in Claim Resolution Methods and Tech
  • Because of social distancing, claim resolutions during COVID-19 have been relying "on digital technologies such as photo estimating tools" and photographs. Insurance adjusters have not been traveling to the sites of accidents during COVID-19. Instead, insurance companies have relied on drivers to upload photographs, accident reports, and other information when submitting claims.
  • New, "sophisticated mobile telematics solutions can not only provide real-time crash detections, but also provide a detailed report by analyzing the motion sensor data and associated contexts." This technology will change the way accidents are perceived.
  • "Mobile Telematics" are forms of mobile-based data collection using smartphones and other devices to learn about driver behavior.
  • Three key technologies will likely be used to assure collection of accurate mobile-based UBI (PAYD & PHYD) measurements.
  • The three key technologies are (1) Transport mode classification (motion sensor data collected by the mobile phone), (2) Driver/passenger detection data, and (3) Driving behavior insights based on "intelligent and accurate driving scores to measure driving behavior".
  • The information transmitted to auto insurance companies about driver behavior will be used to calculate individualized auto insurance policies for each driver.

Research Strategy

We gathered information from a variety of sources about impacts of COVID-19 on the US auto industry. Most of the information applied to all auto insurance policyholders, rather than only to the demographic of Millennials. Thus, we reported information as applying to policyholders in general. Most of the publications and articles we located about the effects of COVID-19 on auto insurance did not present the results of their research via separate demographics. The results were aggregated. However, a few of the facts and statistics were focused on behavior of Millennials (and Boomers), and we pointed them out in our report. We searched for information specifically targeting Millennials and auto insurance, but did not find any sources that presented such information.
Part
07
of eight
Part
07

Millennial Auto Insurance: Agent Marketing Pain Points

The conditions that influence the opinions of millennials about auto insurance vary drastically from those of older generations. This generation is different in the way that it thinks, acts, and even makes purchasing decisions. As a result, auto insurance agents face challenges in selling insurance products to consumers in this age group. The marketing pain points for auto insurance agents looking to market to this generation includes the limited enthusiasm that millennials have for face-to-face interaction with agents, the amount of time that it takes, and the insistence by millennials on usage-based auto insurance.

Limited Enthusiasm for Face-to-Face Interactions

  • Most insurance shopping research and activities start online and end with a face-to-face meeting with an insurance agent.
  • However, a study by ORC International found that approximately 50% of millennials are unwilling to buy from local insurance agents, and only 34% of them were willing to buy their auto or renter insurance from local agents.
  • This means that insurance agents, who are usually on average 45.1 years old and often pitch specialized service and personal attention as points of differentiation for their companies, find that millennials are not interested in long face-to-face pitches.
  • Ultimately, this generation is more interested in agents who offer them speedy pitches, so agents are expected to personalize their digital and online pitches with millennials in mind.
  • While this can be a challenge for the agents, who come from a different generation, using online pitches can help the agents to give their young customers a feeling that they have received personal attention but in a setting that is more preferable to the millennials.

The Amount of Time it Takes to Complete the Insurance Process

  • In any purchasing process, millennials prefer speed and comfort above all else.
  • This perception was clarified by the Council of Insurance Agents and Brokers, who found that millennials think that auto and renter insurance services should be fast.
  • This is a pain point for agents because they often prefer to have sufficient time to be able to describe their products to the millennials.
  • Insurance is a heavily regulated industry that uses complex pricing and process strategies that consumers cannot easily understand.
  • However, 61% of millennials spend less than four hours researching auto insurance before they make a purchase. This means that they ultimately do not understand what the process entails, and agents need a lot of time to explain the different aspects related to purchasing insurance to the buyer so that they can make the best decision.
  • However, irrespective of the amount of savings that one may find from understanding all the options that are available to them, millennials have little patience, in general, to listen to insurance agents pitch their offering.
  • This means that agents are forced to look for ways to speed up and simplify the buying process for this generation of clients.

Millennials Prefer Usage-Based Auto Insurance

  • Hypelife Brands noted that millennials are more interested in usage-based auto insurance (UBI) than any other generation.
  • Furthermore, Towers Watson, a global consumer research company, agreed that millennials are very excited about the availability of UBI. What this means is that they are only willing to pay for what they use rather than paying a blanket insurance price.
  • This is a pain point for agents because they are used to traditional underwriting metrics that generate a base rate that is adjustable by the agent and the company after a consideration of the relevant UBI data.
  • UBI is a system that uses quantifiable evidence to reward drivers for driving safely, and this is a process that appeals to millennials than to any other generation.
  • In fact, millennials believe that linking insurance rates to driving behavior is a better strategy than linking the rates to gender, age, credit score, and occupation, among others.
  • Therefore, they are willing to pay for UBI policies that are linked to vehicle and theft tracking, breakdown notification services, automated emergency calls, and auto location service apps on their mobile phones.
  • In the end, UBI creates problems for agents during the marketing process because it poses security and privacy challenges for the client and for the company. This is because a customer's driving information and location history are usually stored in a database, and if anything happens to the data or if the UBI tracking device is unplugged from the car, then the customer might be disqualified from premium savings.
  • This in turn means that the customer might end up dissatisfied and even switch to another insurance company. As a result, the agent and the company will lose valuable customers.

Research Strategy

We scanned articles from various business, insurance, and industry publications such as the Council of Insurance Agents and Brokers, KPMG, Risk & Insurance Magazine, and Insurance News Magazine. While we found some material related to pain points for auto insurance alone, some material referred to both auto and renter insurance for millennials and it was consequently used to inform the research due to its relevance to the topic.
Part
08
of eight
Part
08

Millennial Auto Insurance: Agent Marketing Best Practices

One best practice for auto insurance agents looking to market to Millennials is to digitize the auto insurance shopping and purchasing experience. They can accomplish this by employing messaging tools, tracking software, and social media. Another best practice is for auto insurance agents to offer Millennials flexibility; they can accomplish this by offering them personalized packages, unique product differentiation, and flexible, short-term contracts.

Best Practice #1: Digitize the Experience

  • According to a Facebook IQ study, 43% of surveyed Millennials discover auto insurance online and 42% of them purchase it online, making the Internet the top discovery channel for Millennials seeking auto insurance.
  • Also, 38% of the surveyed Millennials believe that social media platforms are helpful when looking for information about auto insurance.
  • In addition, the surveyed Millennials were 2.7x more likely than Gen Xers and Baby Boomers to take interest in an auto insurance product or brand that was promoted on a social media platform.
  • Furthermore, 44% of the surveyed Millennials evaluate auto insurance brands and products online; the Millennials were over 3.5x more likely to utilize their mobile phones, during the evaluation process, than Gen Xers or Baby Boomers.
  • Since Millennials use digital tools when looking for, evaluating, and purchasing auto insurance, auto insurance agents can digitize the insurance shopping experience and utilize messaging technology to provide Millennials with personalized guidance at each stage of the process.
  • Auto insurance agents can also use digital tools to re-target Millennials since they often visit insurance sites several times before making their decision; agents can leverage website visitor software to track shoppers who come to their sites without making any purchases.
  • Auto insurance agents can take advantage of various social media channels to reach, engage, and interact with Millennials since this demographic uses social media to obtain information about auto insurance brands and products.

Best Practice #2: Offer Flexibility

  • According to a Towers Watson survey, 88% of Millennials are interested in usage-based insurance (UBI) and 75% of them believe that insurance rates should be linked to driving behavior as opposed to age, gender, profession, or credit.
  • Additionally, Millennials are "willing to pay more for services enabled by UBI technology, including theft tracking, location services in a mobile app..., automated emergency calls, and breakdown notification service."
  • Since Millennials value personalized insurance and flexible services, auto insurance agents can make their brands stand out by offering personalized packages and distinct product differentiation.
  • Auto insurance agents can also offer Millennials short, flexible contracts; agents can note that each Millennial would be offered different options in terms of contracts so that can they choose one that meets their specific needs.
Sources
Sources

From Part 03
From Part 06
Quotes
  • "Stay-at-home mandates due to the COVID-19 pandemic have caused vehicles across the U.S. to sit in parking spots and garages much more than usual. Drivers are generally staying off the roads except for essential travel and occasional trips for food and household supplies."
  • "It’s no surprise that the reduction in driving has resulted in fewer claims and higher profits for auto insurers. That’s why carriers are voluntarily stepping up with relief for their customers."
  • "According to the Insurance Information Institute, auto insurers will be giving back a total of $10.5 billion in premiums and benefits. Policyholders will receive the paybacks in various forms — such as premium percentage discounts, credits, and added coverages — depending on their insurer."
  • " The expectation of lower auto rates, at least over the next two to three months, is undoubtedly a welcome surprise for consumers."
  • "It’s too early to know precisely how the pandemic will affect auto premiums over the long term. Rates are likely to return to pre-coronavirus levels, but there are many factors at play, including the following."
  • "Will policyholders continue to drive less? Most insurers factor annual mileage into their rates. Just how much it affects premiums, however, varies by carrier and by state. Claim frequency As workers and the unemployed shelter in place due to coronavirus mandates, insurers report that vehicle accidents and claims are down significantly. When drivers are on the road for shorter periods and fewer miles, they have less exposure to accident risk. Policyholder hardships To date, nearly 22 million Americans have filed for unemployment insurance benefits during the pandemic. This number is likely to rise as new claimants get through overwhelmed state websites and call centers to submit applications successfully."
  • "Will distracted driving get worse? Another potential factor in the future of auto premiums is legislation and enforcement against the use of handheld devices while driving. According to the Insurance Information Institute, cellphone use is a factor in 14% of distraction-related fatal crashes."
  • "The new normal’ Many factors influence the rates that auto insurers charge policyholders. Even with a sharp reduction of drivers on the road and claims submitted, the stay-at-home mandates are temporary. Accidents, damage, thefts and liability, should return to normal as the adverse effects of the pandemic gradually lift. Most policyholders will enjoy short-term savings but shouldn’t count on it lasting too far into the future."
Quotes
  • "Two weeks ago, together with Sentiance, we started an analysis of the data from our users Pre and Post-Corona period. Based on that information we came up with the following insights: Amount of trips and kilometers decreased by 40% The total distance of short trips increased Use of public transport for commuting to work reduced to 0% Fewer people that drive together, so less carpooling Fewer people that went out for drinks, dinner, sports, and cultural activities” -Tony Dingemanse, New Initiatives, RISK"
  • "Premium reduction Some US insurance companies have already decided to offer discounts or refunds for their customers. For example, Liberty Mutual is offering refunds of 15 percent to personal auto insurance customers on two months of their auto premiums. State Farm is giving customers $2 billion in rebates for those who have auto insurance policies with the company between March 20 to May 31. Progressive Insurance customers will receive a 20 percent credit for their April and May premiums. Other insurance companies, such as Allstate, Geico, Nationwide, are all offering compensation to their customers due to the impact of Coronavirus. Admiral has become the first major UK motor insurer to offer its customers partial refunds."
  • "Covid-19 crisis emphasizes a need for Usage-based Insurance (UBI) The Coronavirus lockdown change has brought a well-known problem into the spotlight again: “How can insurance companies make sure rates are fair for their customers?” The lockdown is an extreme case. In our day-to-day life, not everyone is driving the same miles, and not everyone is a careful driver. How can insurers reflect that risk level into their customers’ premiums? The Covid-19 crisis emphasizes a need for usage-based insurance (UBI) solution where the insurance package for each customer is determined by: How much the customer is driving his/her car – Pay As You Drive (PAYD). The customer’s driving behavior – Pay How You Drive (PHYD)."
  • "“Fewer cars” does not mean “Lower risks” Just because there are fewer cars on the road, it does not mean the risks are lower. The auto premium reduction act has only taken how much the user drives (PAYD) into account, but it did not take the user’s driving behavior (PHYD) into consideration. Therefore, the simple solution of auto premium reduction can seem premature. "
  • "According to Digital Insurance, In New York City, traffic volume decreased between 78% and 92% compared to January, but there was a 57% increase in speeding violations in the ten days following the Governor’s stay at home orders. And in Minnesota, traffic fatalities have increased by about 50% during a time when traffic was down roughly 50%. In California, during the lockdown, there was a spike in collisions following a downpour and was attributed to people maintaining higher speeds on roads that would otherwise be congested."
  • "Claim resolution under social distancing Because of social distancing, claim resolutions rely more and more on digital technologies such as photo estimating tools. However, the photographs offer limited insights and fail to capture every aspect of a complex situation leading to a crash. Sophisticated mobile telematics solutions can not only provide real-time crash detections, but also provide a detailed report by analyzing the motion sensor data and associated contexts. By determining driving events just before a crash (such as a speeding event, an evasive manoeuvre, or distracted driving), insurance companies can find clues to the cause of the accident and help them resolve claims faster."
  • "Post-Covid-19: More private cars, more new drivers, higher risks When we look at the data from China, we see the percentage of people who prefer using private cars has doubled after the Coronavirus outbreak. The main motivation for this is to reduce the chance of getting infected on public transport. As a result, families are getting a second or third private car. It is likely to give a boost in new car sales and second-hand car sales. "
  • "What can insurance companies do to manage post-Covid-19 risks? To ensure accurate mobile-based UBI (PAYD & PHYD) measurements, there are 3 key technologies: Transport mode classification: Through the motion sensor data of the mobile phone, transport mode classification technology can recognize precisely when a user is traveling by car. Driver/passenger detection: An insurance company needs to know whether the user is the driver or the passenger when a car trip is detected. The good news is that with advanced machine learning and AI technology, mobile-based driver/passenger detection technology is available to detect the difference. Driving behavior insights: Intelligent and accurate driving scores to measure driving behavior"
  • "Data-driven risk management is the future “I suspect Covid-19 will have an ongoing impact on future day-to-day life for a while. The way we work, the way we commute, the way we shop and go on vacation. Here’s the opportunity for insurers to leave the trenches and create new personalized products and services for their existing and new customers. People will work more from home but also the use of private cars will surge, meaning also less experienced drivers on the road at peak times. Pay-per-mile solutions don’t create safe roads, pay-how-you-drive does. And it matches the growing private car use with sustainability. Safety on the road goes hand in hand with safety of the planet.” – Toon Vanparys, CEO, Sentiance"
  • "With data-driven UBI programs, insurance companies can manage their risks better. Customers will be motivated to drive safer to get cheaper premiums. Moreover, it’s critical for insurance companies to have the leading technology in mobile telematics with high accuracy, high battery efficiency, and the highest data security to succeed. "
Quotes
  • "U.S. auto insurance shopping showed an average year to year growth rate of +7% from January through early March, according to the LexisNexis Insurance Demand Meter, a quarterly analysis of shopping volume and frequency, new business volume and related data. This began to change on March 16, when shopping declined to -11% year-over-year growth, the lowest level in more than a decade. Activity rebounded a few weeks later, returning to an average growth rate of +8%."
  • "Similarly, new business volume growth has decreased at unprecedented rates, shrinking -10% in March and -14% in April. For Q1 2020, this represents a decline of 52% compared to Q1 2019 and tracks to a historical five-year average decrease, according to the meter."
  • "The LexisNexis meter shows that among the states with the highest coronavirus cases, New York’s growth rates dropped the fastest and bottomed out at -26%. Countrywide, shopping volumes dropped as much as -31% to as little as -6% compared to Pre-COVID volumes."
  • "Across the three types of insurance shopping channels – direct, exclusive agent and independent agent – the direct and independent agent channels took the biggest hits during the worst of the pandemic at -26% and -24% respectively. By contrast, exclusive agent carriers saw a far more modest decline of -9%."
  • "The pandemic has had the biggest impact for shoppers ages 35 and younger with growth rates down by more than -20% among this demographic group. Shoppers ages 55 and older kept on pace and their shopping even surged by 32% around the time of stimulus checks. Since then shopping has leveled off to the pre-COVID growth rate, according to the LexisNexis data."
Quotes
  • "Now that there are less people on the road, a new trend is breaking through: excess speeding. This puts both commercial and personal drivers at risk of danger: Behavior like this behind the wheel can lead to higher fatality rates in the event of an accident."
  • "But while personal lines are seeing fewer drivers on the road, that isn’t always the case for commercial vehicles. Amazon, GrubHub, delivery services and more are supplying people stuck at home with their essentials, like groceries."
  • "This means the increased use of personal cars for work. More and more restaurants are turning to home delivery services since they cannot allow patrons to enter their facilities. “Is the employee delivering the food using their own car? What happens if they get into an accident?” Frankowiak asked. “Owners would want that covered under commercial lines coverage,” he continued, “because it typically isn’t covered under personal lines coverage.”"
  • "What’s in Store for Future Ratemaking? Actuaries consider a number of factors when projecting future rates for auto insurance, including expected frequency of accidents, amount of miles driven, inflation related to repair costs, inflation related to medical care, age of the insured/driver, type and cost of vehicle being insured and more."
  • "A Chance to Revisit Operations and Claims Handling Another area COVID-19 has had an impact on is operations. Auto insurers have been forced to rethink how they’ve traditionally conducted business and what’s been needed to adjust to the current times. “The majority of us are working from home, which changes a large aspect of auto insurance’s operations right there,” said Frankowiak. What is needed to function outside an office space? As claims come in, how does a claim team work together without being in each other’s presence? If there’s an accident, how can a physical inspection take place? “Auto insurers have had to think about how they can still effectively adjust claims and process them,” said Frankowiak."
  • "As mentioned, there is a silver lining: Fewer drivers headed to an office each day has lowered the frequency of accidents, therefore reducing the number of claims coming in."
  • "“One thing driving costs on the other end of claims is the interruption to the supply chain,” Frankowiak explained. “Being able to obtain repair parts for cars or even have repair shops open can prove challenging and can push some of those costs up.”"
Quotes
  • "“On average, most customers will see a 25% policy credit” for auto insurance policies, State Farm announced. “Customers do not need to take action. Credits will be applied automatically.”"
  • "Geico posted an update to its website announcing an automatic Giveback Credit. “GEICO is providing a 15 percent credit to our auto and motorcycle policyholders as your policy comes up for renewal between April 8 and October 7, 2020. The credit will also apply to any new policies purchased during this period.” Geico has included a Giveback Credit Estimator on its website, but be aware that the full 15% credit for your policy term is applied at the time of renewal. Its website also states that: “Effective immediately, we’re pausing cancellation of coverage due to non-payment and policy expiration through April 30, 2020.“ Keep in mind, any payments set up through Auto-Pay will still be deducted unless you manually cancel them. Also, you’ll still be required to pay back the balance owed on your policy once this grace period expires."
  • "Allstate is also responding to coronavirus with an automatic program, its Shelter-In-Place Payback. “On average, personal auto insurance customers will receive 15 percent money back based on their monthly premium in April and May.” For those who are struggling to make payments right now, an Allstate representative responded to our request with the following statement: “Customers can now request a special payment plan, allowing them to skip two premium payments in a row with no penalty."
  • "Progressive announced it will be offering customers an automatic credit on both April and May premiums. “If you have an active personal auto policy at the end of April or May, you will be receiving a 20% premium credit.” It will be offering assistance to make sure customers don’t lose coverage during this crisis. “Starting April 1, 2020, we’ll waive late fees and hold off on canceling or non-renewing any active policies due to non-payment through May 15, 2020.”"
  • "USAA recently announced: “Every member with an auto insurance policy in effect as of March 31, 2020, will receive a 20% credit on two months of premiums in the coming weeks.” USAA’s website confirms its response to COVID-19: “Special payment arrangements are available to assist members experiencing financial difficulties. USAA will not cancel members’ auto or property insurance policies or charge fees due to late payments on USAA auto and property insurance coverage through June 17, 2020. Expanded auto insurance coverage for members who use their personal vehicles to deliver food, medicine and other goods for commercial purposes.”"
  • "Liberty Mutual personal auto insurance policyholders “will receive a 15% refund on two months of their auto premiums, as of April 7, 2020, pending regulatory approval.” It will also be providing payment flexibility for those in need “and have temporarily paused personal auto & home coverage cancellations due to non-payment from March 23 through May 22, 2020, or later as directed by your state.” You can reach out to customer support for assistance if needed."
  • "If you have a Farmers or 21st Century auto insurance policy that was active on April 1, you are eligible to receive a “25% personal auto premium credit.” It is also “providing additional time to pay while still maintaining your coverage,” but cautions that any deferred payments will accumulate if unpaid and become due “when normal billing operations resume.” "
Quotes
  • "One of the most fascinating areas of growth is mobile-based data collection, or the use of smartphones to learn more about driver behavior. It’s no longer a secret: usage-based insurance (UBI) and insurance telematics are completely changing how the insurance industry functions with expected customer demands for UBI to grow over 140 million subscribers globally by 2023 and over $700 billion in revenue through car data monetization by 2030."
  • "Telematics devices installed in a vehicle allow an insurance provider to have more precise information to rate driver’s premiums such as on-road activity (including braking and cornering speed or acceleration), the time of day when driving, and the amount of time spent behind the wheel."
  • "The advantages of smartphone telematics and Behavior-Based Insurance (BBI) programs are fairly obvious: insurance providers can identify and understand risks by gaining a more accurate glimpse of how their clients actually behave behind the wheel. They can also limit their exposure to risks through loss prevention techniques by understanding when and where clients drive, helping them determine who should be paying more, and who should be paying less, for automotive insurance."
  • "One of the most exciting options for telematics data collection is mobile, or the use of smartphones. There are a number of clear advantages to this system, starting with the elimination of hardware costs for insurers. Whereas OBD-II programs require the insurance provider to purchase and distribute telematics devices that clients can install in their vehicles, the mobile option employs a client’s own mobile device."