The common refrain in the life insurance industry over the past few years has been that it's vital for companies to do more to connect with young adults. As millennials age into their early and mid-30s, they have an ever-growing need for such coverage, and generally are starting to recognize that fact. Consequently, they are now starting to increase their participation in these mutually beneficial relationships with life insurers.
Today, fewer than 60 percent of American adults have a life insurance policy, down from 77 percent as recently as 1989. There are only 27 million policies held nationwide, according to Bloomberg View. This comes at a time when economic indicators don't show why there should have been such a drop-off in enrollment.
This issue is seen at all income levels, among all age groups, and across education gaps, the report said. Changes to the way the life insurance industry itself operates could explain some of the declines, but at the same time, it seems that those who do buy life insurance are buying more of it than they ever have before. This may highlight the fact that once insurers can connect with consumers, they are able to quickly communicate just how valuable coverage can be.
Bridging the gap
Life insurance companies are working to connect with millennials on ways they may be able to boost engagement among young adults and provide a mutually beneficial relationship, according to Creighton University. At Creighton's RaD Lab, among a number of other organizations, young adults created a way to "gamify" the idea of life insurance as a way of engaging millennials and helping them estimate their need for coverage in the event of major life changes via a web-based app that functions much like a board game.
"We joke about it, but looking back, we did design it sort of like the game of Life," said Creighton senior Nye Fong, who worked on the project and recently presented it to industry executives. "It's not just a simple calculator, but it allows you to push and pull a little bit and think about how and when events are going to unfold. You can think about what happens if you get married at this point or go back to school at another point and what the costs are and what different levels of services are there."
Understanding the value
There is, however, plenty of evidence to suggest that young adults mostly understand why life insurance can be valuable to them as their financial needs grow and change after getting married, having a child or buying a home. However, they also tend to dramatically overestimate just how much this coverage can cost, according to NerdWallet.
As a consequence, outreach is necessary not only to help young people see why life insurance can work for them, but what it will actually cost them each year and how that might fit into their monthly budgets, the report said. If term life insurance typically costs only a few hundred dollars a year, and nearly half of millennials think the number is several times that amount, it's vital to overcome this misconception sooner rather than later. The cost of coverage only rises as people age, so when millennials can lock in their policies relatively early, they're likely to save a potentially large amount of money in the long run.
Outreach efforts doesn't always focus on helping young adults fully understand the actual cost of coverage. However, given that is often cited as one of their primary concerns, that may be the best area for life insurers to address. That, in turn, could help them develop the kinds of relationships that end up paying off for all involved over the course of decades.