One of the big issues that came up time and again as the life insurance industry examined its well-being amid years of economic growth is why millennials weren't as fervent about buying coverage. Previous generations had been relatively eager to purchase the life insurance they and their growing families needed. By and large, this just wasn't true for millennials, who were often highlighted as being dramatically underinsured in study after study.
Now, as the first wave of millennials approaches the notable life milestone of turning 40, things may be changing. However, a recent IBM iX survey shows that for both those younger adults and insurers alike, some challenges remain while others are being cleared up. For instance, more than 2 in 3 indicated the cost of coverage was no longer a concern for them, and slightly more than half had at least some kind of long-term financial coverage (39% reported having term policies, and 13% indicated they had annuities, compared with 50% who still say they have no coverage).
Close to half — 46% — noted that they didn't really know how to obtain a policy, or didn't see the need to do so. However, 70% of respondents said they would be "likely" or "very likely" to obtain coverage if they could more clearly understand what was being offered or how it benefited them and their loved ones. Nearly as many said they would do so if the process of obtaining the coverage was simpler or faster.
Problems of perception
As has so often been the case with millennials, the recent financial climate may not be conducive to many millennials diving into the life insurance realm just yet, and some are actually falling back out. Data from LIMRA and Life Happens surveys suggest that among lower- and middle-class families, there are many financial challenges that they believe preclude them from obtaining coverage.
In a survey of households that earn less than $100,000 annually conducted before the novel coronavirus hit the U.S., two-thirds of respondents said they had other, more pressing financial priorities besides life insurance. More than half said they were unsure of how much coverage to buy, or the type of policy that best suited them. Almost 2 in 3 said they felt such coverage was too expensive — but as is often the case with these kinds of surveys, consumers tend to dramatically overestimate the cost of such policies. Half of millennials participating in the poll told LIMRA they believed the cost of a $250,000 sought by a mostly healthy 30-year-old buyer would cost about $1,000 annually, when the real number is roughly $160.
Setting themselves up for success
Interestingly, perceived shortcomings don't apply only when it comes to seeking coverage. More than half of millennials — 55% — responded to a recent survey from the National Association of Insurance Commissioners saying they knew, definitively, that they are listed as the beneficiary of someone else's life insurance policy. However, just 30% reported having more knowledge than that basic fact.
For instance, 29% of those polled said they knew where the policy was kept, 30% knew the insurance company in question and 26% were aware of the value of their benefit. The NAIC notes that it is vital for them to have such information so that they can get the full value of the policies that should be due to them, but insurers might need to play a larger role in educating both insureds and beneficiaries of such coverage as to why that information is so important.
A shifting landscape
This all comes as younger adults are changing the game for financial professionals. For instance, in a recent poll from AIG, respondents who are between 30 and 45 said they are far more likely than older generations to discuss their physical health with an advisor (78% to 60%). Likewise, 72% of younger respondents said they would be willing to discuss the finances of family members, and 92% say their housing situation would certainly come up in such conversations. Older respondents were less likely to do either.
However, millennials and younger Gen-Xers were actually less likely than older generations to feel their financial advisor should understand their unique financial and life goals. Instead, when it comes to remaining satisfied with the relationship, younger respondents seemed more interested in that professional's network and their personality.
Clearly, then, this is another issue of insurers simply not doing as much as they might have to in order to better connect with millennials. Especially as more of them enter their late 30s, the need for life insurance coverage is only going to grow, and the sooner they seek it out, the better off they are likely to be. That's true in terms of getting the most affordable policies possible while still meeting their needs, but also when it comes to peace of mind.