Dubbed the smashed avocado generation, millennials are often painted as spendthrifts frittering away money rather than working to build a nest egg or buy life insurance.

But millennials are definitely a client group worth engaging, as they represent a rising majority in Australia’s economy, responsible for 44 per cent of the workforce and 31 per cent of the total spending.

Millennials will soon replace baby boomers as insurance’s biggest potential customer base. So how can financial planners bring insurance into the conversation and help younger clients understand its importance and value?

Low on the priority list

Despite their growing financial clout, researchⁱ by global reinsurance firm Gen Re shows millennials are in no rush to buy life cover. This reluctance is often due to an emphasis on the here-and-now of work and leisure, pushing insurance a long way down their list of priorities.

The traditional life stages that acted as nudges for past generations to buy life insurance also resonate less with millennials. The Gen Re survey found the key reason millennials were not buying life insurance was they thought they did not need it (25 per cent), followed by having no dependants (23 per cent) and no mortgage (13 per cent).

“Older clients have had lots of life experiences and have seen the impact on family and friends of various life events, so they are a lot more invested in the idea of insurance,” explains Peter Campbell CFP^®, Perth-based senior financial planner with Merideon Wealth Strategies.

The problem isn’t that younger clients are disinterested in insurance, but more that it’s something that have not really considered. “Insurance is not front of mind as they have generally not been introduced to it outside what is offered in their super fund,” he says.

With the main triggers for millennials to seek financial advice being debt reduction or investment strategies, there is usually little initial interest in insurance, but this can be changed fairly easily, Campbell suggests.

A generation under financial pressure

To understand why millennials have not embraced life insurance, it’s important to see the world from their perspective.

Despite their profligate stereotype, most millennials are fairly prudent when it comes to money management. But they do manage their money differently to their parents.

A recent surveyⁱⁱ by the Afterpay Touch Group found millennials are saving more than their parents and are 30 per cent more likely to save regularly. They are also careful money managers, with more than 80 per cent of millennials having a budget, compared to two-thirds of older generations.

This financial prudence tallies with Campbell’s experience. “I find the average millennial is living within, or just over, their means before they seek financial advice.”

With millennials facing greater financial pressures than their parents, a reluctance to commit to costly insurance contracts is understandable.

It’s a view Adele Martin CFP^®, founder of Firefly Wealth and The Savings Squad, is familiar with. “Often younger clients see value in insurance, but worry how they would afford it. They are often trying to save for a house, have a mortgage, or start a family, and may not have a lot of cash to throw around,” she says.

This is coupled with a belief they have plenty of time.

“Most millennials think they can just get insurance later. I explain to them that often their health – or that of their immediate family – can impact their ability to obtain cover,” Martin notes.

Getting millennials to engage

Despite millennials’ initial reluctance to purchase life cover, they are not completely against insurance. The Gen Re study found although only 16 per cent of millennials had purchased life insurance, they held other types. Travel insurance was the most common (58 per cent), followed by home contents (54 per cent) and private medical insurance (37 per cent).

“Getting millennial clients engaged with insurance is not so hard if you educate them about the value of protecting their current financial situation,” Campbell notes.

“I say to them, ‘If you lost your income tomorrow, what would you do?’, or ‘What would your spouse do to feed your kids if they are not in a position to earn a similar level of income to you?’ That makes it an immediate concern for the client and easier to see the value of insurance protection.”

For Martin, it’s about creating a relatable mental picture. “I use the analogy ‘If you had a machine in your garage and it spat out money, would you want to have that machine insured? Everyone says yes. I then say that’s what you are, a machine that makes money and that’s why we want to have you insured.”

Using emotion and empathy

Helping younger clients understand what could happen is vital.

“Millennials say it won’t happen to me, but I use my younger age and say I have seen people with heart conditions etcetera at a very young age,” Campbell explains.

Tapping into emotion is an important strategy. “I show them statistics and the chances of it occurring,” Martin says.

“It’s even better when you personalise it. For example, using their name and date of birth to show them their likelihood of claiming on death, TPD and income protection insurance before age 65.”

Once the client is engaged with the idea of insurance, she addresses the cost issue. “As a planner it’s my job to help show them they can afford it. So I look at how they might be able to fund some of it from superannuation and the pros and cons of this,” she says.

“If they are paying for it personally, I take the time to understand their budget and whether they can afford it.

Making insurance simple 

Millennials look for help in navigating the purchase process. The complex route to taking out a policy is unappealing for a group more familiar with frictionless electronic shopping.

A recent surveyⁱⁱⁱ by IBM iX found millennials are interested in life insurance, but cite confusion around policy specifics as a significant barrier to purchase. Hurdles such as paperwork and doctor’s appointments were a deterrent for 23 per cent, while another 28 per cent said they could not find the time involved.

To overcome this, planners need to clearly explain the insurance process, Martin says. “They need to keep the client updated weekly about where their plan or insurance is up to. Communication is key.”

Establishing a standardised strategy also helps.

“I also think it’s good to have a company policy for insurance. For example, ‘We recommend income protection in your own name because of X and we like to have a level premium for trauma because of Y’,” she notes.

“I find this a great starting point for the discussion and helps clients feel less overwhelmed with the choices.”

Campbell emphasises to millennials that his job is to set them up for the longterm. “I say, ‘We are not trying to jinx you by saying you could get sick or die. We want to help you by buying insurance for 30 years from now.”

Providing additional value

Another useful tool when working with millennials can be insurerbased wellness programs.

The AIA Vitality program, for example, helps drive engagement by providing millennials with additional value from their cover. Participants receive points for efforts to improve their health, such as completing online health assessments, tracking their nutrition, or counting daily steps.

These points build their AIA Vitality status and provide access to rewards such as discounted insurance premiums and gym memberships, as well as cashback on shopping, entertainment and travel.

From the planner perspective, offering access to programs like AIA Vitality can demonstrate to younger clients that you care about their wellbeing and helps you position your advice as proactive and client-focused.

“AIA Vitality is a useful tool – especially for clients who are healthy and interested in their health. They get rewarded for what they are already doing, so it works well with this group,” Campbell says.

“They also see it as a way to keep themselves accountable for their health goals and they can regularly check how their health is going. It provides them with greater peace of mind about their health.”

As with any product, the AIA Vitality program needs to be right for each client’s situation.

“It’s a good program, but it’s not for everyone. If they are incredibly busy it can be a detractor, as some clients don’t want more pressure in their lives,” explains Campbell.

To succeed, these programs need ongoing practice involvement.

“If you use an AIA Vitality-type program, you need to have a strong process in the business to do it well, as there are membership fees attached and people need to maintain their points to get the discounts,” Campbell notes.

“The practice needs to have a process to send communications at least annually to check the client has done what is necessary. An automated reminder is easy to implement and will be seen as a value add communication from the practice.”

By sending regular communications about insurance, planners can reinforce to their millennial clients that insurance protection is a key part of their financial plan. It also helps to emphasise the value and peace of mind well structured insurance cover can provide.

Tips for getting millennial engagement with insurance

Educate clients on what insurance cover provides and how it can help achieve their goals.

Ask questions about how the client would deal with losing their income.

Create mental images to make concerns real, such as how their spouse would cope financially.

Improve efficiency by sending educational and information prior to the insurance meeting.

Provide a step-by-step explanation of underwriting and emphasise ongoing communication through to acceptance.

Use standardised recommendations to start the conversation and reduce ‘choice overload’.

Ensure clients understand exactly what their policy covers.

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What do millennials think about insurance?

50 per cent wish their spouse/partner had more coverage

27 per cent say they need more life insurance than they have

73 per cent say it’s too expensive

80 per cent overestimate its cost

42 per cent say they wouldn’t qualify

50 per cent say no one has approached them about buying it

52 per cent don’t like to think about death

58 per cent say they haven’t got around to it

What would help millennials get coverage?

8 in 10 want something that’s easy to understand

7 in 10 want to talk to someone about their life insurance needs

7 in 10 see life insurance with simplified underwriting (no medical testing) as appealing

Source: 2017 Insurance Barometer Study, Life Happens and LIMRA