Make Sure You Know How to Speak to Young People

IN ORDER TO REACH THE MILLENNIAL TARGET GROUP, INSURANCE COMPANIES MUST RENOVATE THEIR PRODUCT PORTFOLIO, AND UPDATE THE LANGUAGE AND MEDIA OF THEIR BUSINESS COMMUNICATION

by Patrizia Contaldo and Sergio Paci
Translated by Alex Foti

Millennials and Generation Y are two labels attached to the generation that has grown up in times of global economic crisis. Youngsters are plagued by uncertainty and either transform their natural propensity to risk from generational attitude into market skill or lose their sense of purpose and faith in the future.

Bocconi's Baffi Carefin research center has studied how younger generations perceive risk and adequacy of supply and communication in reference to the products targeted to them by the insurance industry. Conducting a survey on 1,000 young people, half in the 18-24 age bracket, half comprised between 25 and 34 years of age, we found that job loss and low income in old age are risks the Italian youth feels very much exposed to. Such perception is positively correlated with age. The social security issue is perceived as a very significant risk in both age brackets: also the very young feel worried they will have low pensions when they grow old.

Segmenting data by gender, we found that young women are more preoccupied than their male peers with respect to health and social security. Also, they perceive a lower possibility of preventing such risks, and feel less protected by the state. It is thus indispensable that government agencies, universities, and other institutions do continuous education to inform the Italian youth about the social security system, which is characterized by a rapidly evolving regulatory framework, in order to make them aware of appropriate risk management.

Currently, there is little market penetration of this target by the insurance industry, with the exception of car and motorcycle insurance: 50% of those under 25 are not covered by any form of insurance. Economic constraints and the inability of properly appraising cost-benefit ratios are the main reasons that prevent young people from underwriting insurance policies. The empirical analysis conducted on the supply of insurance products targeted toward the young market, which was made possible by the collaboration of a team of graduating students, highlights a yawning communication gap that the insurance industry has all the interest to fill if it wants to address the youth.

Product supply should take into account the needs of a clientele that jumps from job to job and has intermittent income, and thus needs competitive pricing and flexibility in premium payments. Communication still focuses on feel-good messages, revolving around the generic need for protection, and broadcasted across old media. It should then be completely overhauled. Today young consumers expect messages that make a product's advantages clear to understand, by using open communication codes that combine alphanumeric text, symbols, visuals, and icons to get the information across. The medium of choice should definitely be the web, which favors personal emotion but spurns lofty idealization, and amplifies the word-of-mouth circulating on the street. Also, the web enables companies to offer personalized products at competitive prices.

The key element to sustain the conversation with consumers is trust. Young people are aware that the state will no longer be able to offer the certitudes on health and pensions that prior generations enjoyed. Mutuality in the insurance system can find through communities and their engagement a new way to fulfill its role in society. Companies can decide to make young people co-creators of insurance products tailored to their needs and inform them about their risk profiles, thereby creating value for all the stakeholders involved.

Trust can only be built if information asymmetry is contained, for instance by simplifying the supply of financial products, also the language in which they are expressed, and changing inherited ways to communicate with and relate to the market being targeted. In this respect, the case of the Dutch insurance company Kroodle is an example of high customer involvement and proximity to the target that could provide useful tips to the rest of the industry.