The insurance industry is undergoing a transformation - it is a vastly different landscape from a few years ago with the digital evolution and shifting demographics.
We are seeing an emerging segment of a new generation of consumers – millennials, who make up almost a quarter of Singapore’s total population1. They are increasingly sophisticated and discerning, and are digital natives.
Getting into their heads and into their lives has become the top priority of many insurers and a study we did in 2018 2 uncovered some key insights that have helped us better meet their needs through their life journeys.
Decoding millennials’ mindsets
- What they value – In analysing the values and lifestyles of millennials, we found that millennials embrace experiences over materialism, with great emphasis on family. 81% of respondents said that gaining a new experience matters more than material possession; while devoting time to children is as important as pursuing dreams. Many said they prioritized planning protection for their loved ones over themselves. Health is also a top concern among millennials, with 49% indicating that they worry most about being diagnosed with a critical illness.
- Their aspirations – Millennials’ key aspiration in life is to have enough money to afford their desired lifestyles. 75% of millennials polled said they would choose to start saving or save more – as compared to aiming for higher salaries or additional income – in order to achieve their top aspirations.
- Their saving goals – Ambitious and driven, more than 8-in-10 millennials said they plan their finances before they are 30. While millennials are aware that savings will help them achieve their financial goals, many are not maximising the returns on their savings. 82% of millennials polled said they would invest more if they had more money but did not know where to start.
- Perceptions linked to life stages – The study found that the need for financial planning comes mostly with entering new phases of life, such as starting a new job, marriage, or purchasing a first house. The focus of millennials’ financial planning also differs based on priorities, such as wealth accumulation or protection.
- Insurance policies – When it comes to including insurance in their financial mix, close to 1-in-2 millennials intend to buy an insurance policy in the next 12 months, with 42% seeking insurance savings plans. Having products specially customised to their needs was also crucial, such as with endowment products for lifelong learning (50%) and to be insured against retrenchment (52%). The study also revealed that health and medical insurance are the top insurance policies that millennials currently own or intend to purchase.
What this means for insurers
All this tells us that there is often a gap between millennials’ expectations towards financial planning and the actions they should be taking to meet them. And we can help them bridge this gap by first closely understanding their needs, being the trusted face that presents them with viable solutions.
For example, we found that millennials aspire towards basic protection before building assets, with a desire for products that are customisable to their changing needs. This trend is also consistent with the increasing demand for financial flexibility and payouts that we are seeing in the market.
While millennials are aware of the importance of saving, most worry about unforeseen circumstances such as illness and are lacking confidence in their abilities to cope with the financial burden that might arise from the circumstances. This indicates a real need for insurers to step in and help millennials take their first step in financial planning.
So how can we help them along the way?
- Life Insurance – Depending on budget and preference, millennials can consider introducing life insurance into their financial mix to plan for the future, given that family is a key priority for many of them.
- Endowment plan – To extend financial mileage, endowment plans can offer holders a steady stream of monthly cashflow. This is suitable for those who are looking for flexibility in their payouts that can cater to changing life goals and milestones. An example of this is TMLS’s TM Nest Egg (FlexiSaver), which was developed to allow that flexibility for millennials.
- Health Insurance – As health is a top concern among Singaporean millennials, we should be looking at comprehensive protection against critical illness and disability. We should help millennials understand that hospitalisation and surgical insurance is essential to guard against unforeseen circumstances and cover hefty hospitalisation and treatment costs.
Encouraging healthy financial habits
As insurers, we have the responsibility of helping consumers make the right choices for themselves. This means arming them with the relevant information and advice to make that decision. And this can start with a few simple financial tips.
Firstly, help them track and control spending habits. In order to set funds aside for savings, millennials should first be aware of how much they are spending and control unnecessary expenditure so that more can be allocated to savings.
Secondly, encourage them to start young and not to delay. Not only are insurance premiums cheaper when they start young, millennials are also planning ahead for the future, e.g. for their first big-ticket purchase such as planning for a wedding or buying a house.
Last but not least, be that expert on millennials. While millennials are digitally savvy, buying a policy still entails face-to-face interaction and understanding from a trusted advisor. He or she should fully understand the needs and desires of millennials, bringing in fresh ideas and tailored solutions, considering that they are different from past generations and have less traditional financial mindsets.
This article is contributed by Christopher Teo, Chief Executive, Tokio Marine Life Insurance Singapore.