How can insurers reach Gen Z?

The eldest of Gen Z, or the generation of those born between 1997 and 2012 according to the Pew Research Center, are entering their mid 20s, and these young individuals have already faced great economic pressures since entering the workforce. The COVID-19 pandemic, rising inflation and an imminent recession transformed Gen Z's shopping trends, behaviors and expectations – and as Gen Z's spending power rises, insurance companies must be ready to adapt for these young consumers.

Internet and technology

Individuals of this generation, defined as "digital natives," have never known a world without the internet or smartphones. This familiarity with the internet and technology likely carries over into their shopping tendencies and how they interact with insurance, according to experts. In a Travelers Institute webinar, "Meet Gen Z: Your Next Customer and Colleague," held on Sept. 14, 2022, Travelers Assistant Vice President of Market Research Jacqui Heidelberger said that for Gen Z, the internet is one of their most valuable resources. 

"What you need to know is that Gen Z, every single one of them, was born post-internet. They were all born after the internet had become a mainstream, household concept," Heidelberger said in the webinar. "They're internet locals. It's a utility, just like heat, water or electricity."

Nationwide's Vice President of Personal Lines Alt Distribution, Lisa Gobber, adds, "We do see a stronger interest in digital self-service and capabilities to be able to access things like insurance, ID cards and other things from a mobile app."

Chris Rzany, assistant vice president of strategy at Fidelity Life also notes that most Gen Z consumers engage with insurance through the internet or digitally researching insurance options, shopping for different coverages or interacting with their policies.

"These are consumers, the first generation, literally, that's grown up with access to the internet during their entire lifetime. And I think that leads to some differences in how Gen Z consumers wish to shop for life insurance and how they consume information and how they learn, especially in the 'consideration' phase of their customer journey," Rzany states.

Some may assume that these digital natives would prefer a solely digital experience when dealing with insurance; however, Rzany finds that this is not always the case.

"Gen Z wants options...I think it's important that we, in the industry, realize that we're going to meet the preferences and needs of Gen Z, which in three years will be the largest consumer generation in the United States," states Rzany. "That will be the market in a few years, then we need to make available options and meet the consumer where they're at. And for some consumers, that means all online. For some consumers, that means over the phone. And for all consumers, it means we need to really provide great resources and education on the concept."

Price and inflation

The Nationwide Economic Pressures survey, published in October, finds that Gen Z consumers prioritize the price of their insurance – inflation and rising costs likely contribute to the financial pressures many are facing, forcing them to shop for coverage elsewhere, or cut coverage altogether. The survey indicates that 56% of consumers plan to search for ways to save money on existing premiums, and 63% of consumers have already reviewed or plan to review their insurance policies with an insurance agent in the next six months. The report also finds that 33% of Gen Z has removed or plans to remove an insurance policy from their coverage, compared to the reported 23% of the general population of consumers. 

"Consumers are reconsidering their insurance coverage given a tough economy, and so many have looked or indicated that they will be looking for ways to save premium…A surprising or interesting stat is that 37% of Gen Z respondents indicated or reported that they have either already decreased or plan to decrease their coverage in the next six months and that's compared to about 26% of the general population," Gobber explains. "I think what the survey told us is that consumers are still looking for a good value for their dollar. And, of course, that's even more heightened with the economic uncertainty. 

A 2021-2022 study, "Gen Z as Employees and Workforce Trendsetters," by the Center for Generational Kinetics, reports that 70% of Gen Z individuals find it important to invest in retirement and that 30% have started contributing to a retirement plan for a secure future.

"Gen Z consumers are actually more likely to be financially conservative than their older counterparts…It makes sense because [for] Gen Z consumers, they've seen their Gen X parents live through two recessions, struggle in the financial crisis in the first decade of the 21st century, struggle post-pandemic or during the pandemic struggle, dealing with multiple financial priorities," says Rzany. "And so they've seen this as children, have grown up with this. And so I think that contributes to this financial conservatism that they have."

Mental health and financial well-being

The Nationwide Economic Pressure report also notes that financial concerns are negatively impacting Gen Z consumers' mental health – 64% feel affected by inflation and 54% by uncertainty in the economy. Further, Gen Z individuals tend to feel less financially prepared for a recession than other generations, with a response of 37% of the general population feeling prepared and only 23% of Gen Z.  

Research from LIMRA also supports that Gen Z feels especially impacted by financial concerns, with 35% of Gen Z employees indicating that financial worries distract them at work compared to the 30% of Millennials, 19% of Gen X and 8% of Baby Boomers. LIMRA's data also shows that Gen Z individuals score lower than other generations on its Financial Wellness Index, which scores consumer financial wellness. 

"Insurance prices are really driven largely by the cost for repairs," says Gobber. "And so inflation itself often plays a pretty meaningful role in increasing pricing, as opposed to recessionary cycles or other things. And so, that's the hard part, because the entire industry is facing headwinds from inflation, supply chain, etc…" 

Gobber suggests a number of different ways to respond to rising costs that can help Gen Z consumers reduce or manage their insurance costs.

"I think the biggest thing that we can do is to make sure that customers know that to the extent that they're interested in talking with their agent or looking at ways to save such as usage-based insurance [or] bundling their home and auto," Gobber explains. "We've got to respond to inflation so that we can maintain the necessary capital to meet the needs of our customers overall. But we're just making sure that our agents and others are well-versed on some of those items that could help control costs. And it's important for Gen Z, but it's important for everybody."