September 2019

Introduction

The Federal Government’s “Putting Members’ Interests First” Bill, which was originally put on hold in April 2019, was recently reintroduced in Parliament with a proposed commencement date of 1st October, 2019. These reforms aim to ensure that low balance and inactive superannuation accounts are not inappropriately eroded by fees and insurance premiums, with the next phase focusing on the removal of life insurance cover for members below 25 years of age with less than $6,000 balances. If this goes ahead, it will be more crucial than ever to focus on boosting the engagement of members below the age of 25, who most commonly rely on the default insurance cover through their superannuation accounts as opposed to engaging with insurance through retail advised channels.

The challenge for insurers and superannuation Trustees is that young people are typically disengaged with life insurance and the process of purchasing a policy or managing life insurance through different life stages can be perceived as mundane life administration. Herein lies an opportunity for the insurance industry to revisit the way we engage with this group and strive to ensure the future experience is seamless, relevant and interesting for this segment of the market.

Considering this, Pacific Life Re conducted consumer research through a third-party, surveying across all age groups to understand what kind of service they expect to receive in relation to their insurance in the hope to better understand the preferences of the younger demographic. In the survey, there was clear evidence that younger age groups differed from other age groups in how they perceive and want to deal with insurance.

August 2018

Youth trends:Life insurance in Australia—Pacific Life Re

The key insights from our research suggest that respondents between 18-24 years of age:

• Have confidence in insurers and their ability to meet community expectations

• Have a preference to purchase, engage with and make insurance claims through online channels

• Would be likely to consider using a price comparison website to purchase life insurance

• Would appreciate financial advice being offered as part of their insurance product, particularly as part of a potential claim

Industry confidenceThese younger respondents most strongly believe that insurers are transparent, offer high quality products and have their customers’ best interests at heart. This could be attributed to insurers’ more recent efforts to boost engagement with their customers and offer additional benefits such as wellness programs.

This younger age group most strongly believes that insurers, including those acting on behalf of superannuation funds, are trustworthy and deal with customers fairly. It is promising that younger people have this perception of insurers, considering the survey results also demonstrated that these respondents place greater importance on a trustworthy brand and good customer service than on low prices. However, it is essential for insurers to understand the needs and choices of this age group to ensure this level of trust continues.

“... respondents place greater importance on a trustworthy brand and good customer service than on low prices...”

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Source: Pacific Life Re analysis of market information

Rating towards the trustworthiness of insurance product or service

While there is a trust gap between the younger and older generations, our research suggests that this could be bridged through further improving customer service and brand perception. For example, sharing good news stories through customer case studies and more transparent sharing of the societal benefit that insurance brings to the community, would generate public awareness about the positive role played by the insurance industry.

DistributionTo properly engage with a younger audience, it is imperative that we understand what is driving their buying decisions. Unsurprisingly, our research found that the main reasons for younger consumers buying life insurance include buying property and a change in earnings, which are particularly relevant for this stage of their lives.

Once we understand young people’s buying decisions, we need to make the purchasing process more relevant to their current consumer habits. As many companies are now learning, consumers take their best digital experiences in their day to day lives and expect this to apply to every situation. Purchasing insurance is being compared to purchasing from eBay or Amazon.

Youth trends: Life Insurance in Australia —

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We asked people how they would prefer to buy life insurance and close to 60 per cent of younger consumers said they would prefer to buy online. There was a rise in appetite for online when younger people were asked whether they would be likely to consider buying life insurance specifically through a comparison tool. Over 80 per cent of younger people are likely to use a comparison tool, compared to the older age groups who were a third less likely to consider using one. These results suggest that younger consumers trust the models for existing price comparison websites in the Australian market such as those commonly used for travel bookings or travel insurance purchases.

“...purchasing insurance is being compared to purchasing from eBay or Amazon...”

ClaimingWhen it comes to the process of lodging a claim for a life insurance policy, there is an overwhelming preference across all age groups to be able to lodge a claim online, rather than doing so through an adviser or via paper forms, which is the most commonly used lodgement method across the industry now.

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“...there is an overwhelming preference across all age groups to be able to lodge a claim online...”

Product design

We wanted to understand whether there was much appetite for financial advice being offered as a package with life insurance policies. Almost 80 per cent of younger respondents said that if they were to receive a pay-out from making a claim on their insurance policy, they would find financial advice useful. Financial advice is currently offered in some cases but only as a simple and one-off basis, not as a comprehensive benefit. There is clearly appetite for financial advice and thus potential for product innovation in this space.

Preferred way to lodge a life insurance claim

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We also found that most people, if making a claim on their policy, would prefer to be paid-out in regular instalments as opposed to one lump sum payment. Over 70 per cent of younger consumers would prefer regular instalments over a lump sum payment which demonstrates sensible and cautious financial planning, as they identify the risk of receiving and spending the total payment in a short period. The desire for regular instalments decreases with each age group but it is still a preferred option across all age groups.

Claim pay-out structure preference

The cohort that we surveyed included a mix of people that have and haven’t previously made a claim on their insurance policy. Across all age groups, it was those who have previously made a claim that said with hindsight, they would prefer to be paid in regular instalments rather than a lump sum for any future claims made.

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Final thoughts

Listening to consumers will help us to evolve our engagement methods, products, and technology offerings to better suit their changing needs. We are in an era where young consumers expect to engage immediately and at the touch of their fingertips. What is most important to these customers is the ability to engage throughout the lifecycle in this way, combined with a strong and likeable brand. These trump even a cheap price. It is our responsibility to provide products and services that can enable adequate insurance protection for young consumers, and these are the rules we need to play by.

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Youth trends: Life insurance in Australia —

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For more information about Pacific Life Re

please visit our website www.pacificlifere.com,

follow us on LinkedIn or contact —

Tyson Johnston Head of Client Solutions Pacific Life Re | Australia T: +61 (0) 404 276 726 E: tyson.johnston@pacificlifere.com

Pacific Life Re Limited (No. 825110) is registered in England and Wales and has its registered office at Tower Bridge House, St Katharine’s Way, London, E1W 1BA. Pacific Life Re Limited is authorised and regulated by the Financial Conduct Authority and Prudential Regulatory Authority in the United Kingdom (Reference Number 202620). The material contained in this booklet is for information purposes only. Pacific Life Re gives no assurance as to the completeness or accuracy of such material and accepts no responsibility for loss occasioned to any person acting or refraining from acting on the basis of such material.

©2019 Pacific Life Re Limited. All rights reserved.

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