Mind the generation gap

The debate between buying insurance according to price versus advice has raised its head again. This time, Biba has published new findings revealing what it considers to be a worrying trend among young

people buying insurance.

 The survey shows that while 76% of those aged 18 to 24 believe that seeking advice is important when buying insurance, 46% continue to make their insurance purchasing decision based solely on price.

Furthermore, almost a half of younger people believe that buying insurance online is easy, commenting that “you just click a few buttons and then you can relax because you’re covered”.

What is wrong with that you may say? And how does this differ from what young people have done in the past? Probably not a lot.

But Biba is concerned that these habits are in stark contrast to those aged 25 and over. The concern is understandable from a Biba and broker perspective: how can the broker survive if the next generation of insurance buyers ignores brokers completely and only buys online?

Generation gap

Biba chief executive Eric Galbraith says: “We have real concerns about the generation gap that seems to be developing. These results show there is a real discrepancy between younger people’s understanding of insurance, and their actual purchasing habits.

“Biba is concerned younger people are purchasing cheap insurance products, without ensuring they have the correct cover, excess, premium or instalment plan for them.”

Value, adds Galbraith, is not only dependent on price, but also on the product that best meets consumer needs.

But hang on, how much insurance do young people really need? If they are at

university or in their first job how much do they own? An iPod, a stereo, a laptop perhaps? But not much else. If that’s the case, is it worth the broker’s effort to get involved?

In the long-run, as Galbraith indicates, yes, because today’s young people are tomorrow’s home buyers and car owners etc.

But brokers need to understand what young people need and how. According to Mike Stanley, marketing director of personal lines broker OutRight, the average 18-24 year old earns under £250 week with those aged 22 to 29 earning around £375 weekly. “It should therefore come as no surprise that they base much of their buying decision on price. They are also used to buying online, and I would suggest that this will be the preferred method of purchase going forward.”

So although in an ideal world, young people should use a broker, you can see why they don’t. Though Galbraith warns: “We live in a fast moving society and it is all too easy to believe that the touch of a button will provide appropriate cover. This however is no substitute for independent, expert advice.”

“With the right technology, brokers can have a more compelling proposition
than a single policy direct writer

Mike Stanley, OutRight

These are good sentiments, but surely

brokers should be moving with the times and getting online themselves. That is how brokers could plug into the younger market.

“This does not exclude brokers,” says Stanley. “With the right technology, they [brokers] can have a more compelling proposition than a single policy direct writer.

“With respect to the cover required, the average younger person needs a more basic policy and therefore many of the cheaper policies are entirely appropriate, but it is our duty as a broker to ensure that the cover meets their needs.”

And Galbraith adds: “Most brokers have websites that offer choice and quotation facilities accompanied with free advice to consumers before they press the buy button. This could ensure the correct cover and save young people millions.

“The ability to buy online is a method many people use to buy insurance protection, but consumers must ensure they are getting the right product for their demands and needs.”

Galbraith does have a point. In a market environment where business has become commoditised and everything is becoming similar, price, delivery, service and professionalism – the new battleground for differentiating sales – is the client experience. Here the broker has a huge role to play here and

benefit as a result.

According to consultant Andy Chemney, from Chemney Consulting, brokers need to embrace technology to exploit their position. He lists regular personalised e-mails generated by intelligent software, newsletters detailing a broker’s activities, intimate seminars that delve into the details and proactive client calls to touch base are the way to go forward.

Chemney says: “The insurance market spends an inordinate amount of time refining the physical process of dealing with clients via Imarket, software house functioning and insurer extranets. The emotional process is neglected.”

Brokers with a technology focus, and one based on a friendly open relationship as if it were face-to-face is what Chemney calls

e-loyalty. “E-loyalty allows brokers with

limited resources to take advantage of the trend towards e-mail communication between clients and work on their contact strategy.”

If is an often repeated statement: brokers must embrace technology more. And with the stark statistics offered by Biba in regards to young people buying insurance online, there is not a moment for the brokers to lose. IT