The lost generation is finding its way, but will have difficulty making up for lost time.
That generation is the much-examined and somewhat-maligned millennials. Robert Kerzner, CEO of LIMRA, said the insurance industry must understand that the millennials are changing everything.
That is one the themes of a presentation Kerzner is giving this morning to open the LIMRA annual conference in Chicago, which has a record attendance with more than 1,000 present. The talk, “The Age Dichotomy: How Boomers and Millennials Are Changing Everything,” includes the baby boomers, who are doing their own societal-shaking thing.
But Kerzner opens his presentation with the millennials because they are becoming better understood. And what is being learned is a little alarming.
“They are later at taking on certain responsibilities than we were, whether it is buying a house or having children,” Kerzner said of the generation between the ages of 19 and 35. “They're five to seven years behind the curve.”
That gap fits in with the approximate length of the Great Recession, the worst economic downturn since the Great Depression that their grandparents endured.
But when the Silent Generation started to build wealth after World War II, they began with nothing. That certainly sounds difficult, but millennials are starting from an even worse position.
“We need to recognize that they have the highest debt in history at about $28,500,” Kerzner said. “Our researchers have calculated that out and found that they have $300,000-plus less, that they’re that short of starting behind the eight ball toward retirement.”
Throw in some other factors, such as the decline of defined benefit plans, and you have the makings of a crisis.
“They need us more than prior generations,” Kerzner said, adding that they aren’t that into the nuts and bolts of dollars and cents. “They acknowledge that they are really not very knowledgeable about all things financial. And, to be honest, some of them don't care much about it. That just doesn't interest them.”
But the news isn’t all dire. Millennials share traits with the Silent Generation in that they are cautious and appreciate the protection afforded by insurance.
“They are more risk-averse than prior generations because their formative years were very much in the midst of two tumultuous economic times,” Kerzner said. “So they are more inclined toward our products. They're less interested in the stock market than, say, the boomers were.”
So, as they build their families, they want the coverage.
“We're seeing that as they buy homes and have children, they are purchasing at levels of prior generations. So it's a matter of timing."
It’s also a matter of values and communication. For example, they are not so into owning. Just what they need, when they need it.
“It’s the sharing economy,” he said. “It's renting the bicycle when they need it, or it's even car-sharing. So they very much are different than prior generations in that way, but our products don't work that way. You need the insurance in advance.”
The sharing extends to the rest of life, too: “They like working collaboratively. They have a high degree of social interest. So there are a lot of reasons that we should be able to capture them.”
That means different ways of approaching this demographic. Gamification is one of those ways along with understanding that millennials will want to find information on their own before they speak to an advisor. But they will want to talk to an advisor, according to research.
Once millennials are at the table, what can they do? Millennials are unlikely to have lump sums to place into products and accounts, so that leads Kerzner to bring up a favorite topic: systematic saving.
“When I came into the business, a lot of middle-class Americans were buying whole life and endowments because they were ways that they could put money aside systematically,” he said. “People had Christmas clubs where they literally went to the bank and put in money. For middle-class Americans, they often pay everybody else first and they don't save systematically for themselves.”
Just like the millennials harken back to a previous generation, their financial needs inspire a bit of nostalgia for Kerzner.
“In the early days, if you think about the old American Express model with its producers, they really taught people how to save systematically in a mutual fund,” he said. “Going back 25, 30 years in the industry, whether it was wholelife or the early mutual fund industry, it was always about systematic saving.”
Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].
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