Millennials have been under discussion for quite a while now as this group of people are a new group of clients we are trying to understand and do business with. The reality is that there are several characteristics that need to be taken into account when dealing with these clients.
According to Discovery, urgent attention needs to be paid to providing advice to Millennials as there is already a visible insurance gap, and this gap is growing quite significantly.
Speaking at a recently held media round-table, Gareth Friedlander – Head of Research and Development at Discovery – pointed out that just like a good house, good financial futures need to be built on a solid foundation of sound decision making. These decisions ideally need to be made early on in life.
However, we are aware of the challenges our clients face. “Discovery looked at underinsurance amongst Millennials within the context of the figures published by the Association of Savings and Investments South Africa (ASISA). ASISA reports that there is an insurance gap of R28 trillion in South Africa; we believe that R9 trillion of this can be attributed to Millennials,” said Friedlander.
Friedlander pointed out that there are significant reasons why Millennials should purchase insurance.
"The first factor is that there is a lack of meaningful savings among this group. Discovery's research pointed out that only 35% of Millennials are saving for the long term with 46% of Millennials having nothing in their savings accounts," said Friedlander.
The second important factor is that Millennials are overburdened with debt. The Discovery research points out that 64% of Millennials have some form of personal loan.
The third important factor is that 58% of young adults are expected to look after their parents. This also falls perilously close to these Millennials falling within the sandwich generation when they want to start their own families.
“This research proves that it is a misconception to think that insurance is unnecessary in your twenties,” said Friedlander.
While Discovery has established that there is a need for Millennials to take out insurance, there are mitigating factors which influence the propensity of this age group to take out insurance.
“The first of these factors is that Millennials generally have a low level of disposable income. Discovery has found that 55% of young adults do not have life insurance because of affordability constraints," said Friedlander.
The second propensity factor is that Millennials belong to the mobile generation. The Discovery research points out that by the age of 35, approximately 25% of millennials would have worked five jobs. This will have no effect if a person leaves a job at one company for the same position at another company at the same salary. However, if a person leaves a job for a new one in a completely new industry, starting at the lowest salary base will influence purchasing power when it comes to insurance.
“The Discovery research has also found that there is a level of distrust when it comes to the financial services industry. Only 16% of surveyed Millennials said that they would work with a financial adviser,” said Friedlander.
The above information sets the scene perfectly for your message to carry a certain level of gravitas when sitting down with clients.
“There is a very specific reason why advisers should be having serious conversations with Millennial clients. Discovery’s research shows that 3 900 clients, who are 35 years old, will suffer a life changing event that will need the intervention of life insurance this year. A further 10 000 clients who are 45 years old will suffer a similar event,” said Friedlander.
Discovery research adds that 88% of all deaths among Millennials are behaviour related deaths. Most of these deaths are unnatural deaths.
“Millennials are not infallible and indestructible. Purchasing life insurance should be a priority among this age group,” said Friedlander.
At the end of the day, advisers need to solve one equation when sitting down with a Millennial client: how do I make sure that the factors that encourage Millennials to purchase insurance are more important than the propensity factors that prevent them from purchasing insurance? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts email@example.com.
This article is published courtesy of FANews