PYMNTS Intelligence: Bridging the Insurance Industry’s Digital Generation Gap

The generation gap does not make headlines as much as it used to, but one way in which it has unquestionably widened in recent years is through the rapid advancement of technology. The youngest adults today have never known a world without the internet, social media and smartphones. These influences translate to differences not just in digital payment expectations but also in the most basic aspects of human interaction. Recent research, for example, found that 49% of Gen Zers feel anxious about speaking on the phone, instead preferring to text. This preference was largely attributed to texting’s speed, with this factor a priority for nearly 70% of Gen Zers and millennials compared to 27% of all respondents.

As younger consumers’ digital expectations evolve faster than insurance processes, a notable gap has grown between what insurers offer and what these customers want. While the industry is working diligently to eliminate this gap, it was still evident in recent satisfaction data regarding the sector’s digital transformation. Although young people showed a strong preference for digital options, with 32% of millennials purchasing car insurance online, many of their experiences were found wanting, with lengthening claims cycles and redundancies across channels becoming substantial complaints.

For carriers looking to cover the next generation of insureds, customer experience has never been more important. As personalized advice, omnichannel offerings and seamless end-to-end journeys become the norm across industries, insurers must find a way to meet the needs of the growing generation of digital natives — or risk losing them to challengers.

Insurance’s digital transformation is a work in progress.

According to a recent survey, although a majority of North American insurance customers would opt to use digital channels for payments and other everyday insurance services, they are often disappointed when they do. More than 30% of customers said they were dissatisfied with their insurance companies’ digital options, with only 20% naming digital channels their preferred way to interact with their insurers. Another survey found that insurers met customers’ digital expectations just 34% of the time due to frustration with redundant processes, including having to obtain in-person estimates even after submitting photo evidence via mobile apps.

Digital challenges are also evident in the buying process for insurance, where the low frequency of customer interactions heightens the importance of providing a seamless experience every time. This is not yet the reality in insurance, with six in 10 customers switching channels before purchasing and one in six reporting no follow-up from insurers after an initial consultation. Closing these gaps and removing duplicative processes across channels are crucial for insurers to engage digital natives.

Another recent survey identified areas where insurers’ relationships with younger customers are missing the mark. It found that almost 25% of customers ages 25 to 35 said they lacked a feeling of strong connection to their insurance companies, and less than half said they understood what their insurance covers. These customers also reported a keen interest in insurance challenger services, signaling a need for greater transparency and support from traditional industry players.

Insurance requires a digital shift without losing the human touch.

Although insurers have some work to do on the digital technology front, it is equally clear that no amount of digitalization can replace the human touch in this industry — particularly for young consumers. According to one report, more than 70% of insurance customers favor in-person interaction with agents or representatives for complex processes such as buying a policy or resolving an issue, and customers contact their insurers an average of four times when considering a purchase. Agents and advisers are also the highest-rated channel in insurance customer satisfaction, with 20% of insureds saying they would leave a carrier if their adviser left.

New research further suggests that younger consumers’ expressed preference for digital channels is masking a true desire for a combined digital and in-person insurance journey. Despite saying that online purchasing was their top choice for buying insurance, both Gen Z and millennial consumers admitted they ultimately expected to work with a financial professional in person to make their purchase decisions.

As seamless omnichannel experiences become the gold standard of customer engagement everywhere, there is no need for consumers to expect anything less from insurance. Adopting this strategy will ensure the industry’s ability to gain and keep digital-native customers — for many generations to come.