The insurance industry has some work to do to win over Gen Y customers, those ages 21 through 38.
Members of the Gen Y generation, who were born between 1977 and 1994, are less satisfied with their homeowners insurers than others. One reason may be because Gen Y home owners are less likely than older or younger customers to bundle their insurance policies with a single insurer, a new report suggests.
Just 65 percent of Gen Y homeowners insurance customers bundle multiple policies with their insurer, compared with an overall bundling rate of 78 percent among all generations, according to the J.D. Power 2015 U.S. Household Insurance Study.
The trend in bundle rates among Gen Y customers is also not improving; it’s down five percentage points since 2013, while bundle rates among the other age groups have remained relatively stable during that period, the study found.
The Gen Y segment is estimated to be the largest customer segment of home buyers in the U.S. and their tendency to unbundle—or split—their insurance products across multiple insurers at a higher rate than any other generational group creates an opportunity for insurers, according to the J.D. Power report. The authors contend that as Gen Y customers mature and their insurance needs become increasingly complex, insurers will have an opportunity to cross-sell additional products.
The study examines overall customer satisfaction with homeowners and renters insurance, with satisfaction calculated on a 1,000 point scale.
Across generations, there is a strong relationship between providing a satisfying customer experience and the likelihood that customers will purchase more products from their insurer, the study says. However, Gen Y customers are less satisfied with their homeowners insurer compared to other generational cohorts (753 vs. 787 overall), influenced by lower satisfaction across all factors that comprise the customer experience.
While satisfaction is higher among insurance customers who bundle compared with those that don’t bundle, Gen Y customers who bundle are still less satisfied than their older Baby Boomers (779 vs. 811, respectively).
Gen Y satisfaction has been hurt by lower satisfaction in the interaction, billing and payment, and claims factors.
“Understanding the challenges and opportunities that Gen Y customers represent is a key component to developing a bundling strategy,” said Valerie Monet, director of the insurance practice at J.D. Power. “Gen Y customers, for instance, unbundle to receive better coverage and price more often than Boomers, underscoring the importance of straightforward communication about price, as well as the policy and what it covers.”
Nearly half (48 percent) of Gen Y customers unbundle for price and 32 percent for better coverage, compared with 41 percent and 19 percent, respectively, of Boomers who unbundle for these reasons. However, Gen Y non-bundlers indicate a greater intent to bundle additional policies, as 17 percent say they “definitely will” combine policies in the future, compared with 7 percent of non-bundler Boomers.
Providing policy discounts is the largest driver of bundling. Gen Y customers are also more influenced to bundle if a carrier has outbound communications and provides a problem-free experience.
Focusing on the customer experience may not only support increased policy bundling, but it may also improve customer retention and advocacy among current homeowners customers, the authors say. The study finds that 75 percent of highly satisfied homeowners insurance customers (overall satisfaction scores of 900 or higher) say they “definitely will” recommend their insurer; 77 percent say they “definitely will” renew; and only 5 percent say they “definitely will” shop in the next 12 months.
In other findings:
- Overall customer satisfaction with homeowners insurers declined to 787 in 2015, down from 790 in 2014. The decrease in satisfaction in 2015 was driven largely by a significant 8-point decline in the billing and payment factor.
- Satisfaction among bundlers averages 810 vs. 741 among non-bundlers.
- Overall satisfaction among renters insurance customers increased to 808 in 2015 from 802 in 2014. The increase in satisfaction in 2015 was driven largely by a significant 14-point improvement in the interaction factor. Price satisfaction improved by a significant 11 points from 2014.
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