The past few months have taught the world a tough lesson in unknown risks. For many Americans, the pandemic revealed just how exposed individuals can be without a financial safety net.
Since the beginning of the outbreak, around 5.4 million Americans have lost their health insurance, and millions are now out of work and at risk of greater financial losses. And on the B2B side, even businesses with robust coverage are finding it hard to collect on business interruption claims.
As a result, the pandemic has altered the U.S. outlook on insurance and will usher in permanent changes to the industry as business and consumer risk tolerances evolve.
Findings from our new data set, GWI USA, can provide some insight into this.
Americans, especially the young, are underinsured.
Up until this point, Americans have had a non-essential approach to most types of insurance. Those who could easily afford coverage have had a variety of options to choose from, yet for many Americans, proper coverage remains out of reach.
American insurance owners are generally more financially secure than average.
68% of insurance owners in America are over 35, and more than 6 in 10 have an associates’ degree or higher.
The vast majority of policy holders are in the middle- or upper-income segments, and three quarters say they’re comfortable, or doing OK financially.
Uninsured Americans are often those who are less equipped financially to weather bad times.
While it’s clear that huge portions of the country are uninsured, what’s missing from this chart is the extent to which lower income and young Americans drive these high rates of uninsurance.
31% of all US consumers currently rent their place of residence, and those numbers reach as high as 42% among millennials.
In the absence of home ownership, the vast majority of Gen Zs and millennials aren’t covered under a home or personal property policy (86% and 69% respectively), and nearly half of Gen Xs are similarly uninsured.
Instead of general home and property coverage, many Americans – especially younger generations – opt for cheaper, more specific coverage.
Access to insurance, like other systems of security and privilege in America, can also reflect social and racial disparities. African Americans and Hispanic Americans, for example, are less likely than white Americans to have auto, home, life or medical insurance.
But while lack of holistic coverage remains an issue that affects many Americans, the digitization of insurance may make it possible for some groups to get less expensive coverage for specific things.
Compared to white Americans, people of color who own smartphones are more likely to have mobile phone insurance, and people of color who have pets in their household are more likely to have pet insurance. Furthermore, among all pet owners, millennials and Gen Zs are the most likely to have pet insurance coverage.
Those who may be less likely to have policies to cover large assets, are still interacting with the insurance industry to cover the things they care about. And when it comes to more specific policies like pet and phone insurance they do so at greater rates.
Going forward insurance providers may want to focus on the specific needs of those without insurance and offer more affordable and customized packages, rather than appealing to the sweeping, general coverage options that are often inaccessible to many Americans.
So, what is the newest wave of insurance buyers looking for in a brand?
Insurance buyers are looking for more than just coverage.
Those planning on purchasing or renewing an insurance policy in the next 6 months skew younger than the current insurance owners.
1 in 5 millennials and Gen Zs don’t currently own any insurance at all, but over half of this age group plan on purchasing or renewing their coverage in the next 6 months.
Given that half of those intending on buying insurance in the next 6 months claim they remain loyal to brands they like, insurance companies stand to benefit for years to come if they can attract these customers now.
Younger American insurance owners have very different insurance needs than their parents. They’re less concerned about the cost and coverage of an insurance policy, and more concerned about online recommendations and the ease of signing up.
For young Americans who struggle to make ends meet, insurance may feel like something inaccessible to them, and this feeling explains the rise of digital-first insurance platforms, like Lemonade and Allstate’s esurance, who aim to simplify access to insurance products.
The U.S. insurance landscape can also be a minefield of federal and government regulations, subsidies, and penalties. Looking at a category like auto insurance, rather than healthcare, allows us to see some of the true influences of brand and marketing on consumer choices.
Lessons from a competitive sector: auto insurance
Auto insurance is by far the most competitive sector within the insurance industry in America.
Ownership of an auto policy is required by law of all drivers in the U.S., and as such we see a lot of different brands with varying shares of the market.
Tied with health insurance, auto insurance is the most owned policy in the country, and nearly two thirds of U.S. consumers have this coverage. Unsurprisingly, these rates differ depending on where they live.
70% of suburban consumers hold an auto policy compared to 51% of urban dwellers, who are less likely to own a car.
Consumers are more price conscious about this coverage than any other insurance type, with 7 in 10 auto insurance policy holders stating that price is the most important factor when determining which brand to purchase.
Although price leads, it may not be a factor that’s widely researched. Just 6% say they consider online comparison sites, which often highlight price first and foremost, important in determining which company to go with.
Other factors also play a huge role in the decision-making process.
46% of auto insurance owners say that the level of coverage matters most, 35% factor in customer service quality, and 30% find the brand name and reputation most important.
And just as with other policies, age plays a large role in driving what’s important.
Some concerns increase steadily with age, such as price, level of coverage, customer service quality, brand reputation, and the level of excess and deductibles.
Put simply, after decades of driving and owning insurance, older consumers are more equipped to understand the importance of these factors and focused a lot more on finding the perfect policy for their specific needs.
So it’s no surprise that Gen X and baby boomers are most likely to have a policy through State Farm, which has the largest market share of any other auto insurance provider.
On the other hand, when it comes to determining insurance purchases, Gen Zs who own an auto insurance policy are nearly twice as likely than average to say they use recommendations from friends and family, and more than twice as likely to use online comparison sites.
Younger Americans are also most likely to be concerned about the ease of the application process.
This may explain why the AAA is the most popular auto insurer among Gen Zs, as this generation is often yet to own other insurance, and so AAA – known well for their roadside assistance – may attract many as a one-stop-shop through various channels of name recognition.
The future of insurance lies in shifting priorities.
All in all, the financial realities of Americans today drives many of the gaps in insurance coverage we see in the nation overall.
The shifting nature in American home ownership, as well as the acknowledgement of unknown financial risks uncovered in the months following the coronavirus outbreak, may cause many Americans to reevaluate the level of risk they’re comfortable with.
Even though Americans are price conscious when it comes to purchasing their insurance, cost considerations are by no means the only factor in the decision-making process.
Instead, insurance providers stand to attract more new customers by understanding that those without insurance – younger consumers, low income consumers, and people of color among them – are more drawn to custom coverage options.
With that said, many insurance owners across all categories were unable to say which brand they owned a specific policy through.
This response could be due to the fact that many American’s still don’t purchase insurance directly from a brand, but instead work with independent insurance agencies, who deal with the insurance provider on behalf of the buyer.
Often local, these brokers work with insurance providers in many complicated arrangements and often offer advice to the eventual policy holder on the benefits of one brand over another.
So while more consumers shift toward online means of insurance buying, there remains a lasting influence of the personal element of insurance sales. In future explorations of insurance in America, the dichotomy between individual choice and corporate influence will remain an ever-evolving, but important consideration.