Life insurers have a problem with millennials.
After all, who wants to contemplate mortality, or even retirement, when they're just beginning their adult lives? Fewer than 20 percent of those between 18 and 34 years of age say they're very likely to buy life insurance, according to insurance research and consulting firm LIMRA.
Yet three major life insurers have recently started or purchased businesses designed specifically to reach that age group. MassMutual opened a Generation Y-friendly hangout space near Boston in October called the Society of Grownups that offers financial education through supper clubs and wine tastings. Northwestern Mutual bought millennial-focused financial planning company LearnVest for $250 million in March. And Pacific Life funded Swell Investing, which launched in March and helps tech-savvy investors buy stock in companies that support their favorite causes.
Why? Growth potential, for one. In 1985, life insurers represented about 40 percent of the financial services industry by market capitalization; that figure had fallen to 25 percent by last year, according to management consulting firm McKinsey & Co. McKinsey consultants encouraged life insurers to look for unconventional sources of growth and Generation Y was an attractive target: There are more millennials now than baby boomers.
Another reason for life insurers to experiment with new businesses is that traditional approaches to marketing financial products may not work well on a generation that came of age during the Great Recession. Nearly seven out of 10 millennials said that financial services firms have not regained their trust since the 2008 financial crisis, compared with 59 percent of people aged 35 to 54, and 54 percent of people aged 55 and older, according to the 2015 Makovsky Wall Street Reputation Study. The communications firm surveyed more than 1,000 adults in March. "Millennials are much more sensitive to negative news about the industry," said Scott Tangney, executive vice president of Makovsky. "And they are looking for better service through digital channels."
All of these experiments by life insurers are about establishing a relationship with millennials. They may not bear fruit right away, but the hope is that it will build trust and may lead to sales down the road, said Jamie Bisker, a senior analyst with financial research firm Aite Group,