“Disruption” may be one of the most overused buzzwords in business today. However, with 10,000 baby boomers turning 65 every single day, there may not be a more appropriate way to describe the demographic changes that life insurance brokers must address.

Related: Why I dread open enrollment

“The challenge is that brokers always need to educate the next generation about the benefits of having a life insurance policy,” said Michael Barry, vice president, media relations, for the Insurance Information Institute (III) in New York City. “Opportunities will arise, however, as younger Americans advance in their careers, start families and realize that their beneficiaries need the financial protection life insurance provides.”

Continued success in a fast-changing workplace environment requires brokers to understand three things: current demographic trends; how these trends affect their industry; and how they can adapt to turn challenges into opportunities.

Graying population

The baby boomer generation, which has been prominent since World War II, is quickly giving way to millennials. Boomers now account for about 28 percent of the population. The oldest boomers turned 65 in 2010, and the youngest will reach that age by 2029. In 35 years, the youngest surviving boomers will be 85 or older. This segment of the population will have grown by 230 percent, while the general elderly population will have grown by 120 percent.

The post-war spike in family sizes has been followed by a significant decline. The average number of children per family has dropped from 3.6 in 1960 to 2.1 today, meaning fewer workers are supporting more retirees. The number of working-age people per retiree declined from 5.6 in 1960 to 4.6 in 2010, and it is expected to drop to 2.8 by 2030. As a benchmark, Social Security was enacted at a time when there were 10 workers per retiree, and Medicare and Medicaid began when the ratio was more than 5-to-1.

Currently, more than 83 million millennials, born between 1982 and 2000, are taking the place of boomers in the workplace. This group accounted for 25 percent of the population last year, making it the largest demographic age group, according to the U.S. Census Bureau. This means one of every three potential life insurance customers in the workplace is a millennial.

Meeting the challenge

Two interpretations of current trends can lead to trouble: focusing too heavily on proven strategies that have worked with boomers, or adjusting to millennials at the expense of other existing clients. Brokers can navigate this brave new demographic world successfully only if they continue to serve the needs of boomers while also adapting their products and services to the changing demands of millennials.

Remember, boomers are getting older, but they are not a generation to exit the stage quietly. They remain the wealthiest generation in history, and many are still working to maintain their lifestyles or prepare for retirement. More than 75 million Americans born between 1946 and 1964 are still in the workforce, according to the Pew Research Center Fact Tank.

Boomers are looking for insurance solutions that balance their current needs with the futures needs of their heirs. In a recent interview, LIMRA President Bob Kerzner referred to this as a change from “protect my family in case I die early” in the 1960s to “protect me financially in case I die late” today.

Market options now include accelerated benefit riders for chronic illness, which allow policyholders to access cash value in the policies to help pay for assisted living, nursing home care, adult daycare and more. Longevity riders with some universal life insurance products can provide guaranteed income in retirement. These riders transform life insurance into a solution that's intended both to meet a family's financial needs if the worst should happen, and to provide a source of retirement income if the best should happen.

But brokers must also address the emerging needs of millennials. On the LIMRA website, Kerzner says he expects more milennials to start purchasing life insurance in the next five to 10 years, with carriers streamlining products to make them easier for brokers to sell. Instead of needing medical tests and waiting 30 to 90 days to be approved by an insurer, for example, consumers can get immediate approval through some companies by simply answering a few questions on a form.

Younger customers also have a different preference for benefit distribution.

“A LIMRA study released in June showed consumers under age 40 would prefer to receive life insurance benefits as a monthly income rather than a lump-sum payment,” Barry says. “In a study on life insurance product designs, 4 in 10 consumers under age 40 prefer a monthly income benefit, while approximately 30 percent favor a lump-sum payment.”

It would be difficult to overstate the impact technology has had on the way millennials find information and make decisions. “Brokers need to go where the potential customers are, and that, in many cases, means using social media, although face-to-face meetings will always remain an important part of the sales equation,” Barry says.

Prosperous future

Demographic trends point to the continued importance of the workplace as a sales channel. Worksite life insurance sales totaled $6.89 billion in 2014, a 3.7 percent increase from the previous year, according to III research.

“Brokers may want to stress to employers how, for some of their employees, a group life insurance policy may be the only source of income replacement for the employee's beneficiaries,” Barry says.

Today's brokers can offer a much broader range of products and services than in the past. A bundle of coverages tailored to individual needs has great appeal to a generation that is accustomed to an abundance of choices in other areas of life.

Regardless of age, all consumers have a universal need to protect against risk. Brokers can continue to thrive by helping them understand and manage these risks, and by positioning themselves as providers of effective solutions, not simply products and services.

Demographic disruption is well under way in group insurance sales. How brokers understand and approach it will go a long way toward determining how it will affect their business in the future.

Life insurance is a low priority

Although experts caution against generalizations, several conclusions can be drawn about millennials and their attitudes about life insurance:

Many have already fallen behind. Seventy percent don't know how much they should save for retirement, and only 40 percent are saving at least 10 percent of their income, according to a 2015 study by the Life Insurance and Market Research Association (LIMRA).
Planning is not a priority. For many millennials, long-term financial planning takes a back seat to paying down student loans, getting married, starting families, taking on mortgages, and other pressing needs.
Strategies are shortsighted. Fifteen percent consider winning the lottery to be a “viable retirement strategy,” while 11 percent hope for monetary gifts to see them through their later years, according to a study last year by the Insured Retirement Institute and the Center for Generational Kinetics.
Life insurance is lagging. Purchasing life insurance is a low priority, recent LIMRA research found. Although most millennials believe they need to have more coverage, fewer than 1 in 5 are “very likely” to buy it. Sixty percent place a higher priority on paying for mobile phones, internet, cable, or a vacation. In a study conducted on behalf of Colonial Life & Accident Insurance Co., employees said they are more likely to spend an extra $200 on an electronic device or dinner out than applying it toward an insurance policy.
Homework is out. In the same study, more millennials would spend several days researching a new car purchase (77 percent) or vacation destination (70 percent) than researching a life or health insurance purchase (67 percent).

Instant Insights /

Demographic trends reveal life insurance challenges, opportunities

More From HR Executive

Related Stories

Recommended For You