Millennial Homeownership and Renter’s Insurance
By Killian Knowles, Junior Executive at The San Jose Group
Are insurers wasting their efforts on Millennials?
Homeownership in the U.S. has officially dropped down to the lowest point since 1995, according to the U.S. Census Bureau, causing new generations to tap into alternative methods of housing, mainly renting. With home prices expected to jump 6% in the coming year, the rental trend is expected to skyrocket as well. Millennials (those born from the early 1980s to early 2000s) have increased the demand for rental properties, ultimately, refusing homeownership due to money factors including the ever climbing unemployment rate, student loan debts, and harsh job market.
Each year, the number of Millennials who decide to have a home mortgage declines. A survey conducted by Nationwide states only 11% of consumers ages 20-29 actually have a mortgage versus the other 30% nationwide that includes Generation Xers and Baby Boomers. The homeownership market is becoming even more difficult for the Millennial generation to enter, resulting in the generational choice to enjoy renter’s privileges such as avoiding home repair bills, mortgages or simply not being responsible for mowing the lawn.
“We need to look at this consumer group as ‘skeptical, wise shoppers,’ with different value sets and motivating factors” said George L. San Jose, president and chief creative officer at The San Jose Group.
Since Millennials are already boarding the rental bandwagon, insurance agencies aim to pivot their marketing strategy by offering and stressing their renter’s insurance. However, as San Jose points out, these agencies are struggling to pitch renter’s insurance policies due to a generation wide misconception that renter’s insurance is unnecessary and unaffordable. To target this consumer group, The San Jose Group deploys their proprietary tool, the 4th Dimension, to gain true insights into how this group perceives insurance and how to align their wants and needs with the insurer’s offerings.
A survey done by Apartments.com found 58% of Millennial renters do not have renter’s insurance and don’t intend to invest in it anytime soon, causing agencies to scratch their heads and ask each other the question, “At what cost do Millennials value their belongings in the possibility of theft, fire or vandalism?” Well, to answer this question Nationwide found in a recent survey that 68% of these same renters without renter’s insurance do still value their possessions at a high $5,000 replacement cost if a liability were to occur–showing that there is a window of hope for agencies to sell their affordable renter’s insurance.
However, Millennials still refuse the policies, causing agencies to nearly rip their own hair out and hustle to conduct countless studies in hopes of revealing why these negligent trends continue.
Backed into a corner, agencies have started seeing results from various surveys regarding the overall financial temperament Millennials have as consumers, not just in the housing market. What many agencies are finding is that the Millennial generation is deemed “one of the most frugal and saving-oriented generations to emerge when it comes to money investments” as stated in an article by The Guardian; explaining why an underlying hesitant attitude is reflected towards investing in the renter’s insurance policies.
A recent UBS survey found 45% of Millennial investors tend to think living frugally and without major investment in policies is the only way to succeed in today’s economy; possibly explaining why Millennials still tend to back off from money commitments such as renter’s insurance.
So what should renter’s insurance agencies do to convince the Millennial renters to invest?
Showing Millennials that fairly affordable policies can stretch a long way in the face of fire, theft or vandalism provides an effective way for insurers to reach their target. Additionally, education is key to winning millennial business, as the Nationwide study reveals that 75% of Millennial renters have no idea about the affordable costs associated with renter’s insurance. Some policies only cost $20 per month, giving agencies an inexpensive number to advertise and focus on when convincing the frugal Millennial generation to invest.
Millennials, having been called one of the wisest money generations to emerge, can be targeted by insurers after all. The call to action for insurers is simple: invest in Millennials, educate them and appeal to their cost-conscious behaviors, and in return, they’ll invest in insurance plans.