Social and economic changes across the US are poised to create an entirely new consumer base, according to new research from Conning. This has strong implications for personal lines insurers, which will need to meet the needs of a rapidly aging and increasingly more diverse consumer base.
“It’s a different environment for insurers,” says Alan Dobbins, VP, Insurance Research at Conning. “Insurers have benefitted from a growing population over the decades, but the pace of growth is slowing.”
In addition to a slowdown in population growth, the consumer market is experiencing a boost in racial and ethnic diversity, shift in the geographic balance of the population, changes to household structures, and an increasing age profile. Personal lines insurers will need to focus on selling more to each consumer and consider expansion into new markets, says Dobbins, as slower population growth is expected to have a negative effect on insured values.
Population increases are highly correlated with growth for insurers, Dobbins explains, but not all areas of the country are expanding at the same rate. The consumer market is rapidly growing in southern and western states, but rates have slowed in the northeastern and midwestern regions. The smaller growth rate is expected to have a negative effect on the potential for insured values, he says.
Insurers that want to capitalize on these changes and target states with higher growth may face challenges in marketing to different populations, as much of the expansion in the south is caused by an increase in immigration and minority groups. Those who continue to target states with slowing growth in the Northeast will need to respond to an increasingly older population.
“Each of those segments has different needs and preferences for products,” Dobbins explains. “Insurers that respond to that are the ones that are having success.” For example, businesses that have dual language capabilities for customer service and marketing should do well in rapidly growing areas, explains Dobbins.
Customers’ communication preferences are also evolving, which insurers must consider as they maintain and acquire clients. A lot of the sales and service approaches are becoming tech focused, Dobbins says, and the market is presenting new options for customer service through mobile and social channels.
As they reconsider their business and marketing strategies, Dobbins advises insurers to invest in analytical capabilities in order to fully understand each target market. His recommendation aligns with the industry-wide trend of creating efficient customer experiences.
“It requires special attention, via better analytics, to be able to develop, identify and understand the characteristics of various segments,” he explains.