Consumers’ likelihood of purchasing valuables, pets, and household insurance varies based on age, education, and location.
An emerging demographic shift is afoot in insurance that has the potential to change the way carriers engage and build more personalized relationships with their customers. To see it in action, one need look no further than recent trends in insurance shopping for valuables protection, umbrella policies and pet insurance.
Perhaps unsurprisingly, each of these specialized policies appeals to a slightly different demographic. However, being able to understand the specific drivers behind these shopping behaviors and the exact moments in a customer’s journey when they lead to a purchase intent can be key to building long-term value for the customer.
In fact, JD Power’s data on insurance customer loyalty and shopping patterns allows us to diagnose in real time who is shopping for different types of insurance and how important a prospect is to insurance companies. This phenomenon can be illustrated by tracking detailed demographics and consumer behavior across different types of specialty insurance.
Valuables protection insurance
It makes sense for seniors to have valuables (jewelry, collections, etc.) that would be of sufficient value to want to insure them. It turns out that generation is a great indicator of who will buy a valuables protection policy. Only 14% of Gen Z have Valuables Protection insurance, while nearly a third (32%) of Boomers have chosen to purchase such coverage.
Education level is also a factor. Those with postgraduate degrees are more likely to have a valuables protection policy (37%) compared to only 15% of those with a high school diploma. Consumers with self-reported excellent credit history are also more likely to purchase such insurance (34%) compared to only 15% of those with fair credit and 13% of those with poor credit. Males (30%) tend to buy insurance for valuables slightly more than females (23%). Interest in this insurance is consistent across geographies with a 28% rise in the Midwest and 24% in the Northeast.
Comprehensive insurance, excess liability insurance that provides additional liability protection beyond what a person has in their auto and home or rental policies, follows the same patterns as valuables protection, but to a greater extent. For example, a similar portion of Boomers have comprehensive insurance (31%) to protect valuables, while only 5% of Generation Z have the same insurance.
Also, like valuables coverage, 36% of those with a graduate degree have an umbrella policy compared to only 9% of those who complete high school. Consumers with an excellent credit history (33%) are more likely to purchase comprehensive insurance than 6% with self-reported poor credit. Males are more likely than females to have an inclusive policy (27% vs. 16%). One difference emerges, however, as it relates to geography as only 18% of residents in the South have universal coverage compared to 25% in the Midwest.
On the other hand, pet insurance turns these trends on their head. This makes sense, as those with lower incomes and resources may be less willing to cover the exorbitant veterinary costs of their beloved pets. This is a great example of helping people pass risk (and their puppies too). Instead of facing the prospect of paying a four- or five-figure vet bill, consumers can choose to pay a relatively small monthly premium and enjoy the benefits of that coverage if needed.
Generation Z (14%) is twice as likely to own pet insurance as Boomers (7%). Obtaining pet insurance varies slightly based on education level, self-reported credit history, or gender. In contrast to valuables protection and comprehensive insurance, which are most common in the Midwest, pet insurance is least common in the Midwest (7%) and most common in the West (12%).
Those involved in marketing and selling these types of insurance can use trends like these to localize the people most likely to buy these products, by making a relevant offer at the right time.
Source: JD Power Loyalty Indicator & Shopping Trends (LIST)
Family insurance segmentation
Another way to find out who is buying these insurance policies is to look at other insurance policies that the family is also buying. When we look at households based on whether they have auto and home insurance, it is critical to consider whether they combine these policies with the same carrier, whether the family rents their living space or has some other living situation. With this information, we can create four segments of families.
Recently popularized by Progressive, the most valuable customer segment is now known throughout the insurance industry as Robinsons. They are families with auto and home insurance who have both policies with the same carrier. Another division, called Wrights, are those who have both policies, but different carriers. Diane’s are families who rent where they live and may or may not have their own renters policy with the same carrier as their auto policy. Finally, the Sams are families who do not own or rent their housing, but have some other living situation (living with family, etc.) and therefore only have a car insurance policy.
Given the previously observed demographic patterns, it is not surprising that valuables and umbrella protection policies were held more commonly by Robinson households (35% and 34%, respectively) than by Sam or Diane households (see chart below). While pet insurance is not as popular as these other policies, pet insurance is more likely to be purchased by the Sam and Diane families (12% and 10%) than the Wrights and Robinsons (9% and 8%), which indicates There is an opportunity to create product packages specific to these segments.
Source: JD Power Loyalty Indicator & Shopping Trends (LIST)
Insurance companies that want to deepen ties to Sam and Diane’s families today, which may become the Robinsons of the future, might consider targeting a package of pet and auto insurance to offer greater value to those customers. Of course, insurers would be wise to offer valuables and umbrella protection policies to their Robinsons and Wrights families who do not already purchase these products, thus expanding the relationship with these valuable customers.
Stephen Crewdson is Senior Director, Insurance Business Intelligence at JD Power.
NB: JD Power defines generational groups as pre-boom (born in 1946); Boomers (1946-1964); Gen X (1965-1976); Gen. Y (1977-1994); and Generation Z (1995-2004). Millennials (1982-1994) are a subset of Generation Y.
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