Visualize: Insights that power innovation

The Millennial Generation and the Future of Insurance

By Matthew D. Lawlor and Meghan Alpert  |  November 17, 2016
millenial generation future insurance

What segment of the U.S. population would typically rather...

  • stay at the home of someone they found online than at a hotel with room service?
  • be single in the city than start a family in the suburbs?
  • use a ridesharing app than buy a car?

If you said the Millennial generation, then you’re correct. Born between 1980 and the early 2000s, Millennials represent nearly 40 percent of the U.S. population. Due in part to their sheer numbers and notably distinct lifestyles from prior generations, Millennials potentially have a major effect on the U.S. economy and could generally pose new challenges and opportunities for the insurance industry.

Generally, Millennials delay big decisions

Unlike their parents, Millennials have typically elected a lifestyle that may include postponing significant life decisions, such as marriage, having children, and purchasing a home. To be fair, they have good reason to be cautious, having matured during one of the most dramatic boom/bust cycles in American history. According to a report last year by the Council of Economic Advisers (CEA), the rise and fall of the bubble, followed by the upheavals in the economy in general (attributed by many to the housing market crash), instilled in many millennials a rational fear of excess and spending beyond one’s means.

Education is a big investment

According to the CEA report, more Millennials have a college degree than any other generation of young adults in U.S. history. The report states that in 2013, 47 percent of those between the ages of 25 and 34 years received a postsecondary degree, and an additional 18 percent achieved some level of postsecondary education. By comparison, approximately 28 percent of their parents’ generation have college degrees, according to U.S. Census data. Millennials have also accumulated a significant amount of student loan debt, totaling $1.2 trillion as of 2014.

The sharing economy

A mass migration to urban centers by many Millennials has created the opportunity for Millennial workers to often replace owning or renting cars with other forms of transportation, such as ridesharing. According to a AAA Foundation for Traffic Safety report, Millennial car purchases declined by 30 percent between 2007 and 2011, while ridesharing continues to grow. The number of drivers for a major ridesharing service provider grew from nearly zero in the middle of 2012 to more than 160,000 by the end of 2014, according to a study published by the provider last year.

Another growing trend is home sharing, which typically provides Millennials a relatively short-term place to stay when they travel, or alternatively, an opportunity to potentially earn supplemental income by either renting out space in their apartments or their entire residence. One major home-sharing service has grown since 2008 to match more than 60 million guests in more than 190 countries.

Implications for insurers

Some insurers may already have considered the potential that Millennials are primarily a generation of renters and adjusted their portfolios accordingly. ISO has also developed a number of tools and resources to help insurers address the sharing economy, information on which may be found in including online ISO resource centers for ridesharing and home sharing.

ISO staff has also been actively monitoring some of the needs related to Millennials in the context of personal auto and homeowners’ insurance, and has produced a white paper—available to download—about the potential effects of Millennials on the insurance industry. If you have any questions, please feel free to contact Matt Lawlor at (201-469-3182) or Meghan Alpert at (201-469-2714).

Matthew D. Lawlor is a Marketing Data Analyst at Verisk Insurance Solutions–Underwriting and Meghan Alpert is an Assistant Manager, Personal Property Product Development at Verisk Insurance Solutions – ISO.