Last week, IA covered two trends that have already started affecting homeowners insurance claims and pricing: new home construction and in-home telematics, particularly in the high net-worth homeowners segment.
Here are two more trends your agency should keep an eye on as you look to grow your personal lines book this year.
Cyber liability. You face a big enough challenge trying to sell cyber to your commercial clients. But brace yourself—cyber could be headed for personal lines soon, too.
“Consumers of personal insurance products aren’t going to lead the way in buying cyber coverage,” says Bill Gatewood, vice president of personal insurance at Burns & Wilcox. “But coverages are starting to be offered in the market.”
What would cyber liability coverage entail for the average homeowners client? Gatewood says some carriers are already offering loss control services that investigate homeowners’ Wi-Fi setups, servers and online activity to make sure family members aren’t compromising security.
“More and more people are working out of their homes,” Gatewood points out. “If someone hacks into your private computer, you may have business records stored there, employee records, a lot of financial data—none of us really wants to think about how easy it would be for somebody to sit in a car outside our house, hack into our Wi-Fi system and access our data. But it’s much easier to be compromised than we want to believe.”
Like cyber in commercial lines, the biggest challenge will be convincing your homeowners clients it’s necessary. “A lot of people don’t think they need it,” Gatewood says. “It’ll be interesting to see at what point consumers actually start to see it as a valuable coverage and service they’re willing to pay for.”
Millennial behavior. According to Alan Dobbins, director and senior research analyst with the insurance research group at Conning, pickup in home sales overall has been slow, and homeownership declined from about 69% in 2006 to 63.7% in the first quarter of 2015. “That’s a big drop,” he says. “It got to about 64.5% maybe a year ago and we thought we wouldn’t forecast any lower than that, but it keeps going lower and lower and lower.”
In large part, you can blame millennials for that shift: Gen Y is far less likely to purchase a home than previous generations. “It’s tougher for them now—the requirements for qualifying for a mortgage are tougher now than they were before the economic crisis,” Dobbins says. “Incomes are less steady in terms of qualifying for a mortgage. And that whole segment’s had their formative years at a period when homeownership was all of a sudden not so appealing.”
It’s a generation that by and large grew up watching homeowners lose money—a stark contrast “to the group who came before that and said, ‘Wow, homeownership means we’ll buy a home and watch its value appreciate,’” Dobbins says. “When you go through that at an early age, it can stick with you.”
For your millennial clients, that means you can expect to sell more renters policies than you might have anticipated based on your previous experience with Gen Xers and boomers. But it’s a product you’ll have to push. “Millennials just don’t understand insurance, don’t appreciate what it is and what it does, so they tend to be underinsured,” Gatewood says. “And that has always been the case when it comes to renters. Renters just don’t buy rental coverage.”
Although Gatewood has observed an increase in property managers requiring their tenants to secure renters insurance prior to signing a lease, renters still comprise a largely underserved population when it comes to insurance. And the most common misconception is that renters insurance costs more than it actually does.
“Most people don’t realize they can get a very good renters policy for a couple hundred dollars a year that will provide the liability coverage they need as well as coverage for their personal property,” Gatewood says. “And in a lot of cases, if they buy it with the same carrier that provides their auto insurance, they’ll save money on their auto policy—sometimes to the point that the renters insurance costs just a couple dollars a month.”
All that presents serious opportunity for independent agents who want to gain the trust of their millennial prospects and clients. “In many respects, a renters policy is a homeowners policy,” Gatewood says. “The coverages are a little different, but if you’re in your 20s and you purchase a renters policy, buying a homeowners policy probably won’t be so foreign to you when it comes up. There’s an opportunity there to educate millennials on what insurance is, what it’s for, how it should be used and the value of having it.”
Jacquelyn Connelly is IA senior editor.