Before baby boomers leave record-breaking levels of wealth to their heirs over the next two decades, agencies should start considering how to court the next generation of clients.
Before baby boomers leave record-breaking levels of wealth to their heirs over the next two decades in what's been termed “the Great Wealth Transfer," insurance agencies should start considering how to court the next generation of clients.
It's also an ideal time to make sure your house is in order before an influx of new business opportunities crop up. With new wealth, new opportunities will arise for insurance agencies, carriers and individual producers. So, what are you doing to make sure your operations are streamlined and your organization is a well-oiled machine that is ready to jump on whatever prospects come your way?
What Is the Great Wealth Transfer?
The Great Wealth Transfer is the name for the impending inheritance of an estimated $68 trillion as the baby boomer generation dies over the next 20 years, according to CNBC. It's no secret that baby boomers have accumulated a lot of wealth over their lifetimes. As of March 2022, this generation holds a cumulative $71 trillion in assets, according to Fortune, which makes baby boomers the wealthiest living generation by a wide margin. While it is not true for every individual baby boomer, the cumulative wealth held by this generation is more than has ever been accumulated by a single generation in recorded history. It also means they have more money to leave their children and grandchildren than any generation before them.
Gen X and millennials stand to gain a lot in the Great Wealth Transfer as many of them are the children of baby boomers. On average, Gen X isn't nearly as well off as baby boomers, but they're doing better than millennials with a cumulative wealth of around $42 trillion, according to Fortune, which is more than 50% the worth of the boomer generation and almost five times as much as what millennials have accrued.
Millennials, those born roughly between 1981 and 1997, are now the largest generation in the U.S. This inherently means they have a lot of purchasing power as consumers, including as consumers of insurance. Their need and desire for insurance will only continue to grow as they go through life events like marriage, homeownership, and childbirth that have historically prompted people to seek out greater financial protection. On top of that, they could soon be one of the richest generations in history thanks to the transfer of their parents' and grandparents' assets, according to Coldwell Banker.
How Will the Great Wealth Transfer Impact the Insurance Industry?
As a result of the Great Wealth Transfer, younger generations will have more money and more assets to protect as they inherit them from their boomer generation parents and grandparents. Logically, they may use some of that money to buy insurance policies to protect some of their newfound assets.
However, it may take some work for agents to earn the trust of these younger generations, mainly because they simply aren't as familiar with insurance agents as baby boomers. Generation Z is the least likely (43%) to have worked with an insurance agent, while 84% of boomers have used an agent, according to Agentero. However, importantly, once younger consumers work with an agent, they are likely to do so again.
Here are three things you can do to make sure you're ready to take advantage of the Great Wealth Transfer when the opportunity strikes:
1) Shore up your internal processes and operations. As the insurance industry welcomes a new pool of potential clients, it's also losing a large number of seasoned employees. Only 5% of risk management firms say they won't be impacted at all by the mass retirement of baby boomers, with 58% saying it will have a high to moderate impact, according to the Risk Institute at The Ohio State University Fisher College of Business.
But fewer professionals focusing on more consumers means insurance carriers and agencies need to have their systems dialed in. These new consumers and their wealth won't stick around if companies have bloated operating expenses that get passed along to the client. Nor will millennials stand for slow and poor customer service.
One of the greatest challenges for insurance industry organizations will be attracting and retaining employees to care for tomorrow's insurance consumers. Getting your house in order by adopting systems that make employees' lives easier will make your organization more competitive to potential talent.
2) Embrace modern technology to provide the seamless client experience that millennials demand. Focusing on internal systems is a crucial first step. But don't discount the importance of client-facing technology as well. We already know millennials still value human relationships and are likely to use insurance agents as trusted advisors, but at the same time, they prefer to initiate contact and complete tasks digitally—including via mobile devices.
Make sure your insurance agency not only has an online presence but that it's a positive and mobile-accessible one. It has never been more important because potential clients commonly visit websites and read online reviews before reaching out to speak with a human.
3) Focus on client attraction and retention by thinking like a startup. For some products, rates are set—by carriers or state insurance commissioners—and not negotiable even by the most eager producer or most flexible carrier. This means clients will choose to do business with you based on what you bring to the table, not just the price of the product.
So, how do you attract loyal clients who'll stay with you as they move through the different stages of life? The answer: Think like a startup.
Just because you're not a tech startup doesn't mean you can't adopt this mentality in your organization. Making a conscious effort to prioritize your clients and their experience above all else will put you lightyears ahead of others in the industry.
A few keys to the startup mentality that you can put into practice include:
- Make “customer love" a key component of your culture. Clients should never question whether you appreciate their business.
- Be agile and flexible, responding to what your clients tell you they need, even if it means thinking outside the box.
- Empower your team to act like owners in all situations. Automating some—or all—of tedious, manual work goes a long way toward giving your staff the bandwidth to solve complicated customer problems using skills only humans have.
Ellen Lichtenstein is a content writer with AgentSync.