What can insurers learn from millennials' obsession with pet insurance?

There is a nascent demographic shift afoot in insurance that has the power to transform the way carriers engage and build more personalized relationships with their customers. To see it in action, one needs to look no further than the recent trends in insurance shopping for valuables protection, umbrella policies and pet insurance.

Perhaps not surprisingly, each of these specialty policies appeals to a slightly different demographic group. However, the ability to understand the specific drivers behind those shopping behaviors and the precise moments on the customer journey when they trigger an intent to purchase can be the key to building long-term customer lifetime value.

In fact, J.D. Power data on insurance customer loyalty and shopping patterns allows us to diagnose in real-time who is shopping for various types of insurance and how valuable a prospect they are to insurers. The phenomenon can be illustrated by tracking detailed demographics and consumer behavior across different types of specialty insurance.

Valuables protection insurance

It makes sense that older people would be more likely to have valuables (jewelry, collections, etc.) that would be of enough value to want to have them insured. It turns out that generation is a great predictor of who will purchase a valuables protection policy.  Only 14% of Generation Z currently has valuables protection insurance, whereas almost one-third (32%) of Boomers have chosen to purchase this coverage.

Education level is also a factor. Those with post-graduate degrees are most likely to have a valuables protection policy (37%) compared to only 15% of those who have a high school diploma. Consumers with an excellent self-reported credit history are also more likely to purchase this insurance (34%) compared to only 15% of those with fair credit and 13% of those with poor credit. Males (30%) are a bit more likely to purchase insurance for valuables than females (23%). Interest in this insurance is consistent across geographic regions with a high of 28% in the Midwest and a low of 24% in the Northeast.

Umbrella insurance

Umbrella insurance, excess liability insurance that provides additional liability protection beyond what a person has in their auto and home or renters policies, follows the same patterns as valuables protection, but to an even greater extent. For instance, a similar portion of Boomers have umbrella insurance (31%) as valuables protection, while only 5% of Gen Z have the same.

Also, like valuables coverage, 36% of those with a post-graduate degree have an umbrella policy compared to only 9% of those who completed high school. Consumers with an excellent self-reported credit history (33%) are much more likely to purchase umbrella insurance than the 6% with poor self-reported credit. Males are more likely than females to have an umbrella policy (27% vs. 16%). One difference does appear, however, as it pertains to geographic region as only 18% of those in the South have umbrella coverage compared to 25% of those in the Midwest.

Pet insurance

Pet insurance, on the other hand, flips these trends on their head. This makes intuitive sense, as those with less disposable income and resources may be less prepared to cover expensive veterinary costs for their beloved pets. This is a great example of risk transfer helping people (and their little dogs too). Rather than face the prospect of a four- or five-figure vet bill, consumers can choose to pay a relatively small monthly premium and enjoy the benefits of that coverage should it ever be needed.

Pet insurance is twice as likely to be held by Gen Z (14%) than Boomers (7%). Having pet insurance differs little by educational level, self-reported credit history or gender. Unlike valuables protection and umbrella insurance, which are most popular in the Midwest, pet insurance is least popular in the Midwest (7%) and most popular in the West (12%).

Those involved in marketing and selling these types of insurance can use trends like these to home in on the people most likely to buy such products, by presenting a relevant offer at the right time.

Source: J.D. Power Loyalty Indicator & Shopping Trends (LIST)

Household insurance segmentation

Another way to view who is buying these insurance policies is to consider what other insurance policies the household also purchases. When we look at households based on whether they have auto and homeowners insurance, it is critical to take into account whether they bundle those policies with the same carrier, or whether the household rents their living quarters or has some other living situation. With this information, we can create four segments of households.

Popularized recently by Progressive, the most valuable customer segment is now known throughout the insurance industry as the Robinsons. They are households that have auto and homeowners insurance and have both policies with the same carrier. Another segment, dubbed the Wrights, are those who have both policies, but have them with different carriers. The Dianes are households who rent the place where they live and may or may not have their renters policy with the same carrier as their auto policy.  Lastly, the Sams are households that do not own or rent their residence, but have some other living situation (living with family, etc.) and therefore only have an auto insurance policy.

Considering the demographic patterns noted previously, it is not surprising that valuables protection and umbrella policies are more commonly held by Robinsons households (35% and 34%, respectively) than Sam or Diane households (see chart below). While pet insurance isn’t as popular as these other policies, pet insurance is more likely to be purchased by Sam and Diane households (12% and 10%) than Wrights and Robinsons (9% and 8%), showing there is an opportunity to create specific product bundles for these segments.

Source: J.D. Power Loyalty Indicator & Shopping Trends (LIST)

Insurers who wish to deepen relationships with the Sam and Diane households of today, who may become the Robinsons of tomorrow, may consider targeting a pet and auto insurance bundle to deliver more value to these customers. Of course, insurers would be wise to offer valuables protection and umbrella policies to their Robinsons and Wrights households who do not already purchase these products, thus further expanding the relationship with these valuable customers.

Stephen Crewdson is senior director, insurance business intelligence at J.D. Power.

Note: J.D. Power defines generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995-2004). Millennials (1982-1994) are a subset of Gen Y.

Related:

Gen Z trends insurance pros should know about in 2023

How to narrow the personal P&C protection gap

Dog bite litigation, breed biases and Pennsylvania laws

Insurance and pets and vets: Oh my!