SINGAPORE: Analysts are urging insurers in the Asia-Pacific region to seize the opportunity to cater to Generation Z.
This emerging demographic, born between 1997 and 2012, is now navigating the complexities of financial responsibilities, presenting a potentially steady source of premium revenue for the insurance industry.
Bernhard Kotanko, senior partner at McKinsey & Co., emphasized the importance of engaging Gen Z through digital media and social platforms to establish a narrative that resonates with their values and lifestyle.
“We haven’t seen this yet,” Kotanko remarked in a recent interview with Insurance Asia.
Gen Z members are in the early stages of their careers but exhibit strong ambition and confidence in their financial literacy. However, their awareness of insurance products remains lower compared to millennials, according to a Peak Re report published in September.
Despite this, Gen Z is expected to make up at least 25% of the Asia-Pacific population by 2025, with China’s Gen Z alone contributing an estimated 13% to household spending.
The insurance sector faces an increasingly urgent challenge as the region’s ageing population grows, with projections that it will double by 2050. Connecting with the financial needs of younger generations will become even more difficult as this trend intensifies.
“Some insurers are starting to make progress by engaging with young families, but we still need to develop solutions and communication strategies that resonate with this demographic,” Kotanko said, highlighting the need for a shift in focus.
He noted that retirement planning will require new solutions, including long-term care and legacy planning, which could be key growth areas for insurers targeting Gen Z.
The market, traditionally focused on wealth accumulation, must now pivot to meet the needs of this younger audience. “Asia has been a wealth accumulation market so far, but the shift needs to happen soon,” Kotanko added.
Targeting high-net-worth young people is also seen as a potential growth area.
Martin Wong, regional CEO of Grandtag Financial Consultancy & Insurance Brokers, pointed out that approximately 30% of high-net-worth individuals are in the Asia-Pacific region.
These individuals seek sophisticated, adaptive strategies to manage their wealth and ensure smooth wealth transfers to the next generation. UBS Group’s July 2024 report highlights the rapid growth of wealth in the Asia-Pacific region, which has nearly tripled since 2008.
Millennials and Gen Z, now aged 28 to 43, expect real-time insights and seamless digital experiences when interacting with their investments.
Grandtag has already responded by introducing innovative insurance products, such as those allowing premium payments via alternative assets and products that balance growth potential with legacy preservation.
However, Wong cautioned about the growing challenges of cross-border tax compliance and regulatory requirements, as many wealthy families have members in multiple countries.
“Cookie-cutter solutions don’t work for legacy planning,” he said, emphasizing the need for tailored approaches to address these complexities.
Kotanko agreed that the insurance industry needs to rethink its offerings, particularly in addressing the underappreciated needs of young professionals.
Disability coverage, which is crucial for individuals who rely on their incomes, is one such product that is not heavily promoted.
Health concerns, including mental health issues like depression and anxiety, are also rising among Gen Z, presenting another opportunity for insurers.
Gen Z is facing significant stress due to social pressures, work-related stress, and the responsibility of caring for ageing parents. Many see themselves as primary caregivers, a role that adds both pride and emotional strain.
“Insurers have a significant opportunity here,” Kotanko stated. “They need to embrace a digital-first approach and be proactive in offering solutions that integrate life insurance, wealth management, and health.”
Finally, Kotanko suggested insurers focus on lean, cost-effective products to cater to the mass market, particularly those who need protection but cannot afford the more expensive offerings available to high-net-worth individuals.
“What are the core products that would fit this segment?” he asked, pointing out the need for distribution models that reduce costs and expand access.
However, Wong cautioned that insurers must also contend with regulatory challenges and a talent shortage.
“The market requires professionals who understand complex financial structures and can navigate cross-border issues while maintaining compliance,” he explained. “Asia’s insurance professionals also need expertise in emerging technologies and sustainable finance.”
As the insurance landscape evolves, the industry’s ability to adapt to these challenges and engage with the rising Gen Z will determine its long-term success.