A New Generation In the Cross Hairs.

Some insurers already have begun targeting members of Generation Y-the first wired generation -- as future policyholders.

Generation Y--those born during the baby boomlet of 1977 to 1995--is the largest population sector in the United States since the baby-boomer era. Generation Y is more technology savvy and financially literate than previous generations, and some insurers are refocusing their marketing campaigns to target these nearly 80 million future insurance buyers.

Several insurance companies, including State Farm Insurance Co., have programs and Web sites designed for young people. State Farm recognizes the importance of educating these future policyholders and is targeting Generation Y through its Web sites. Guardian Life Insurance Co. also is trying to educate young people about future financial options. Through a new scholarship program, young girls are learning about financial issues--such as investing, saving and protecting themselves against financial risks--and are getting a first-hand account of financial careers from prominent female business leaders.

After a 15-year decline in the U.S. teen-age population, Generation Y, which includes all of today's teenagers, is one of the largest population sectors ever in the country. This generation has surpassed Generation X--those born between 1961 and 1983--by nearly 20 million people. Generation Y--which is also known as the Echo Boomers, Digital Generation and the Millenniums--makes up 21% of the U.S. population. With the rise of computers, multimedia and the Internet, Generation Y is the first truly wired generation and is more comfortable acquiring information and doing business online.

Targeting the Cyber-Culture

The Internet is the primary venue through which these future insurance shoppers will be reached. According to an Online Kids Report from Jupiter Research, an e-commerce research group, nearly half of the 13-to 17-year-olds in the United States will be Internet users by 2002. Not only are members of Generation Y relying on the Internet to provide them with a wide array of information, they're also making purchases online. Jupiter Research reports that 67% of 13- to 18-year-olds and 37% of 5- to 12-year-olds have researched or bought products via the Internet.

Generation Y members use the Internet to get information quickly, said Carolyn Martin, master trainer with RainmakerThinking Inc., a research and consulting firm focused on the working lives of those born after 1963, and co-author of Managing Generation Y: Global citizens Born in the Late 70s and Early 80s. "In marketing information to Generation Y, companies must ask how they can customize it, personalize it and provide fast access," she said. "A month or even a day is a long time for Generation Y-ers; they look for 'what information and response can I get right now?'"

Digital media have given Generation Y members unprecedented means to connect with each other and the world. Because this generation spends much of its time in front of a computer screen, marketing information on the Web will be a dominant strategy for developing a relationship with these young people.

"I would say [Generation Y] might be the best-informed consumers yet," said Bob Reiner, unit manager of enterprise Internet services with State Farm. Reiner said up to 70% of customers research insurance online before purchasing. "This is an important marketing tool for companies preparing to reach these potential consumers, particularly a growing [population] like Generation Y that spends hours online and are able to access such information at a click of a button.

"We are really going to feel an impact of Generation Y in the next five years or so," Reiner said. "This is the first generation to truly internalize the Internet, as opposed to other generations that have adopted it. This makes a huge difference when you have already internalized some of your purchasing patterns. We are very cognizant of that in trying to build a utility for that generation that they are very comfortable using." State Farm, based in Bloomington, Ill., has several programs targeted to members of Generation Y, including online education forums and the sponsorship of collegeclub.com, an online community for college students.

Progressive Casualty Insurance Co., Mayfield Village, Ohio, also recognizes the importance of using the Internet as a marketing tool to target young people. "We see more younger people shopping on the Internet and using the power of it to comparison shop," said Alan Bauer, Internet business leader with Progressive. He indicated that many young consumers use a combination of the Internet and other media to make their policy purchases. "When they've found the combination of price and service that satisfies them, they buy the policy in another way-either through an independent agent or over the phone.

"While it appears that more people in general are transacting personal business on the Internet, young people will likely do more of this than any other group," Bauer adds. "Having a sophisticated site that allows transactions to be completed by the consumer anytime is one way to target this group and satisfy their needs."

Reiner said research indicates that young people recognize that the Internet is not just useful for playing games and being entertained. "They are just like the rest of us," he said. "They are time-starved and they visit a lot of sites because they are more contemporary, but also because [the Internet] offers utility and the ability for them to do something in a very efficient manner at a lower cost than normal." He added that it is up to the industry to build a program that today's teens will find useful for information-retrieval purposes.

Educating the Masses

Lessons about auto insurance continue to be part of many high school drivers' education courses across the United States. But digital media, such as computer software and the Internet, are changing the way students are taught.

Progressive continues its efforts to educate students about auto insurance in a classroom setting. The company recently contributed to a program created and managed by the Independent Insurance Agents of America. "The semester-long class uses software programs, internship opportunities and classroom lectures to educate students on the basics of auto insurance buying and selling," said Dave Pratt, consumer marketing director with Progressive. The curriculum was developed to teach high school students about the business of auto insurance, and it is available in 300 high schools in 25 states, Pratt said.

Auto insurance isn't the only type of coverage being introduced to young Americans. Many people do not decide to buy insurance until they reach their 30s or 40s or after an event occurs that forces them to acquire a policy. But Generation Y is receiving information about financial issues at an earlier age than members of previous generations. This may prove profitable for insurance companies that are targeting their marketing strategies at future customers.

Research indicates that Generation Y is more financially savvy than previous generations. A recent survey sponsored by the American Savings Education Council indicates that half of people age 16 to 22 save a portion of their money. Nearly 11% of 16- to 22-year-olds invest in mutual funds, and as many own stock, according to a Merrill Lynch study.

Guardian Life Insurance Co., New York, is helping educate teens about financial options. Through its Girls Going Places scholarship program, the company teaches girls between the ages of 12 and 16 how to take control of their financial futures by highlighting the advantages of financial independence.

Guardian's program selects scholarship finalists from hundreds of applicants and teaches them about financial matters--such as investing, saving and protecting themselves against unforeseen risks--through field trips and onsite visits with prominent female business leaders (See "Guardian Life Teaches Young Women About Financial Matters," page 52).

"We are attempting to explain to them the notion of protecting themselves for long-term risks, such as a disability or something down the road that might make them uninsurable," said Eileen McDonnell, senior vice president with Guardian.

RainmakerThinking's Martin said today's young people are more involved with financial responsibility than those of earlier generations. "By the time many Generation Ys reach the workplace full time, they already have had three to five different jobs or internships," she said. In addition, many teens live in single-parent homes and are required to get jobs at earlier ages to assist with family expenses, such as buying their own clothing and paying for their own entertainment.

"There is a movement right now, not from the insurance industry but from the sector of responsible taxation and retirement, that is beginning to focus on this age group and believing it is never to soon to talk to them about their retirement program as it relates to coming to a full-time job and the decisions you need to make in terms of 401(k) and flexible benefits options," said Patricia A. Borowski, division vice president with the National Association of Professional Insurance Agents.

Borowski said agents of all ages are reaching out to the younger generation, "including them in the decisions and making sure they understand why these decisions are taking place."

"While I think younger agents may be a little more cognizant that they are talking to a younger person, and the older agent is thinking more in terms of their parents' portfolio exposure, every agent is going to be looking at things, such as the implication of parents' portfolios, because independent agents and brokers have an individual responsibility to clients to discuss their appropriate exposures and help them with options of coverage and decisions," Borowski said.

Marketing to a New Generation

Confident, idealistic, ambitious committed--these are some of the attributes being attached to Generation Y. Researchers believe that implementing these characteristics into marketing strategies may reap beneficial results for companies targeting today's teen-agers.

"They have a highly independent spirit and optimism," Martin said. "In addition, this is the 'self-esteem generation,' so companies can play upon that self-esteem, sense of responsibility and independence when reaching these young people."

Brands are another important aspect of the mindset of this technologically advanced generation. Much like their parents born into the baby-boomer era, young people have a strong attachment to brands. Some insurance companies already recognize the importance of stressing brands to today's teens, and several are running ads during major sporting events and top-rated TV shows popular with this age group to embed their brand names into the minds of these future consumers.

Christopher Swift, national industry director of professional-services firm KPMG LLP, acknowledges the importance of building branding strategies to reach this generation.

"Companies may be trying to build branding programs to raise awareness levels of Gen Ys so that when it comes time--perhaps five to 10 years down the road--their name will be more identifiable to future generations of consumers," he said. For example, once a brand is established among a small group of young people, their frequent use of e-mails to others could cause it to "spread like wildfire," he said.

Swift said some companies focused on personal lines--such as auto, renters and homeowners insurance-- are already building these branding campaigns into their marketing to young consumers.

Room Left on the Bandwagon 

While several companies are putting these practices to work, the majority of insurance companies have not yet jumped on the bandwagon to market to this up-and-coming consumer sector. According to a recent survey by KPMG, only 17% of 175 senior insurance executives surveyed felt they were prepared to serve the needs of Generation Y. This is a small percentage compared with the 51% who indicated a high degree of preparedness in serving the changing needs of the baby-boomer generation.

Why are many companies slow to target these young people? Many insurance businesses are still concentrating efforts on baby boomers and Generation X, Swift said. Only 6% of insurance executives surveyed by KPMG felt they were prepared to target Generation Y members to a significant degree, 11% to a high degree, 39% are moderately prepared, and 44% are prepared only to a low degree.

Because the majority of Generation Y members are under the age of 18, most are still part of their parents' insurance policies, which may be another reason companies are not yet targeting these future policyholders. Instead, agents are concentrating efforts on reaching both parents and their children.

"The needs and decisions are going to be collaborative with their parents," Borowski said. "It is really a family decision, but I think the difference from other generations is that a majority of agents are increasingly engaging parents and their children in the decision-making process."

Following their parents' decision-making processes has influenced members of Generation Y when making insurance purchases. "Young people tend to buy from the company or the independent agent that their parents chose," Progressive's Pratt said.

Looking to the Future

Companies currently examining Generation Y and its needs already may be beginning to make changes in the way they market to potential customers. "Companies are more prepared to manage channel conflict than ever before, and there is the realization that you need to operate 24/7 and interact with the customer in every way they choose to interact with you," Swift said.

An example is Boston-based Fidelity Investment's advertising campaign that invites customers to call, listen or click for information. "This is quite powerful in saying that you get to choose, and we are prepared to interact with you," Swift said. In addition, Swift said he believes that future consumers may see companies using more sophisticated referral techniques or marketing programs targeted at different stages of a customer's life.

"I think it is the brand and getting the customer initially to interact with you and working with them through their life cycle," he added. "Customer-relationship management programs, particularly for insurance companies, are often spending tremendous amounts of effort trying to understand how you can retain customers for 30 to 50 years."

Regardless of their strategy, insurers seem to agree that Generation Y already has made its mark on society. State Farm's Reiner said: "We believe this generation will have more impact than any other generation since the baby boomers, particularly through their access with the Internet."

Guardian Life Teaches Young Women About Financial Matters

Today's teens are tomorrow's financial consumers and career force. With this in mind, Guardian Life Insurance Company of New York is offering young women a financial education that will not only benefit them now but in years to come.

Guardian Life recently completed the first year of its national program to acclimate young women to the financial world. Girls Going Places is a three-tiered national college scholarship competition that aims to educate women about financial matters, create an awareness of career options in nontraditional fields and highlight the advantages of financial independence. It addresses the troubling disparities between men and women in terms of investments, wages and wealth accumulation. According to Guardian, which cited a recent Charles Schwab/Harris Interactive Survey, nearly half of all women (48%) found investing to be "scary for them," and only 52% of women felt confident in their ability to invest their money, vs. 82% of men.

"The purpose of [the program] is to raise awareness among young ladies about financial responsibility and the ability for them to begin at an early age," said Eileen McDonnell, senior vice president of Guardian Life. "The girls serve as role models for other girls."

The Girls Going Places program, one strategy of Guardian's national Women's Initiative, was implemented after the company recognized the need for early financial education, literacy and independence among women. "The statistics are that women who are poor in the U.S. due to divorce or being widowed are not properly prepared for that type of event, and this leads them to situations where they no longer are financially independent," McDonnell said.

The scholarship competition, which ran from March through Sept. 1, 2000, was sponsored by Guardian and Working Woman magazine. The goals of the competition are to search for, recognize and reward girls ages 12 to 16 who demonstrate budding entrepreneurship, are taking the first steps toward financial independence and have made a difference in their school or community. Of the more than 1,600 nominations Guardian received, 15 finalists were selected and awarded an all-expense-paid trip to New York City. To educate the young women and encourage them to value financial independence, the finalists toured the New York Stock Exchange and an esolutions company. In addition, they attended seminars with prominent female business leaders and were addressed by TV broadcast journalist Debra Norville, who gave the keynote speech at the awards luncheon. Three scholarship winners were selected, and the top winner received a $15,000 scholarship. The winner, Melissa Sconyers, is a 16-year-old who, after educating herself abo ut the Web design language HTML, began her own online design company.

Another part of Guardian's three-tiered program is to educate young women about career opportunities in financial planning and related fields. "The insurance industry has not done as well as the banking industry or Wall Street to attract women to financial services, and yet the insurance industry today and what it has evolved to in terms of financial and comprehensive planning lends itself to a great career for women," McDonnell said.

McDonnell believes that it is critical to reach and educate people at an early age, particularly females. "What actually put us down the path of educating young girls is that as they reach puberty they tend to lose their self-confidence as it relates to academic studies around the sciences and technology."

Guardian plans to continue the Girls Going Places program.

McDonnell said members of Generation Y--those born between 1977 and 1995--already have drawn the attention of financial-services companies as an important market. "They are probably going to be the best-educated consumers by the time they reach their maturity and come into the working environment, many of them in entrepreneur careers," she said.