March 3, 2017

Niche insurance opportunities for the Young Elderly

Sameer Datye

Head of Business Development Insurance and Wealth management, Tieto

The Young Elderly is a segment of 75 million persons in the Nordics. These comprise of “baby boomers” born after the Second World War who will turn 65 in period till 2030.

They present an ever-growing niche segment of consumers. Unfortunately, very few services are developed for this segment even though they hold a large and growing business potential- especially in the Financial Services area.

We are trying to understand the retirement specific Form of Life; when a paradigm shift takes place as one moves from a working life to retirement. Daily routines that are followed for decades do not matter one fine day and new routines need to be invented, accepted, adapted and ingrained in daily life. As most of the young elderly already have reasonably good ICT skills, they will challenge technology providers and relevant stakeholders to create new business models for the needs of their active senior lives.

In the study (Searching for business ideas for financial services by means of life-based design  - Datye, Leikas, Jokinen, Saariluoma) conducted in Finland, we discovered the key insights:

  • They are very comfortable with technology and used computers in their daily lives especially in the two main branches of the financial services industry viz.  Banking and Insurance.
  • Traditional visits to the bank is slowly being replaced by the digital banking channels. However, there is still a resistance in the usage of mobile technology.
  • Digital interfaces provided by the insurance companies were hardly used by any of the participants, though it was common practice to use the Internet bank to pay the insurance premiums
  • The use of third party non-biased modes to compare the features and pricing of products by different insurance carriers was on the increase.
  • There was opacity in knowing their ‘Financial Net worth’.   A single snapshot of the financial asset and liabilities especially when they were from different financial institutions is simply not available.
  • The role of insurance in people’s lives is rather limited compared to banking services because of the limited need for transactions.

We also discovered some interesting insights in their lifestyle ambitions and targets:

  • World travel: “Planning my world travel. It is not easy. I have to do all the planning myself. It is not normal tourist stuff. It is technical.”
  • Leisure Travel and Winter Getaways: “…long winters in Thailand”
  • Winter migration: “I spend the winter in Spain and the summer in Finland.”
  • Summer house: “…planning to build a summer cottage for my daughter…”
  • Fitness: “I don't expect to be idle. I will be active. If everything is ok with my health then I will find something to do.”
  • Financial Support to Children: “I will never pay for her car but can help with the house

Now the question is how we use these findings in coming-up with a winning Business model targeting this niche and wealthy target market.  Here are some recommendations:

  • The mobility part of the digitization journey needs to be more user friendly. This is even more so for the insurance vertical where mobility adaption lagged markedly in comparison with the banking verticals where it was more common.
  • There is a glaring gap in financial aggregator services (Wealth Management) that would have a snapshot wide-spectrum view of the financial status of each individual across the different instruments including insurance, equities, securities, real estate etc. A service provider agnostic view could be even more desirable and relevant.
  • Insurance sector as a whole lacks recall value. Participants have challenges in remembering the service providers as well as their products. Opportunity lies in creating positive and engaging dialogue with the consumers in order to expand the portfolio leveraging ecosystem thinking.
  • The lifestyle ambitions for this group throws open a niche market for digital insurance e.g. in Travel insurance, property insurance, pay-as-you-live insurance products, loan services etc.

With the Young Elderly in the Nordics there is a lot of focus on health, fitness & travel which is complemented with financial muscle.  Result is that, serious money is flowing towards specific expenses and investments e.g. car, summer cottage, travel, housing for children etc. This represents unique- sell, upsell and cross-sell opportunities for the financial sector. So there has to be a change in mindset of looking upon this segment as a challenge / burden - to being an economic opportunity with its unique needs. Products and Services developed for other segments have very little spill-over effect in this segment. The Young Elderly’s “forms of life” needs to be explored further in order to identify specific opportunities.

The Financial Services industry needs to be the fulcrum and catalyze an ecosystem driven approach towards service generation for the Young Elderly. If the business case stands, the services will automatically follow.

If you have any question or want deeper insights in the research findings, please feel free to reach out to me.

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