Fastest Growing Segment of Car Buyers – Millennials
How Can You Amp Up Your Underwriting Process To Reach Them?
Despite all the handwringing about the millennial generation’s lack of enthusiasm for cars, they now represent the second-largest and fastest growing segment of car buyers.
This burgeoning cohort, which the U.S. Census defines as 16-34 year olds, overtook baby boomers as the largest living generation last year, and early concerns over car ownership may be dissipating. 
Collectively, Generation Y purchased 28% of new cars in the U.S. in 2015, up from 17% in 2010, according to JD Power. Gen Y consumers, who represent the oldest millennials, still represent a much smaller share of total purchases than their car-loving boomer parents, but the boomers’ share of sales peaked in 2010 and will continue to decline.
That makes millennials a crucial target for the slow-growing auto insurance industry. To be successful, insurers would do well to address the significant behavioral, lifestyle and economic differences inherent in this group. Gen Y consumers tend to have high levels of student debt and a propensity for urban living, consider unconventional living and working arrangements, and desire to shop online — all of which challenge auto, home and business insurers who are angling for their business. That means that insurers are pressured to do an even better job of assessing the risk of millennial consumers to provide competitive quotes that accurately reflect their potential for loss.
The torrent of data that insurers now have at their disposal can help, but only if you can extract actionable insights. Credit-based insurance scores provide a great example, having transformed the insurance landscape when it came to underwriting and pricing policies during the ascendance of the baby boom. But in today’s competitive environment, credit data alone may not be enough.
Consider the example of a 24-year-old retail store manager who does not have or use credit cards and paid cash for her car. If you look beyond her limited credit history, you might find that she pays her utility and cell phone bills on time, month in and month out. This suggests she might be a better risk than her nonexistent credit history would indicate. By way of contrast, a 34-year-old software developer may have paid off his car loan six months early, but he almost always pays his cable TV bill late. At first assessment, his credit-based insurance score seems appealing, but his payment history for a discretionary service like cable may reveal more about his risk level than the traditional credit report data indicates.
In both cases, policy premiums may be more accurately priced based on a more complete picture of consumers’ payment behavior.
A nuanced and well-rounded view of applicants and existing policyholders can help improve the accuracy of your segmenting and pricing, which are key steps on the path to profitability for any customer group.
Millennials today look very different from the previous generation, but no one knows for sure if they will eventually come around to embrace a lifestyle more like their boomer parents, whose markers of success were nice cars and large homes.
But who can afford to wait to find out? With the right data insights, insurers can meet their largest group of potential customers where they are today.
 U.S. Census. ‘Millennials Outnumber Baby Boomers and Are Far More Diverse, Census Bureau Reports,’ 2015. https://www.census.gov/newsroom/press-releases/2015/cb15-113.html
 Power Information Network, JD Power. JD Power defines Generation Y as those born between 1977 and 1994.
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