As Gen Z comes of age, it is quickly becoming one of the most influential consumer groups in the global economy. Born between 1997 and 2012, this digital-native generation is known for its tech savviness, pragmatic approach to money, and social consciousness. But one sector that is still struggling to capture its attention is insurance.

A generation on the sidelines of insurance

A 2024 study by the National Association of Insurance Commissioners (NAIC) found that fewer than 21% of Gen Z adults carry renters insurance. Life insurance rates are even lower. A study conducted by Smart Money People in March 2024 revealed that Gen Z falls behind other generations when it comes to key insurance products. Only 5% have contents insurance, 24% have life insurance, and 30% have travel insurance. This disengagement stems from more than just apathy. Gen Z is navigating an unstable job market and a challenging economic reality, from rising housing costs to student debt. In this environment, insurance can seem like a luxury or merely something to think about later.

Why isn’t Gen Z engaging?

Gen Z-ers are sceptical of traditional financial institutions. They are digital natives who have grown up amid economic instability and online misinformation. Many see insurance companies as opaque, profit-driven entities that make it hard to understand coverage and even harder to file a claim. There is also a common belief among young people that insurance is only necessary when you are older or have a family. The mindsets of “I am healthy and don’t need life insurance” or “I’ll worry about contents insurance if something happens” help contribute to underinsurance.

Many Gen Z individuals do not fully understand the value of insurance or trust insurance providers. A poll indicated that two-thirds of respondents from this age group believe that a lack of understanding or trust is a significant barrier to purchasing insurance. More worryingly, a considerable portion of Gen Z (48.1%) reported not thinking about insurance at all or assuming it was covered by other platforms they use.

Opportunities for insurers to reconnect

The current disconnect represents a unique opportunity for the insurance industry to reinvent itself and meet Gen Z’s needs. Insurers can start by teaming up with content creators on TikTok, Instagram, and YouTube to break down insurance myths in relatable ways. Bite-sized videos explaining renters’ insurance or how deductibles work would make a big impact.

Gen Z has grown up in a digital environment where easy payments and streamlined processes are expected. They demand simple payment options such as mobile-first channels and digital wallets when considering any insurance purchases. Insurers should create flexible insurance products in the form of micro-policies, such as insuring a phone for a week, bundling lifestyle-specific coverage, or covering gig income for a month. Subscription-style pricing and the ability to turn coverage on and off digitally will appeal to Gen Z’s needs and flexibility.

A market waiting to be won

The combination of low homeownership rates, financial constraints, a lack of understanding about insurance, a demand for digital solutions, and a perception that insurance is a low priority contributes to Gen Z’s hesitance to purchase. Insurance providers must adapt to these dynamics to effectively engage this new generation.

Gen Z is not anti-insurance, they just do not see themselves reflected in how it is traditionally sold. To earn their trust and loyalty, the industry needs to simplify, digitize, and humanise its offerings. This should be more than a marketing shift but a total transformation of its business mindset.