The over-50s are the fastest growing demographic, with plenty of free cash to spend on insurance, but can the industry capitalize? Kevin Lavery finds out
When it comes to assessing the importance of the over-50s as a demographic group, the statistics could not be more compelling. Over 50% of the UK population is predicted to be aged 50-plus by the year 2020. The mature market holds 80% of all personal wealth in the UK; they also control 40% - and rising - of consumer spending.
Many over-50s have no children living at home, and either high salaries or at least large amounts of disposable income. Furthermore, with retirement giving greater levels of flexibility, it is no surprise that the over-50s represent an attractive market for insurance companies.
To its credit, the insurance industry has, in the main, always been one step ahead of other industries in marketing to this age group. A willingness to tailor certain products and even manufacture new ones for this important cohort has seen a rise in specialist companies offering tailor-made packages for the mature market.
These include everything from car insurance with lower annual-mileage allowances and travel cover for far-flung destinations, with a reassuringly high dose of medical cover, to home-insurance policies that allow this group to be away from home for longer than the usual 30 days. For example, when they take their retirement dream holidays to New Zealand, or go on spiritual-enlightenment backpacking trips in Nepal, or simply spend three months in their second home in Spain.
However, while insurers have enjoyed a relatively high degree of success and continue to attract a base level of custom, a more thorough and rigorous approach to marketing and communication to the over-50s needs to be implemented in order to capitalise on the burgeoning mature market.
The statistics do not lie. With 50,000 people turning 50 each month, the over-50s are the only growth market. And it is this group of high-spending, better-educated and more sophisticated consumers that will spell the difference between profit and loss for companies in the industry, from the big insurers down to smaller independents.
While there has been some progress with regards to targeting the mature market effectively, it appears that many insurance companies are still reverting back to age-ist stereotypes and outmoded views on how the over-50s travel. To view this age bracket as ignorant old dears would be myopic, to say the least. The over-50s are just as discerning as other purchasers when it comes to finding the best policy.
What is more, they will use the latest technologies in order to find the best deals and spend time researching the most preferable options. The internet has been key in providing consumers with the best price comparisons, and the over-50s are equally keen to use this to their benefit.
If insurance companies want to attract the mature market, they must eschew the view that over-priced policies will suffice and that the over-50s are disinclined to check the small print. Neither of these is true, which insurers forget at their peril.
Furthermore, the over-50s represent a significant growth market for insurance companies. Many in the mature market have higher levels of disposable income than their younger counterparts and are likely to make the resultant purchases to reflect this. As such, home-contents insurance policies should provide a lucrative source of income for insurers as home goods prices increase.
Travel insurance is also another key growth area with regards to insurance for the mature market. Recently conducted research shows that the over-50s are travelling even further afield, and often competing with peers to travel to the most obscure and exotic locations in the process.
This means there can be significant opportunities for insurers. However, policies offered must be properly tailored to suit the needs of the mature traveller and must also offer excellent value. It cannot be overstated that a combination of both product development and successful marketing are essential for insurers to capitalise on the growth of the mature market.
Marketers must also be aware that although policies might be tailored to the over-50s, those purchasing don't want to be reminded too much of their age, nor wear it 'on their sleeve', so a degree of discretion is also to be advised. In terms of developing marketing strategies, it is important not to treat the over-50s as one homogenous group, as the outcome will not only be ineffective but potentially offensive.
In contrast to a 'one-size-fits-all' approach, data segmentation will allow effective targeting of the complex strata within this market. Breaking down the over-50s into age brackets is vital to provide solid foundations on which to build a segmentation model. Identifying these groups will help marketers appreciate the key events that have shaped consumers' minds during their formative years. This breakdown, however, is just the start of the process.
Insurers must also have a clear idea of the present situation and life stage of consumers, based on criteria such as whether they are still working and their levels of affluence and technological sophistication, for example. These two approaches combined will provide much clearer insight into how to target this diverse but lucrative market effectively.
While many challenges face the insurance industry at the moment, arguably, the way companies tackle the growth of the over-50s market will determine whether or not they survive in what is becoming an increasingly competitive market. Putting into practice some key principles should ensure that the insurance industry has a better understanding of this growth sector. The demographics speak for themselves - and this could make the difference between profit and loss for insurers big and small.Kevin Lavery is the executive creative director at over-50s marketing specialist Millennium.
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